Bill Text: AZ SB1293 | 2020 | Fifty-fourth Legislature 2nd Regular | Chaptered
Bill Title: DOI; DFI; omnibus
Spectrum: Partisan Bill (Republican 2-0)
Status: (Passed) 2020-03-24 - Chapter 37 [SB1293 Detail]
Download: Arizona-2020-SB1293-Chaptered.html
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Senate Engrossed |
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State of Arizona Senate Fifty-fourth Legislature Second Regular Session 2020
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CHAPTER 37
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SENATE BILL 1293 |
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AN ACT
amending sections 6-101, 6-110, 6-112, 6-113, 6‑638, 6‑852, 6‑1403, 9‑951, 9‑952, 11‑952.01, 11‑981, 12‑581, 12‑593, 13‑3885, 15‑387 and 20‑101, Arizona Revised Statutes; amending title 20, chapter 1, article 1, Arizona Revised Statutes, by adding section 20-101.01; amending sections 20-102, 20‑108.01, 20‑141, 20‑142, 20‑144, 20‑147, 20-157.01, 20-158, 20‑167, 20‑169, 20‑183, 20‑224, 20‑224.03, 20‑224.06, 20‑224.07, 20‑237, 20‑261.03, 20‑265, 20‑285, 20‑289, 20‑336.03, 20‑336.04, 20‑340.01, 20‑340.04, 20‑367 and 20‑398, Arizona Revised Statutes; repealing section 20‑400.08, Arizona Revised Statutes; amending sections 20‑400.10, 20‑401.03, 20‑401.04, 20‑401.05, 20‑403, 20-410, 20‑422, 20-423, 20‑466, 20‑481.08, 20‑481.25, 20-485, 20-485.09, 20‑489.01, 20‑612, 20‑613, 20‑624, 20‑625, 20‑662, 20‑663, 20‑671, 20‑678, 20‑683, 20‑684, 20‑706, 20‑713, 20‑714, 20‑718, 20‑724, 20‑727, 20‑729, 20‑730, 20‑731, 20‑733, 20‑735, 20‑776, 20‑822, 20‑824, 20‑835, 20‑873, 20‑884, 20‑885, 20‑893, 20‑1008, 20‑1051, 20‑1057, 20-1098.17, 20-1098.23, 20‑1379, 20‑1556, 20‑1603, 20‑1634, 20‑1652, 20‑1673, 20‑1691, 20-1691.04, 20-1691.06, 20‑1691.08, 20-1691.11, 20‑1691.12, 20‑1741, 20‑1742, 20‑1801, 20‑1808, 20‑1812 and 20‑2202, Arizona Revised Statutes; repealing section 20-2305, Arizona Revised Statutes; amending sections 20-2306, 20‑2310, 20-2318, 20‑2402, 20‑2501, 20‑2533, 20‑2541, 20‑2802 and 20‑2901, Arizona Revised Statutes; repealing section 20-2905, Arizona Revised Statutes; amending sections 20‑3251, 20‑3302, 20‑3459, 23‑722.04, 23‑901, 23‑904, 23‑930, 23‑950, 23‑961, 23‑1091, 25‑529, 28‑667, 28‑2166, 28‑4007, 28‑4008, 28‑4038, 28‑4133, 28‑6923, 28‑7369, 28‑7704, 29‑609, 29‑3108, 32-1004, 32‑1134, 33‑1003, 33‑1004, 33‑1062, 33‑1076, 34‑201, 34‑222, 34‑608, 34‑610, 35‑457, 35‑762, 36‑2905, 36‑2906.01, 36‑2944.01 and 36‑2999.51, Arizona Revised Statutes; amending section 38‑871, Arizona Revised Statutes, as amended by laws 2019, chapter 252, section 48; amending sections 41‑621, 41‑621.01, 41-1009, 41‑1525, 41‑2574, 41-3451, 42‑1102, 43‑1183, 43‑1504, 44‑288, 44‑1273, 44‑3152, 44‑6951, 48‑586, 48‑924, 48‑2054 and 48‑2842, Arizona Revised Statutes; relating to the department of insurance and financial institutions.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 6-101, Arizona Revised Statutes, is amended to read:
6-101. Definitions
In this title, unless the context otherwise requires:
1. "Automated teller machine" means an automated device that is established by a bank, savings and loan association or credit union and that facilitates customer‑bank communications activities, including taking deposits and disbursing cash drawn against a customer's deposit account or a customer's preapproved loan account, at a location separate from the home office or a branch.
2. "Bank" means a corporation that holds a banking permit issued pursuant to chapter 2 of this title.
3. "Banking office" means any place of business of the bank at which deposits are received, checks are paid or money is loaned but does not include the premises used for computer operations, proofing, record keeping, accounting, storage, maintenance or other administrative or service functions.
4. "Branch" means any banking office other than the principal banking office.
5. "Department" means the department of insurance and financial institutions.
6. "Deputy director" or "superintendent" means the deputy director of the financial institutions division of the department.
6. 7. "Director" has the same meaning prescribed in section 20‑102.
7. 8. "Division" means the financial institutions division within the department.
8. 9. "Enterprise" means any person under the jurisdiction of the department other than a financial institution.
9. 10. "Federal deposit insurance corporation" includes any successor to the corporation or other agency or instrumentality of the United States that undertakes to discharge the purposes of the corporation.
10. 11. "Financial institution" means banks, trust companies, savings and loan associations, credit unions, consumer lenders, international banking facilities and financial institution holding companies under the jurisdiction of the department.
11. 12. "Home state" means the state that has granted the bank its charter, permit or license to operate.
12. 13. "Host state" means the state in which a financial institution is doing business and not the state that has granted the bank its charter, permit or license to operate.
13. 14. "In‑state financial institution" means a state or federal bank, savings bank, savings and loan association or holding company with its home office located in this state.
14. 15. "International banking facility" means a facility that is represented by a set of asset and liability accounts segregated on the books and records of a commercial bank, the principal office of which is located in this state, and that is incorporated and doing business under the laws of the United States or of this state, a United States branch or agency of a foreign bank, an edge corporation organized under section 25(a) of the federal reserve act (12 United States Code sections 611 through 631) or an agreement corporation having an agreement or undertaking with the board of governors of the federal reserve system under section 25 of the federal reserve act (12 United States Code sections 601 through 604(a)) that includes only international banking facility time deposits and international banking facility extensions of credit as defined in 12 Code of Federal Regulations part 204.
15. 16. "National credit union administration" includes any successor to the organization or other agency or instrumentality of the United States that undertakes to discharge the purposes of the organization.
