2005 Nevada Revised Statutes - Chapter 694B — Reciprocal Insurers

CHAPTER 694B - RECIPROCAL INSURERS

NRS 694B.010 Reciprocalinsurance defined.

NRS 694B.020 Scope.

NRS 694B.030 Powersof reciprocal insurers.

NRS 694B.035 Reciprocalinsurer authorized to affect title to real property for purposes of insurer.

NRS 694B.040 Name;suits.

NRS 694B.050 Attorney.

NRS 694B.060 Organizationof reciprocal insurer.

NRS 694B.070 Certificateof authority.

NRS 694B.080 Powerof attorney.

NRS 694B.090 Modifications.

NRS 694B.100 Attorneysbond.

NRS 694B.110 Depositin lieu of bond.

NRS 694B.120 Actionon bond.

NRS 694B.130 Serviceof process; judgment.

NRS 694B.140 Contributionsto insurer.

NRS 694B.150 Financialcondition: Method of determining.

NRS 694B.160 Personseligible to be subscribers.

NRS 694B.170 Subscribersadvisory committee.

NRS 694B.180 Subscribersliability.

NRS 694B.190 Subscribersliability on judgment.

NRS 694B.200 Assessments.

NRS 694B.210 Timelimit for assessments.

NRS 694B.220 Aggregateliability.

NRS 694B.230 Nonassessablepolicies.

NRS 694B.240 Subscribersshare in assets.

NRS 694B.250 Mergeror conversion.

NRS 694B.260 Impairedreciprocal insurer.

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NRS 694B.010 Reciprocalinsurance defined. As used in this Code, reciprocalinsurance is that resulting from an interchange among persons, known assubscribers, of reciprocal agreements of indemnity, the interchange beingeffectuated through an attorney-in-fact common to all such persons.

(Added to NRS by 1971, 1827)

NRS 694B.020 Scope.

1. All authorized reciprocal insurers shall begoverned by those sections of this chapter not expressly made applicable todomestic reciprocals.

2. After January 1, 1972, existing authorizedreciprocal insurers shall comply with the provisions of this chapter, and shallmake such amendments to their subscribers agreement, power of attorney,policies and other documents and accounts and perform such other acts as may berequired for such compliance.

(Added to NRS by 1971, 1827)

NRS 694B.030 Powersof reciprocal insurers.

1. A reciprocal insurer may, upon qualifying thereforas provided for by this Code, transact any kind or kinds of insurance definedby this Code other than life or title insurances.

2. Such an insurer may purchase reinsurance upon therisk of any subscriber, and may grant reinsurance as to any kind of insuranceit is authorized to transact directly.

(Added to NRS by 1971, 1827)

NRS 694B.035 Reciprocalinsurer authorized to affect title to real property for purposes of insurer. A reciprocal insurer may purchase, sell, mortgage,encumber, lease or otherwise affect the title to real property for the purposesand objects of the reciprocal insurer. All deeds, notes, mortgages or otherdocuments relating to the real property may be executed in the name of thereciprocal insurer by its attorney.

(Added to NRS by 1993, 649)

NRS 694B.040 Name;suits. A reciprocal insurer shall:

1. Have and use a business name. The name shallinclude the word reciprocal, or interinsurer, or interinsurance, orexchange, or underwriters, or underwriting, or association.

2. Sue and be sued in its own name.

(Added to NRS by 1971, 1827)

NRS 694B.050 Attorney.

1. Attorney, as used in this chapter, refers to theattorney-in-fact of a reciprocal insurer. The attorney may be an individual,firm or corporation.

2. The attorney of a foreign reciprocal insurer, whichinsurer is duly authorized to transact insurance in this State, shall not, byvirtue of the discharge of its duties as such attorney with respect to theinsurers transactions in this State, be thereby deemed to be doing business inthis State within the meaning of any laws of this State applying to foreignpersons, firms or corporations.

3. The subscribers and the attorney-in-fact comprise areciprocal insurer and a single entity for the purposes of chapter 680B of NRS as to all operations underthe insurers certificate of authority.

(Added to NRS by 1971, 1828)

NRS 694B.060 Organizationof reciprocal insurer.

1. Twenty-five or more persons domiciled in this statemay organize a domestic reciprocal insurer and make application to theCommissioner for a certificate of authority to transact insurance.

2. The proposed attorney shall fulfill therequirements of and shall execute and file with the Commissioner when applyingfor a certificate of authority a declaration setting forth:

(a) The name of the insurer;

(b) The location of the insurers principal office, whichshall be the same as that of the attorney and shall be maintained within thisstate;

(c) The kinds of insurance proposed to be transacted;

(d) The names and addresses of the originalsubscribers;

(e) The designation and appointment of the proposed attorneyand a copy of the power of attorney;

(f) The names and addresses of the officers anddirectors of the attorney, if a corporation, or its members, if a firm;

(g) The powers of the subscribers advisory committee,and the names and terms of office of the members thereof;

(h) That all moneys paid to the reciprocal shall, afterdeducting therefrom any sum payable to the attorney, be held in the name of theinsurer and for the purposes specified in the subscribers agreement;

(i) A statement that each of the original subscribershas in good faith applied for insurance of a kind proposed to be transacted,and that the insurer has received from each such subscriber the full premium orpremium deposit required for the policy applied for, for a term of not lessthan 6 months at an adequate rate theretofore filed with and approved by theCommissioner;

(j) A statement of the financial condition of theinsurer, a schedule of its assets, and a statement that the surplus as requiredby NRS 680A.120 is on hand; and

(k) A copy of each policy, endorsement and applicationform it then proposes to issue or use.

3. The declaration shall be acknowledged by theattorney in the manner required for the acknowledgment of deeds.

(Added to NRS by 1971, 1828)

NRS 694B.070 Certificateof authority.

1. The certificate of authority of a reciprocalinsurer shall be issued to its attorney in the name of the insurer.

2. The Commissioner may refuse, suspend or revoke thecertificate of authority, in addition to other grounds therefor, for failure ofthe attorney to comply with any applicable provision of this Code.

(Added to NRS by 1971, 1829)

NRS 694B.080 Powerof attorney.

1. The rights and powers of the attorney of areciprocal insurer shall be as provided in the power of attorney given it bythe subscribers.

2. The power of attorney must set forth:

(a) The powers of the attorney;

(b) If a domestic insurer, that the attorney isempowered to accept service of process on behalf of the insurer in actionsagainst the insurer upon contracts exchanged;

(c) The general services to be performed by theattorney;

(d) The maximum amount, if any, to be deducted fromadvance premiums or deposits to be paid to the attorney and the general itemsof expense, if any, in addition to losses, to be paid by the insurer; and

(e) Except as to nonassessable policies, a provisionfor a contingent several liability of each subscriber in a specified amountwhich amount shall be not less than one nor more than 10 times the premium orpremium deposit stated in the policy.

3. The power of attorney may:

(a) Provide for the right of substitution of theattorney and revocation of the power of attorney and rights thereunder;

(b) Impose such restrictions upon the exercise of thepower as are agreed upon by the subscribers;

(c) Provide for the exercise of any right reserved tothe subscribers directly or through their advisory committee; and

(d) Contain other lawful provisions deemed advisable.

4. The terms of any power of attorney or agreementcollateral thereto shall be reasonable and equitable, and no such power oragreement shall be used or be effective in this state until approved by theCommissioner.

(Added to NRS by 1971, 1829)

NRS 694B.090 Modifications. Modifications of the terms of the subscribers agreementor of the power of attorney of a domestic reciprocal insurer shall be madejointly by the attorney and the subscribers advisory committee. No such modificationshall be effective retroactively, or as to any insurance contract issued priorthereto.

(Added to NRS by 1971, 1829)

NRS 694B.100 Attorneysbond.

1. Concurrently with the filing of the declarationprovided for in NRS 694B.060, theattorney of a domestic reciprocal insurer shall file with the Commissioner abond in favor of this state for the benefit of all persons damaged as a resultof breach by the attorney of the conditions of this bond as set forth insubsection 2. The bond shall be executed by the attorney and by an authorizedcorporate surety, and shall be subject to the Commissioners approval.