16. 17. "Out‑of‑state bank" means a bank, savings bank or savings and loan association that is approved by the superintendent pursuant to section 6‑322 and that has a charter, a permit or any other license to operate that is issued by a state other than this state.
17. 18. "Out‑of‑state financial institution" means a state or federal bank, savings bank, savings and loan association or holding company with its home office in a state other than this state.
18. "Superintendent" means the superintendent of the financial institutions division of the department.
19. "Title" includes this title, title 32, chapters 9 and 36 and title 44, chapter 2.1.
Sec. 2. Section 6-110, Arizona Revised Statutes, is amended to read:
6-110. Financial institutions division; superintendent
The financial institutions division is established in the department. The director shall appoint a superintendent deputy director of the financial institutions division of the department to assist the director with the execution of the laws of this state relating to financial institutions and enterprises. The deputy director serves at the pleasure of the director and reports directly to the director.
Sec. 3. Section 6-112, Arizona Revised Statutes, is amended to read:
6-112. Assistant director; examiners; personnel
Subject to title 41, chapter 4, article 4, the director:
1. Shall appoint a deputy superintendent an assistant director who shall have the power and perform the duties of the superintendent deputy director of the financial institutions division of the department. The deputy superintendent assistant director shall hold such the appointment at the will and pleasure of the director.
2. May appoint such other assistants as the director deems necessary whose powers are limited to the powers, duties or functions set forth in the appointment.
3. Shall appoint such examiners and other personnel as necessary.
Sec. 4. Section 6-113, Arizona Revised Statutes, is amended to read:
6-113. Acts prohibited; officers; employees
A. The director, the superintendent deputy director, the deputy superintendent assistant director and any personnel of the department may not do any of the following with respect to any financial institution or enterprise under the jurisdiction of the department:
1. Be indebted, directly or indirectly, as borrower, accommodation endorser, surety or guarantor, to any such financial institution or enterprise unless the indebtedness was contracted before becoming employed by the department and is fully disclosed to the department, except that an employee of the department, other than the director, the superintendent deputy director or the deputy superintendent assistant director, may become so indebted if the indebtedness is both:
(a) Incurred on terms not more favorable than those available to the general public.
(b) Fully disclosed to and approved by the director before funding, including the following information:
(i) The date of the indebtedness.
(ii) The amount.
(iii) The interest rate.
(iv) Other obligors.
(v) Security.
(vi) The purpose for which the monies are to be used. The borrower shall not participate in any examination of the lender conducted by the department.
2. Be an officer, director or employee of any such financial institution or enterprise.
3. Own or deal in, directly or indirectly, the shares or obligations of any such financial institution or enterprise.
4. Be interested in, directly or indirectly, or receive from any such financial institution or enterprise, or any officer, director or employee of the financial institution or enterprise, any salary, fee, compensation or other valuable thing by way of gift, credit, compensation for services or otherwise.
5. Be interested in or engage in the negotiation of any loan to, obligation of, or accommodation for another person to or with any such financial institution or enterprise.
B. Notwithstanding the provisions of subsection A of this section, the director, the superintendent deputy director, the deputy superintendent assistant director and any personnel of the department may:
1. Maintain demand, savings, time, share and trust accounts in any financial institution.
2. Become a beneficiary of any trust or estate administered by any fiduciary under the jurisdiction of the division.
3. Become indebted to and own and deal in shares and obligations of national banks, federal savings and loan associations and federal credit unions.
Sec. 5. Section 6-638, Arizona Revised Statutes, is amended to read:
6-638. Other insurance
A. A licensee who is licensed to sell life insurance pursuant to title 20 may sell and include in the principal amount of a consumer lender loan the cost of the premium for life insurance that is not for credit if all of the following apply:
1. The insurance policy or certificate is approved by the director of the department of insurance.
2. The purchase of the insurance is not a condition of the consumer lender loan.
3. The consumer signs an application for the insurance that is separate from the consumer lender loan application.
4. The licensee does not offer or discuss with the consumer the option of life insurance until after the consumer lender loan application is completed and the consumer lender loan is approved.
B. A licensee who is licensed to sell disability insurance pursuant to title 20 may sell and include in the principal amount of the consumer lender loan the cost of the premium for accidental death and dismemberment insurance or disability income protection insurance, or both, if all of the following apply:
1. The insurance policy or certificate is approved by the director of the department of insurance.
2. The purchase of the insurance is not a condition of the consumer lender loan.
3. The consumer signs an application for the insurance that is separate from the consumer lender loan application.
4. The licensee does not offer or discuss with the consumer the option of accidental death and dismemberment insurance or disability income protection insurance until after the consumer lender loan application is completed and the consumer lender loan is approved.
C. Any insurance purchased by the consumer pursuant to this section is optional and the licensee shall disclose in writing to the consumer that the insurance is optional.
D. The consumer may cancel the insurance for any reason at any time within thirty days after the date of purchase and the consumer shall receive a full refund of the premium within five days of after the date of cancellation. If the consumer cancels the insurance after thirty days from the date of purchase, the consumer shall receive a refund of the unearned premium in accordance with the insurance policy. In the event the consumer cancels the insurance, the licensee shall give the consumer the amount of any refund of premium or shall credit the consumer's lender loan at the option of the consumer. For the purposes of this subsection, the date of cancellation is defined as the date the licensee receives the receipt for the notice of cancellation for the insurance policy.
E. If the consumer decides to cancel the policy, the consumer shall either:
1. Return the policy to the insurer or to the licensee at the licensee's place of business.
2. Provide written notice of cancellation to the insurer or to the licensee at the licensee's place of business.
F. The licensee shall give the consumer a written copy of the provisions of this section.
Sec. 6. Section 6-852, Arizona Revised Statutes, is amended to read:
6-852. Exemptions and allowed activities
A. For the purposes of this article, a person does not engage in the trust business by:
1. Rendering services as an attorney‑at‑law in the performance of his the person's duties as such.
2. Acting as trustee under a deed of trust made only as security for the payment of money or for the performance of another act.
3. Acting as a trustee in bankruptcy or as a receiver.
4. Holding trusts of real estate for the primary purpose of subdivision, development or sale, or to facilitate any business transaction with respect to such real estate, provided such person is not regularly engaged in the business of acting as a trustee for such trusts.
5. Engaging in the business of a debt management company to the extent of the activities for which it is licensed under chapter 6 of this title.
6. Engaging in the business of an escrow agent to the extent of the activities for which it is licensed under chapter 7 of this title.
7. Holding assets as trustee of trusts created for charitable purposes.
8. Receiving rents and proceeds of sale as a licensed real estate broker on behalf of a principal.
9. Engaging in securities transactions as a dealer or salesman registered under title 44, chapter 12.
10. Acting as a guardian, conservator, special conservator, trustee or personal representative pursuant to a court order under title 14 or 36.
B. Insurance companies licensed to write life insurance policies and annuity or endowment contracts in the this state of Arizona and subject to regulation and control of the director of insurance are excluded from the provisions of this chapter, except the provisions of section 6‑860.
C. A bank, savings and loan association or credit union not exercising trust powers may act as a trustee or custodian of individual retirement accounts established pursuant to the employees retirement income security act of 1974 or self‑employed retirement plans established pursuant to the self‑employed individuals tax retirement act of 1962 without the prior written consent of the superintendent deputy director if both:
1. The duties of the bank, savings and loan association or credit union as trustee or custodian are essentially custodial or ministerial in nature.
2. The bank, savings and loan association or credit union is required to invest the funds from such plans only in its own time or savings deposits or shares.
Sec. 7. Section 6-1403, Arizona Revised Statutes, is amended to read:
6-1403. Exemptions
A. The licensing requirements of this article do not apply to:
1. Any savings and loan association, bank, savings bank, trust company, consumer lender or credit union authorized to do business in this state.
2. Any agent or broker who is licensed by the department of insurance and who allows an insured to pay premiums on policies written by the agent or broker in installments if the agent or broker receives no interest or other fee, except that an agent or broker may collect a service charge of not more than five per cent percent of the total premium amount and a delinquency charge as provided in section 6‑1413.
3. Any person who purchases or otherwise acquires premium finance agreements from a licensee if the licensee retains the right to service the agreements and to collect payments due under the agreements and remains responsible for the premium finance agreement being handled in compliance with this article.
4. Any insurer authorized to transact insurance in this state in connection with the issuance of premium finance agreements relating to commercial insurance policies issued by the insurer.
B. The exemption from licensing as provided in subsection A of this section does not authorize the financing of insurance premiums without compliance with the other requirements of this article.
Sec. 8. Section 9-951, Arizona Revised Statutes, is amended to read:
9-951. Disposition of fire insurance premium tax proceeds; composition of fund
A. The proceeds of the annual tax provided by law on the gross amount of all premiums received on policies and contracts of fire insurance covering property within this state, after deducting cancellations, return premiums, dividends and the amount received as reinsurance on business in this state, are appropriated and set aside for distribution to cities and towns and legally organized fire districts that procure the services of private fire companies and for the payment of benefits pursuant to this article, article 4 of this chapter or title 38, chapter 5, article 4.
B. Not later than April 30 of each year, the office of the state fire marshal shall certify to the state treasurer the incorporated cities and towns that have organized fire departments, the incorporated cities and towns and legally organized fire districts that procure the services of a private fire company and the areas served by legally organized fire districts, and the department of insurance and financial institutions shall certify to the state treasurer the respective amounts of tax on fire premiums paid in the previous year for properties located in this state. Not later than June 15 of each year, the department of revenue shall certify to the state treasurer the full cash value of the real property and improvements for the previous year in each incorporated city and town and legally organized fire district that procures the services of a private fire company and in each area served by a fire department or a legally organized fire district. The total amount of the tax proceeds shall then be prorated among the several incorporated cities and towns and legally organized fire districts in proportion to the full cash value of the real property and improvements in each incorporated city and town and legally organized fire district that procures the services of a private fire company and in each area served by a department or a legally organized fire district to the total full cash value of all incorporated cities and towns and legally organized fire districts that procure the services of a private fire company and incorporated cities and towns that have a fire department and legally organized fire districts in this state.
C. Each incorporated city or town that has an organized fire department and each legally organized volunteer fire district shall deduct five percent from the salaries or compensation of its firefighters and add a like amount from its general revenues. The employer or the employee may add a contribution greater than that specified in this subsection to the fire fighters' relief and pension fund. The total of the two amounts shall be paid each month into the fire fighters' relief and pension fund. The treasurer of each board shall keep a record of the salary deductions. If a firefighter dies under circumstances that do not entitle the firefighter's dependents to a benefit from the fire fighters' relief and pension fund, or if the firefighter becomes separated from the service voluntarily or involuntarily without having become eligible for retirement benefits under the fire fighters' relief and pension fund, all deductions previously made from the firefighter's salary under this article, plus interest as determined by the board, are payable to the firefighter's beneficiary in the event of the firefighter's death, or otherwise to the firefighter.
D. Payroll deductions made under subsection C of this section, plus any additional sums the board of trustees may add, shall be set aside in a permanent reserve fund, the income of which but no part of the principal, shall be used to pay retirement benefits or relief, but in order to pay the refunds provided for in subsection C of this section, that portion of the principal that accrues from salary deductions may be drawn on when necessary.
E. For the purposes of this section and section 9‑952, full cash value of real property and improvements for the previous year with respect to each incorporated city and town that procures the services of a private fire company are limited to thirty percent of the amount certified by the department of revenue and the percentage shall be utilized in computing the entitlement of an incorporated city or town that procures the services of a private fire company.
Sec. 9. Section 9-952, Arizona Revised Statutes, is amended to read:
9-952. Disposition of fire insurance premium tax
Not later than July 31 of each year, the state treasurer, using the information provided by the cities and towns and legally organized fire districts, the office of the state fire marshal, the department of insurance and financial institutions and the department of revenue as provided in section 9‑951, subsection B, shall distribute the fire insurance premium tax to the respective incorporated cities and towns and legally organized fire districts in proportion to the full cash value of the real property and improvements in each incorporated city and town and legally organized fire district that procures the services of a private fire company and in each area served by a fire department or legally organized fire district. The warrant issued by the state treasurer to incorporated cities and towns and legally organized fire districts having organized fire departments and to legally organized fire districts shall be identified as "fire fighters' relief and pension fund". The warrant issued by the state treasurer to an incorporated city or town or legally organized fire district procuring the services of a private fire company that has a pension plan covering firefighting personnel shall be identified for deposit in the municipality's general fund or, in the case of a fire district, in the fire fighters' relief and pension fund.
Sec. 10. Section 11-952.01, Arizona Revised Statutes, is amended to read:
11-952.01. Public agency pooling of property, fidelity, liability, workers' compensation, life, health, accident and disability coverage; exemptions; board of trustees; contract; termination; audit; insolvency; definition
A. In addition to other authority granted pursuant to this title, two or more public agencies may enter into contracts or agreements pursuant to this article for the joint purchasing of insurance, including prepaid legal insurance or reinsurance, or to pool retention of their risks for property, fidelity and liability losses and to provide for the payment of such property loss, fidelity loss, prepaid legal insurance or claim of liability made against any member of the pool, including any elected or appointed official, officer or employee covered by the pool, on a cooperative or contract basis with one another or may jointly form a nonprofit corporation or enter into a trust agreement to carry out this section in their behalf directly or by contract with a private party.