2. The bond shall be in the penal sum of $25,000,aggregate in form, conditioned that the attorney will faithfully account forall moneys and other property of the insurer coming into his hands, and that hewill not withdraw or appropriate to his own use from the funds of the insurerany moneys or property to which he is not entitled under the power of attorney.

3. The bond shall provide that it is not subject tocancellation unless 30 days advance notice in writing of cancellation is givenboth the attorney and the Commissioner.

(Added to NRS by 1971, 1829)

NRS 694B.110 Depositin lieu of bond. In lieu of the bond requiredunder NRS 694B.100, the attorney maymaintain on deposit through the Commissioner, a like amount in cash or inmarket value of United States Government bonds, subject to the same conditionsas the bond.

(Added to NRS by 1971, 1830)

NRS 694B.120 Actionon bond. An action on the attorneys bond orto recover against any such deposit made in lieu thereof may be brought by oneor more subscribers suffering loss through a violation of its conditions, or bya receiver or liquidator of the insurer. Amounts recovered on the bond shall bedeposited in and become part of the insurers funds. The total aggregateliability of the surety shall be limited to the amount of the penalty of suchbond.

(Added to NRS by 1971, 1830)

NRS 694B.130 Serviceof process; judgment.

1. Legal process shall be served upon a domesticreciprocal insurer by serving the insurers attorney at his principal officesor by serving the Commissioner as the insurers process agent under NRS 680A.250 and 680A.260.

2. Any judgment based upon legal process so servedshall be binding upon each of the insurers subscribers as their respectiveinterests may appear, but in an amount not exceeding their respectivecontingent liabilities, if any, the same as though personal service of processwas had upon each such subscriber.

(Added to NRS by 1971, 1830)

NRS 694B.140 Contributionsto insurer.

1. The attorney or other parties may advance to adomestic reciprocal insurer upon reasonable terms such funds as it may requirefrom time to time in its operations. Sums so advanced shall not be treated as aliability of the insurer, and, except upon liquidation of the insurer, shallnot be withdrawn or repaid except out of the insurers realized earned surplusin excess of its minimum required surplus. No such withdrawal or repaymentshall be made without the advance approval of the Commissioner.

2. This section does not apply to bank loans or toother loans made upon security.

(Added to NRS by 1971, 1830)

NRS 694B.150 Financialcondition: Method of determining. In determiningthe financial condition of a reciprocal insurer the Commissioner shall applythe following rules:

1. He shall charge as liabilities the same reserves asare required of incorporated insurers issuing nonassessable policies on areserve basis.

2. The surplus deposits of subscribers shall beallowed as assets, except that any premium deposits delinquent for 90 daysshall first be charged against such surplus deposit.

3. The surplus deposits of subscribers shall not becharged as a liability.

4. All premium deposits delinquent less than 90 daysshall be allowed as assets.

5. An assessment levied upon subscribers, and notcollected, shall not be allowed as an asset.

6. The contingent liability of subscribers shall notbe allowed as an asset.

7. The computation of reserves shall be based uponpremium deposits other than membership fees and without any deduction forexpenses and the compensation of the attorney.

(Added to NRS by 1971, 1831)

NRS 694B.160 Personseligible to be subscribers.

1. Individuals, partnerships and corporations of thisstate may make application, enter into an agreement for and hold policies orcontracts in or with and be a subscriber of any domestic, foreign or alienreciprocal insurer. Any corporation organized under the laws of this statebefore, on or after January 1, 1972, in addition to the rights, powers andfranchises specified in its articles of incorporation, has full power andauthority as a subscriber to exchange insurance contracts through such areciprocal insurer. The right to exchange such contracts is hereby declared tobe incidental to the purposes for which such corporations are organized and tobe as fully granted as the rights and powers expressly conferred upon suchcorporations.

2. Government or governmental agencies, a state orpolitical subdivisions thereof, boards, associations, estates, trustees orfiduciaries are authorized to exchange nonassessable reciprocal interinsurancecontracts with each other and with individuals, partnerships and corporationsto the same extent that individuals, partnerships and corporations areauthorized in this chapter to exchange reciprocal interinsurance contracts.