B. In addition to other authority granted pursuant to this title, two or more public agencies may enter into contracts or agreements pursuant to this article to establish a workers' compensation pool to provide for the payment of workers' compensation claims pursuant to title 23, chapter 6 on a cooperative or contract basis with one another or may jointly form a nonprofit corporation or enter into a trust agreement to carry out this section in their behalf directly or by contract with a private party. A workers' compensation pool established pursuant to this subsection may provide coverage for workers' compensation, employers' liability and occupational disease claims. A workers' compensation pool is subject to approval as a self‑insurer by the industrial commission of Arizona pursuant to section 23‑961, subsection A, paragraph 2 and is subject to title 23, chapter 6 and rules adopted pursuant to that chapter in addition to the requirements of this section. The industrial commission of Arizona, by rule, resolution or order, may adopt requirements for the administration of a workers' compensation pool under this subsection, including separation or commingling of funds, accounting, auditing, reporting, actuarial standards and procedures.
C. In addition to other authority granted pursuant to this title, two or more public agencies may enter into contracts or agreements for the joint purchase of life insurance, disability insurance, accident insurance or health benefits plan insurance or may pool retention of their risks of loss for life, disability, health or accident claims made against any public agency member of the pool or to jointly provide the health and medical services authorized in section 36‑2907. Public agencies may establish pools for the purposes of this subsection by any of the following methods:
1. On a cooperative or contract basis.
2. By the formation of a nonprofit corporation.
3. By contracts or intergovernmental agreements with the Arizona health care cost containment system administration.
4. By the execution of a trust agreement directly by the agencies or by contracting with a third party.
D. In addition to other authority granted pursuant to this title, two or more public agencies may enter into contracts or agreements pursuant to this article for the joint purchasing of insurance for property, liability or workers' compensation losses or to pool retention of their risks for property and liability loss to cover the public agency, its elected officials and employees and the contractor and subcontractor of every tier engaged in the performance of a construction project for the public agency. Public agencies may establish pools for the purpose purposes of this subsection by any of the following methods:
1. On a cooperative or contract basis.
2. By the formation of a nonprofit corporation.
3. By the execution of a trust agreement directly by the agencies or by contracting with a third party.
E. Section 10‑11301 does not apply to nonprofit corporations formed pursuant to this section.
F. Title 41, chapter 23 does not apply to the procurement of insurance or reinsurance, or to the procurement of the services provided for in subsection K, paragraph 8 of this section, by any pool established pursuant to this section.
G. Title 43 does not apply to any pool established pursuant to this section. Any pool established pursuant to this section is exempt from taxation under title 43.
H. Each pool shall be operated by a board of trustees consisting of at least three persons who are elected officials or employees of public entities within this state. The board of trustees shall notify the director of the department of insurance and financial institutions of the existence of the pool and shall file with the director and with the attorney general a copy of the intergovernmental agreement or contract. The board of trustees of each group shall do all of the following:
1. Establish terms and conditions of coverage within the pool, including exclusions of coverage.
2. Ensure that all claims are paid promptly.
3. Take all necessary precautions to safeguard the assets of the group.
4. Maintain minutes of its meetings.
5. Designate an administrator to carry out the policies established by the board of trustees and to provide day‑to‑day management of the group and delineate in the written minutes of its meetings the areas of authority it delegates to the administrator.
6. If the pool is a workers' compensation pool, file a copy of the agreement with the director of the industrial commission of Arizona.
I. If the pool includes private, nonprofit educational institutions, each private, nonprofit educational institution shall post a bond, cash deposit or other comparable financial security in an amount that is equal to at least one and one‑half times the amount of the private, nonprofit educational institution's annual premium to ensure payment of the school's or institution's legal liabilities and other obligations if the pool is determined to be insolvent or is otherwise found to be unable to discharge the pool's legal liabilities and other obligations pursuant to subsection N of this section.
J. The board of trustees shall not:
1. Extend credit to individual members for payment of a premium, except pursuant to payment plans established by the board.
2. Borrow any monies from the group or in the name of the group except in the ordinary course of business.
K. In addition to the requirements of section 11‑952, a contract or agreement made pursuant to this section shall contain the following:
1. A provision for a system or program of loss control.
2. A provision for termination of membership, including either:
(a) Cancellation of individual members of the pool by the pool.
(b) Election by an individual member of the pool to terminate its participation.
3. A provision requiring the pool to pay all claims for which each member incurs liability during each member's period of membership.
4. A provision stating that each member is not relieved of its liability incurred during the member's period of membership except through the payment of losses by the pool or by the member.
5. A provision for the maintenance of claim reserves equal to known incurred losses and an estimate of incurred but not reported claims.
6. A provision for a final accounting and settlement of the obligations of or refunds to a terminating member to occur when all incurred claims are concluded, settled or paid.
7. A provision that the pool may establish offices where necessary in this state and employ necessary staff to carry out the purposes of the pool.
8. A provision that the pool may retain legal counsel, actuaries, auditors, engineers, private consultants and advisors.
9. A provision that the pool may make and alter bylaws and rules pertaining to the exercise of its purpose and powers.
10. A provision that the pool may purchase, lease or rent real and personal property it deems necessary.
11. A provision that the pool may enter into financial services agreements with banks and other financial institutions, that it may issue checks in its own name and that it may invest its monies in equity securities, mutual funds and investment funds registered with the United States securities and exchange commission, debt obligations and any eligible investment permitted allowed by section 35‑323.
L. A pool or a terminating member shall provide at least ninety days' written notice of the termination or cancellation. A workers' compensation pool shall notify the industrial commission of Arizona of the termination or cancellation of a member thirty days before the termination or cancellation of the member.
M. The pool shall be audited annually at the expense of the pool by a certified public accountant, with a copy of the report submitted to the governing body or chief executive officer of each member of the pool and to the director of the department of insurance and financial institutions. The board of trustees of the pool shall obtain an appropriate actuarial evaluation of the claim reserves of the pool, including an estimate of the incurred but not reported claims. The department of insurance and financial institutions shall examine each public agency pool once every five years. The director of the department of insurance and financial institutions may examine a public agency pool sooner than five years from the preceding examination if the director has reason to believe that the pool is insolvent. The costs of any examination shall be paid by the pool subject to the examination.
N. If, as a result of the annual audit or an examination by the director of the department of insurance and financial institutions, it appears that the assets of the pool are insufficient to enable the pool to discharge its legal liabilities and other obligations, the director of the department of insurance and financial institutions shall notify the administrator and the board of trustees of the pool of the deficiency and the director's list of recommendations to abate the deficiency, including a recommendation not to add any new members until the deficiency is abated. If the pool fails to comply with the recommendations within sixty days after the date of the notice, the director shall notify the chief executive officer or the governing bodies, if any, of the members of the pool, the governor, the president of the senate and the speaker of the house of representatives that the pool has failed to comply with the recommendations of the director.
O. If a pool is determined to be insolvent or is otherwise found to be unable to discharge its legal liabilities and other obligations, each agreement or contract shall provide that the members of the pool shall be assessed on a pro rata basis as calculated by the amount of each member's annual contribution in order to satisfy the amount of deficiency. The assessment shall not exceed the amount of each member's annual contribution to the pool.
P. A pool established pursuant to this section may make available programs providing for insurance coverages described in subsections A, B and C of this section to those charter schools governed by section 15‑183, subsection M and, except for a workers' compensation pool, to private, nonprofit educational institutions.
Q. In addition to the authority set forth in this title, a pool established pursuant to this section may invest public monies on behalf of pool members, but any such investments shall be limited to those permitted allowed by section 35‑323, except as provided in section 15‑1225, subsection G. A pool established pursuant to this section may not invest monies that are required by law to be deposited with a county treasurer.
R. A pool established pursuant to this section, by the adoption of a resolution of continuing effect, may authorize and request the state treasurer to invest funds for the pool pursuant to section 35‑326.
S. A pool established pursuant to this section may offer services on behalf of pool participants that participate in the unemployment insurance program administered by the department of economic security, including the option to make payments in lieu of contributions as permitted allowed by sections 23‑750 and 23‑751. The pool is deemed an agent of the pool participants as employers for the purposes of title 23, chapter 4.
T. For the purposes of this section, "health benefits plan" means a hospital or medical service corporation policy or certificate, a health care services corporation contract, a multiple employer welfare arrangement or any other arrangement under which health and medical benefits and services are provided to two or more persons.
Sec. 11. Section 11-981, Arizona Revised Statutes, is amended to read:
11-981. Payment of benefits, losses and claims; establishment of trust funds
A. In addition to authority granted pursuant to other provisions of law or city charter, any city, town, county, any special health care district organized pursuant to title 48, chapter 31 or other political subdivision that is located in a county with a population of more than one million persons and whose governing body is composed of members of a county board of supervisors may procure insurance from any insurer authorized by the director of the department of insurance and financial institutions or may establish a self‑insurance program for the management and administration of a system for direct payment of benefits, losses or claims or any combination of insurance and direct payments, and including risk management consultation, to provide:
1. Health, accident, life or disability benefits for employees and officers of the city, town, county, any special health care district organized pursuant to title 48, chapter 31 or other political subdivision that is located in a county with a population of more than one million persons and whose governing body is composed of members of a county board of supervisors and their dependents.
2. Payment of any property loss sustained or lawful claim of liability or fortuitous loss made against the city, town, county, any special health care district organized pursuant to title 48, chapter 31 or other political subdivision that is located in a county with a population of more than one million persons and whose governing body is composed of members of a county board of supervisors or its elected or appointed officials, employees or officers if such elected or appointed officials, employees or officers are acting within the scope of employment or authority.
B. If any city, town, county, any special health care district organized pursuant to title 48, chapter 31 or other political subdivision that is located in a county with a population of more than one million persons and whose governing body is composed of members of a county board of supervisors establishes a self‑insurance program for the management and administration of a system for direct payment of benefits, losses or claims pursuant to subsection A, the governing body of such city, town, county, any special health care district organized pursuant to title 48, chapter 31 or other political subdivision that is located in a county with a population of more than one million persons and whose governing body is composed of members of a county board of supervisors shall place all funds into a trust fund for the purposes of this section in amounts as determined appropriate by the governing body of the city, town, county, any special health care district organized pursuant to title 48, chapter 31 or other political subdivision that is located in a county with a population of more than one million persons and whose governing body is composed of members of a county board of supervisors, except that any city, town, county, any special health care district organized pursuant to title 48, chapter 31 or other political subdivision that is located in a county with a population of more than one million persons and whose governing body is composed of members of a county board of supervisors establishing such a trust fund shall:
1. Designate a risk management consultant or insurance administrator licensed pursuant to title 20, chapter 2, article 3 or 9, and such license shall be verified by the governing body of the city, town, county, any special health care district organized pursuant to title 48, chapter 31 or other political subdivision that is located in a county with a population of more than one million persons and whose governing body is composed of members of a county board of supervisors.
2. The trust shall be administered by at least five joint trustees, of whom no not more than one may be a member of the governing body of the city, town, county, any special health care district organized pursuant to title 48, chapter 31 or other political subdivision that is located in a county with a population of more than one million persons and whose governing body is composed of members of a county board of supervisors and no not more than one may be an employee of the city, town, county, any special health care district organized pursuant to title 48, chapter 31 or other political subdivision that is located in a county with a population of more than one million persons and whose governing body is composed of members of a county board of supervisors.
3. The trustees of the trust must be bonded, a stop‑loss provision must be incorporated in the trust agreement and an annual audit must be performed by an external auditor and a copy of the report kept on file in the offices of the governing body of the city, town, county, any special health care district organized pursuant to title 48, chapter 31 or other political subdivision that is located in a county with a population of more than one million persons and whose governing body is composed of members of a county board of supervisors for a period of not less than five years.
4. Not make any expenditure from the trust fund for any purpose not specified in this article.
C. Expenditures during the fiscal year from the trust fund and monies in the trust fund at the close of the fiscal year shall not be subject to the provisions of title 42, chapter 17, article 3.
D. In the event that such a trust fund is no longer used by the city, town, county, any special health care district organized pursuant to title 48, chapter 31 or other political subdivision that is located in a county with a population of more than one million persons and whose governing body is composed of members of a county board of supervisors for the purposes herein set forth, it shall revert during that fiscal year to the general fund of such city, town, county, any special health care district organized pursuant to title 48, chapter 31 or other political subdivision that is located in a county with a population of more than one million persons and whose governing body is composed of members of a county board of supervisors.
E. The authority granted to a city, town, county, any special health care district organized pursuant to title 48, chapter 31 or other political subdivision that is located in a county with a population of more than one million persons and whose governing body is composed of members of a county board of supervisors by this section is not subject to title 20, except that any health, life, accident or disability benefit plan shall conform to the benefits required by title 20.