3. Any officer, representative, trustee, receiver orlegal representative of any such subscriber must be recognized as acting for oron its behalf for the purpose of such a contract but may not be personallyliable upon the contract by reason of acting in such a representative capacity.

(Added to NRS by 1971, 1831; A 1997, 1628)

NRS 694B.170 Subscribersadvisory committee.

1. The advisory committee of a domestic reciprocalinsurer exercising the subscribers rights shall be selected under such rulesas the subscribers adopt.

2. Not less than two-thirds of such committee shall besubscribers other than the attorney, or any person employed by, representing orhaving a financial interest in the attorney.

3. The committee shall:

(a) Supervise the finances of the insurer;

(b) Supervise the insurers operations to such extentas to assure conformity with the subscribers agreement and the power ofattorney;

(c) Procure the audit of the accounts and records ofthe insurer and of the attorney at the expense of the insurer; and

(d) Have such additional powers and functions as may beconferred by the subscribers agreement.

(Added to NRS by 1971, 1832)

NRS 694B.180 Subscribersliability.

1. The liability of each subscriber, other than as toa nonassessable policy, for the obligations of the reciprocal insurer shall bean individual, several and proportionate liability, and not joint.

2. Except as to a nonassessable policy, eachsubscriber shall have a contingent assessment liability, in the amount providedfor in the power of attorney or in the subscribers agreement, for payment ofactual losses and expenses incurred while his policy was in force. Suchcontingent liability may be at the rate of not less than one nor more than 10times the premium or premium deposit stated in the policy, and the maximumaggregate thereof shall be computed in the manner set forth in NRS 694B.220.

3. Each assessable policy issued by the insurer shallcontain a statement of the contingent liability, set in type of the sameprominence as the insuring clause.

(Added to NRS by 1971, 1832)

NRS 694B.190 Subscribersliability on judgment.

1. No action shall lie against any subscriber upon anyobligation claimed against the insurer until a final judgment has been obtainedagainst the insurer and remains unsatisfied for 30 days.

2. Any such judgment shall be binding upon eachsubscriber only in such proportion as his interests may appear and in an amountnot exceeding his contingent liability, if any.

(Added to NRS by 1971, 1832)

NRS 694B.200 Assessments.

1. Assessments may from time to time be levied uponsubscribers of a domestic reciprocal insurer liable therefor under the terms oftheir policies by:

(a) The attorney upon approval in advance by thesubscribers advisory committee and the Commissioner; or

(b) The Commissioner in liquidation of the insurer.

2. Each subscribers share of a deficiency for whichan assessment is made, but not exceeding in any event his aggregate contingentliability as computed in accordance with NRS694B.220, shall be computed by applying to the premium earned on thesubscribers policy or policies during the period to be covered by theassessment, the ratio of the total deficiency to the total premiums earnedduring such period upon all policies subject to the assessment.

3. In computing the earned premiums for the purposesof this section, the gross premium received by the insurer for the policy shallbe used as a base, deducting therefrom solely charges not recurring upon therenewal or extension of the policy.

4. No subscriber shall have an offset against anyassessment for which he is liable, on account of any claim for unearned premiumor losses payable.

(Added to NRS by 1971, 1832)

NRS 694B.210 Timelimit for assessments. Every subscriber of adomestic reciprocal insurer having contingent liability shall be liable for,and shall pay his share of any assessment, as computed and limited inaccordance with this chapter, if:

1. While his policy is in force or within 1 year afterits termination, he is notified by either the attorney or the Commissioner ofhis intentions to levy such assessment; or

2. If an order to show cause why a receiver,conservator, rehabilitator or liquidator of the insurer should not be appointedis issued while his policy is in force or within 1 year after its termination.

(Added to NRS by 1971, 1833)

NRS 694B.220 Aggregateliability. No one policy or subscriber to suchpolicy, shall be assessed or charged with an aggregate of contingent liabilityas to obligations incurred by a domestic reciprocal insurer in any 1 calendaryear, in excess of the amount provided for in the power of attorney or in thesubscribers agreement, computed solely upon the premium earned on such policyduring that year.