F. This section shall not be construed to does not authorize any city, town, county, any special health care district organized pursuant to title 48, chapter 31 or other political subdivision that is located in a county with a population of more than one million persons and whose governing body is composed of members of a county board of supervisors to procure insurance from any insurer not authorized by the director of the department of insurance and financial institutions.
Sec. 12. Section 12-581, Arizona Revised Statutes, is amended to read:
12-581. Definitions
In this article, unless the context otherwise requires:
1. "Bodily injury" means bodily harm, sickness, disease or emotional or mental distress, including death resulting from any of these conditions at any time, sustained by a person.
2. "Claimant" means a person suffering bodily injury, a person claiming on behalf of or as a result of bodily injury to another person, the representative of the estate of a deceased person or a beneficiary of a wrongful death action.
3. "Costs of health care" means medical, custodial, rehabilitative and related expenses.
4. "Economic loss" means pecuniary harm for which damages are recoverable.
5. "Future damages" means economic loss and noneconomic loss arising from bodily injury which that accrues after trial of a claim under this article.
6. "Noneconomic loss" means nonpecuniary harm for which damages are recoverable but does not include punitive or exemplary damages.
7. "Past damages" means economic loss and noneconomic loss arising from bodily injury which that have accrued before a claim is tried under this article, including punitive or exemplary damages.
8. "Qualified insurer" means an insurer, self‑insurer, plan or arrangement approved by the director of the department of insurance and financial institutions.
Sec. 13. Section 12-593, Arizona Revised Statutes, is amended to read:
12-593. Duties of the director of the department of insurance and financial institutions and insurance companies
A. The director of the department of insurance and financial institutions shall adopt rules:
1. For determining which insurers and assignees are financially qualified to provide and maintain the funding required under this article and to be designated as qualified insurers.
2. To require insurers to provide and maintain funding under section 12‑587 if required by court order.
3. For publishing and revising a list of persons who have been designated by the director as qualified insurers.
B. The director shall annually review and evaluate the effectiveness of the system of periodic payments. If pursuant to such review and evaluation, the director determines that the system of periodic payments is effectively reducing the cost of medical malpractice tort claims for bodily injury, the director shall order appropriate actuarially justified rate adjustments based on such those findings.
C. In order to qualify under this section, an insurance company shall:
1. Have at least an "A+" (superior) rating and a financial size category of VIII in the current edition of Best insurance reports as published by A. M. Best company.
2. Have no more than one ratio falling outside the usual range according to the current ratio published by the national association of insurance commissioners insurance regulatory information system.
3. Be licensed to do business in a state that has an applicable insurance guaranty fund of at least one hundred thousand dollars $100,000.
4. Meet any other standards that the director deems necessary to assure that funding will be provided and maintained. A qualified insurer may be a subsidiary of a parent insurance company if the parent insurance company qualifies as a qualified insurer and guarantees the obligation of the subsidiary.
Sec. 14. Section 13-3885, Arizona Revised Statutes, is amended to read:
13-3885. Arrest of principal by surety; prohibited conduct; violation; classification; definitions
A. For the purpose of surrendering the defendant, a surety on the bail bond of a defendant may arrest the defendant before the forfeiture of the undertaking or, by written authority attached to a certified copy of the undertaking, may empower a bail recovery agent or a bail bond agent as defined in section 20‑340 to arrest the defendant.
B. A bail recovery agent or a bail bond agent shall not do any of the following:
1. Enter an occupied residential structure without the consent of the occupants who are present at the time of the entry.
2. Conduct a bail recovery arrest or apprehension without written authorization from a bail bond agent licensed in Arizona this state.
3. Wear, carry or display any uniform, badge, shield or other insignia or emblem that implies that the bail recovery agent is an employee, officer or agent of this state, a political subdivision of this state or the federal government. A bail recovery agent may display identification that indicates the agent's status as a bail recovery agent only.
4. Authorize or allow any third party third-party bail recovery agent to undertake an apprehension or arrest if the bail recovery agent has been convicted in any jurisdiction of theft or of any felony or any crime involving carrying or the illegal use or possession of a deadly weapon or dangerous instrument.
C. The surety or bail bond agent employing, hiring as an independent contractor or otherwise utilizing using a bail recovery agent shall advise the department of insurance and financial institutions in writing that the bail recovery agent is providing the services to the surety or bail bond agent on a given case or cases. The written notice to the department of insurance must be given within twenty‑four hours after the retention and shall include the name, date of birth, home and business addresses and telephone number of the bail recovery agent. The bail recovery agent identified in the written notice shall certify on the written notice, under penalty of perjury, that the bail recovery agent has never been convicted in any jurisdiction of theft or of any felony or any crime involving carrying or the illegal use or possession of a deadly weapon or dangerous instrument and that the bail recovery agent has complied with section 20‑340.04.
D. Bail bond agents shall provide an annual report to the department of insurance listing all bail recovery agents employed, hired as independent contractors or otherwise utilized used by the bail bond agent during the year. This report shall certify that all employees of the bail bond agent have met the requirements prescribed in section 20‑340.03 and that all bail recovery agents have complied with section 20‑340.04. The report shall include the name, home and business addresses, date of birth, telephone number, and a two‑inch wide by three‑inch high photograph of the face of each person identified in the report.
E. To satisfy the requirements of this section, a bail bond agent who is licensed in another state but who is not licensed in this state shall contract with a bail bond agent who is licensed in this state to retain the services of a bail recovery agent in this state.
F. Any A person who violates subsection B or E of this section is guilty of a class 5 felony. Any A person who violates subsection C or D of this section is subject to the provisions of section 20‑295.
G. For the purposes of this section:
1. "Bail bond agent" has the same meaning prescribed in section 20‑282.01 20-340.
2. "Bail recovery agent" means any person who has never been convicted in any jurisdiction of theft or of a felony or any crime involving carrying or the illegal use or possession of a deadly weapon or dangerous instrument and who is employed or hired as an independent contractor or otherwise utilized used by a bail bond agent to assist the bail bond agent in presenting a defendant in court when required, in apprehending a defendant and surrendering the defendant to a court or in keeping a defendant under necessary surveillance. Bail recovery agent does not include an attorney or law enforcement officer who acts in an official capacity and who assists a bail bond agent in the bail bond agent's business.
3. "Occupied residential structure" means an edifice of a type that is generally used to house human beings.
Sec. 15. Section 15-387, Arizona Revised Statutes, is amended to read:
15-387. Procurement of insurance; eligibility of governing board members, former board members and surviving spouse and dependents; deposit of monies
A. Notwithstanding section 15‑323, the governing board may procure insurance from any insurer authorized by the director of the department of insurance and financial institutions or may establish a self‑insurance program as provided in section 15‑382 for the management and administration of a system for direct payment of benefits, losses or claims or any combination of insurance and direct payments, including risk management consultation, to provide:
1. Health, accident, life or disability benefits for employees of the school district and their dependents and for members of the governing board and their dependents as provided in subsection B of this section.
2. Payment of any property or fidelity loss sustained, legal expenses incurred or lawful claim of liability or fortuitous loss made against the school district or its employees, including leased employees, or officers if the employees, leased employees or officers are acting in the scope of their employment or authority.
3. Coverage for all construction projects for purposes of general liability, property damage and workers' compensation.
B. A governing board member is eligible to participate in an insurance plan provided as an employee benefit pursuant to subsection A, paragraph 1 of this section if the member pays the full premium and the participation of the member does not result in an expenditure of school district monies.
C. If the governing board allows its members to participate in the insurance plan, a governing board may also adopt a policy allowing participation in an insurance plan provided as an employee benefit pursuant to subsection A, paragraph 1 of this section for former board members and for surviving spouses and dependents of board members or former board members as follows:
1. The board may allow a former board member to continue to participate if the former board member served at least four consecutive years on the board, was covered under the insurance plan while serving on the board and pays the full premium and the participation does not result in an expenditure of school district monies.
2. The board may allow the surviving spouse and dependent of the board member or former board member to continue to participate in the insurance plan if the surviving spouse or dependent pays the full premium and the participation of the surviving spouse and dependent does not result in an expenditure of school district monies and if one of the following applies:
(a) The deceased board member or former board member met the qualifications for eligibility pursuant to paragraph 1 of this subsection.
(b) The deceased board member or former board member would have met the qualifications for eligibility pursuant to paragraph 1 of this subsection if the deceased board member or former board member had not died in office.
D. Monies that are provided by employees, board members, former board members and surviving spouses and dependents of board members or former board members and that are received pursuant to this section shall be deposited in an account as provided in section 15‑1223.
Sec. 16. Section 20-101, Arizona Revised Statutes, is amended to read:
20-101. Department of insurance and financial institutions; definition
A. There shall be a The department of insurance which and financial institutions is established and shall be administered by the director of the department of insurance and financial institutions.
B. The department shall be known as "DIFI".
B. C. In this title, unless the context otherwise requires, "commission" or "department" means the department of insurance and financial institutions.
Sec. 17. Title 20, chapter 1, article 1, Arizona Revised Statutes, is amended by adding section 20-101.01, to read:
20-101.01. Deputy director
The director shall appoint a deputy director of the insurance division of the department to assist the director with the execution of the laws of this state relating to insurance. The deputy director serves at the pleasure of the director and reports directly to the director.
Sec. 18. Section 20-102, Arizona Revised Statutes, is amended to read:
20-102. Definition of director
When used with reference to the administration of In this title, title 6, title 32, chapters 9 and 36, title 41, chapter 31 and title 44, chapter 2.1, unless the context otherwise requires: ,
1. "Director" or "administrator" means the director of the department of insurance and financial institutions of the state.
2. When used with reference to a member of the governing body of an insurer, director includes trustee.
Sec. 19. Section 20-108.01, Arizona Revised Statutes, is amended to read:
20-108.01. Extended warranty insurers; deposit with state treasurer; powers and duties; definition
A. Every extended warranty insurer shall deposit with the state treasurer and maintain on deposit for the benefit and protection of any person purchasing such extended warranty or guaranty in the event of insolvency of the extended warranty insurer under its contract with any such person either of the following:
1. A bond in the amount of twenty‑five thousand dollars $25,000 issued by an insurance company holding a current certificate of authority issued by the Arizona director of insurance.
2. Eligible securities as defined in section 20‑583 having the lesser of par or market value of not less than twenty‑five thousand dollars $25,000.
B. The director of insurance shall adopt and promulgate rules and regulations to enforce the provisions of this section.
C. For the purposes of this section, "extended warranty insurer" means has the same as defined meaning prescribed in section 20‑108.
Sec. 20. Section 20-141, Arizona Revised Statutes, is amended to read:
20-141. Director of the department of insurance and financial institutions; appointment; qualifications; compensation
A. There The governor shall be appoint a director of the department of insurance who shall be appointed by the governor and financial institutions pursuant to section 38‑211.
B. The director shall:
1. Serve at the pleasure of the governor.
C. 2. The director shall Be a person with business experience, including being well versed in insurance and financial institution matters.
D. 3. The director shall Receive compensation as determined pursuant to section 38‑611.
Sec. 21. Section 20-142, Arizona Revised Statutes, is amended to read:
20-142. Powers and duties of director; payment of examination and investigation costs; home health services
A. The director shall enforce the provisions of this title.
B. The director shall have powers and authority expressly conferred by or reasonably implied from the provisions of this title.
C. The director may conduct examinations and investigations of insurance matters, including examinations and investigations of adjusters, agents producers and brokers and any other persons who are regulated under this title, in addition to examinations and investigations expressly authorized, as the director deems proper in determining whether a person has violated any provision of this title or for the purpose of securing information useful in the lawful administration of any provision of this title. The examined party shall pay the cost costs of examinations that are allowed pursuant to subsection D of this section and that are conducted pursuant to this subsection except for examinations of adjusters, agents producers and brokers. The An examined party adjuster, producer or broker shall pay the cost of examining adjusters, agents and brokers costs allowed pursuant to subsection D of this section only if the party has adjuster, producer or broker is found to have violated any provision of this title. The This state shall pay the cost of an any related investigation.
D. The department shall prepare detailed billing statements that provide reasonable specificity of the time and expenses billed in connection with an examination and that cite the statute or rule that authorizes the fees being charged. Notwithstanding any other law, from and after December 31, 2021, a person that is being examined pursuant to any section of this title is responsible for only the direct costs of an examination that are supported by a billing statement that complies with this subsection.
D. E. The director shall establish guidelines for insurers on home health services that shall be used by the director pursuant to sections 20‑826, 20‑1342, 20‑1402 and 20‑1404. The director may use home health services as defined in section 36‑151. Guidelines shall include but not be limited to the following:
1. Home health services that are prescribed by a physician or a registered nurse practitioner.
2. Home health services that are determined to cost less if provided in the home than the average length of in‑hospital service for the same service.
3. Skilled professional care in the home that is comparable to skilled professional care provided in‑hospital and that is reviewed and approved at thirty day thirty-day intervals by a physician.