(Added to NRS by 1971, 1833)

NRS 694B.230 Nonassessablepolicies.

1. If a reciprocal insurer has a surplus of assetsover all liabilities at least equal to the minimum capital stock and surplusrequired to be maintained by a domestic stock insurer authorized to transactlike kinds of insurance, upon application of the attorney and as approved bythe subscribers advisory committee the Commissioner shall issue hiscertificate authorizing the insurer to extinguish the contingent liability ofsubscribers under its policies then in force in this state, and to omitprovisions imposing contingent liability in all policies delivered or issuedfor delivery in this state for so long as all such surplus remains unimpaired.

2. Upon impairment of such surplus, the Commissionershall forthwith revoke the certificate. Such revocation shall not rendersubject to contingent liability any policy then in force and for the remainderof the period for which the premium has theretofore been paid; but after suchrevocation no policy shall be issued or renewed without providing forcontingent assessment liability of the subscriber.

3. The Commissioner shall not authorize a domesticreciprocal insurer so to extinguish the contingent liability of any of itssubscribers or in any of its policies to be issued, unless it qualifies to anddoes extinguish such liability of all its subscribers and in all such policiesfor all kinds of insurance transacted by it; but if required by the laws ofanother state in which the insurer is transacting insurance as an authorizedinsurer, the insurer may issue policies providing for the contingent liabilityof such of its subscribers as may acquire such policies in such state, and neednot extinguish the contingent liability applicable to policies theretofore inforce in such state.

(Added to NRS by 1971, 1833)

NRS 694B.240 Subscribersshare in assets. Upon the liquidation of a domesticreciprocal insurer, its assets remaining after the discharge of itsindebtedness and policy obligations, the return of any contributions of theattorney or other persons to its surplus, and the return of any unusedpremiums, savings or credits then standing on subscribers accounts shall bedistributed to its subscribers who were such within the 12 months prior to thelast termination of its certificate of authority, according to such reasonableformula as the Commissioner may approve.

(Added to NRS by 1971, 1834)

NRS 694B.250 Mergeror conversion.

1. A domestic reciprocal insurer upon the affirmativevote of not less than two-thirds of its subscribers who vote on such mergerpursuant to due notice and the approval of the Commissioner of the termstherefor may merge with another reciprocal insurer or be converted to a stockor mutual insurer.

2. Such a stock or mutual insurer shall be subject tothe same capital or surplus requirements and shall have the same rights as alike domestic insurer transacting like kinds of insurance.

3. The Commissioner shall not approve any plan forsuch merger or conversion which is inequitable to subscribers, or which, if forconversion to a stock insurer, does not give each subscriber preferential rightto acquire stock of the proposed insurer proportionate to his interest in thereciprocal insurer as determined in accordance with NRS 694B.240 and a reasonable length oftime within which to exercise such right.

(Added to NRS by 1971, 1834)

NRS 694B.260 Impairedreciprocal insurer.

1. Subject to the limitation set forth in the power ofattorney or policy, if the assets of a domestic reciprocal insurer are at anytime insufficient to discharge its liabilities, other than any liability onaccount of funds contributed by the attorney or others, and to maintain therequired surplus, its attorney shall forthwith make up the deficiency or levyan assessment upon the subscribers for the amount needed to make up thedeficiency.

2. If the attorney fails to make up such deficiency orto make the assessment within 30 days after the Commissioner orders him to doso, or if the deficiency is not fully made up within 60 days after the date theassessment was made, the insurer shall be deemed insolvent and shall beproceeded against as authorized by this Code.

3. If liquidation of such an insurer is ordered, anassessment shall be levied upon the subscribers for such an amount, subject tothe limits provided by this chapter, as the Commissioner determines to benecessary to discharge all liabilities of the insurer, exclusive of any fundscontributed by the attorney or other persons, but including the reasonable costof the liquidation.

(Added to NRS by 1971, 1834)

 

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