E. F. Pursuant to section 41‑1750, subsection G, the director may receive criminal history record information in connection with the issuance, renewal, suspension or revocation of a license or certificate of authority or the consideration of a merger or acquisition. The director may require a person to submit a full set of fingerprints to the department. The department of insurance and financial institutions shall submit the fingerprints to the department of public safety for the purpose of obtaining a state and federal criminal records check pursuant to section 41‑1750 and Public Law 92‑544. The department of public safety may exchange this fingerprint data with the federal bureau of investigation.
Sec. 22. Section 20-144, Arizona Revised Statutes, is amended to read:
20-144. Seal of office
A. The director shall have a seal of office consisting of the shield as used in the great seal of the state of Arizona encircled by the words "director of the department of insurance and financial institutions, state of Arizona."
B. Every certificate or license issued by the director shall bear his the director's seal.
Sec. 23. Section 20-147, Arizona Revised Statutes, is amended to read:
20-147. Assistant director; chief examiner; appointment; qualifications
A. The director shall appoint an assistant director of insurance and a chief examiner.
B. The assistant director of insurance shall be experienced in the fields of life and disability and property and casualty insurance and the chief examiner shall have had at least five years years' experience as a full‑time examiner for a state insurance department or departments, or as a full‑time staff member of a public accounting or actuarial firm regularly employed to conduct examinations for a state insurance department.
Sec. 24. Section 20-157.01, Arizona Revised Statutes, is amended to read:
20-157.01. Insurer claim files; access by director; definition
A. Pursuant to the director's authority under sections 20‑156, 20‑157, 20‑160 and 20‑466, an insurer shall comply with a request to produce any documents, reports or other materials, whether maintained in written or electronic format, from an insurer's claim file.
B. Any documents, reports or other materials that are provided to the director pursuant to this section are confidential and are not subject to disclosure, including discovery or subpoena, unless the subpoena is issued by the attorney general or a county attorney or by a court at the request of the attorney general, a county attorney or any other law enforcement agency. The director may only disclose the information only to a state or federal agency or officer pursuant to a lawful request, subpoena or formal discovery procedure. If the requesting party cannot warrant confidentiality pursuant to section 20‑158, subsection I, the information that is provided pursuant to discovery, subpoena or lawful request as provided for in this subsection remains confidential. The director shall make reasonable efforts to notify an insurer of any request for a subpoena for documents, reports or other materials in an insurer claim file or record that are produced by the insurer pursuant to this section so that the insurer may assert, in a court of competent jurisdiction, any applicable privileges.
C. The director may use the documents, reports or other materials in the furtherance of any regulatory action brought by the director or in actions brought against the director.
D. Subject to the restrictions prescribed in section 20-299, the director shall provide an insurer with a copy of any document the director receives pursuant to this section that the director believes supports a violation of this title or that justifies any regulatory or other action against the insurer. A disclosure pursuant to this subsection is not a waiver of any applicable privilege or claim of confidentiality in the disclosed document.
D. E. For the purposes of this section, "insurer claim file" includes medical records, repair estimates, adjuster notes, insurance policy provisions, recordings or transcripts of witness interviews and any other records regarding coverage, settlement, payment or denial of a claim asserted under an insurance policy.
Sec. 25. Section 20-158, Arizona Revised Statutes, is amended to read:
20-158. Report of examinations by director; information sharing
A. The director shall make a full written report of each examination. The director or the examiner in charge of the examination shall certify the report.
B. The director shall provide a copy of the report to the person examined not less than ten days before filing the report. If the person makes a request in writing within the ten day ten‑day period, the director shall consider any objections the person may have to the proposed report and shall not file the report until after making any amendments the director deems proper.
C. The report, when filed, is admissible in evidence in any action or proceeding brought by the director against the person examined, or its officers or agents. The director or the director's examiners may at any time testify and offer other proper evidence as to information secured during the course of an examination, whether or not a written report of the examination has at that time been either made, served or filed in the director's office.
D. The director may withhold from public inspection any examination or investigation report for as long as the director deems prudent.
E. The director may disclose the nonpublic content of a report of examination, a preliminary report or any other matter relating to a report to the insurance department of any other state or jurisdiction, to law enforcement officials of this or any other state or jurisdiction or to an agency of the federal government if the agency or official receiving the report or information agrees in writing to hold the information confidential.
F. Except as provided in this subsection and subsections E and I of this section, documents, materials or other information, including all working papers and copies thereof, created, produced or obtained by or disclosed to the director or the director's deputies, assistants or examiners in the course of an examination or in the course of analysis of the financial condition or market conduct of an insurer are confidential and privileged, are not subject to title 39, chapter 1, article 2, are not subject to subpoena and are not subject to discovery or admissible in evidence in a private civil action. The director may use the documents, materials or other information in the furtherance of any regulatory or legal action brought as part of the director's official duties. Subject to the restrictions prescribed in section 20-299, the director shall provide an insurer being examined with copies of all documents, materials and other information that the director intends to rely on as evidence of an alleged violation of this title or that justifies any regulatory or other action against the insurer to allow the insurer to review the alleged findings and make any objections pursuant to subsection B of this section. A disclosure pursuant to this subsection is not a waiver of any applicable privilege or claim of confidentiality in the disclosed documents, materials or other information.
G. Documents, materials or other information, including all working papers and copies thereof, in the possession or control of the national association of insurance commissioners or its affiliates are confidential and privileged, are not subject to title 39, chapter 1, article 2, are not subject to subpoena and are not subject to discovery or admissible in evidence in any private civil action if the documents, materials or information are either:
1. Created, produced or obtained by or disclosed to the national association of insurance commissioners or its affiliates in the course of assisting the director in the examination or analysis of the financial condition or market conduct of an insurer under this title.
2. Disclosed to the national association of insurance commissioners or its affiliates by the director under subsection E or I of this section.
H. The director, the director's deputies, assistants or examiners and representatives of the national association of insurance commissioners or its affiliates are prohibited from testifying in any private civil action concerning documents, materials or other information that are confidential and privileged pursuant to subsection F or G of this section.
I. The director may:
1. Share nonpublic documents, materials or other information with other state, federal and international regulatory agencies, with the national association of insurance commissioners and its affiliates and subsidiaries and with state, federal and international law enforcement authorities if the recipient agrees and warrants that it has the authority to maintain the confidentiality and privileged status of the documents, materials or other information.
2. Receive documents, materials and other information from the national association of insurance commissioners and its affiliates and subsidiaries and from regulatory and law enforcement officials of other jurisdictions and shall maintain as confidential or privileged any document, material or other information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material or other information.
3. Enter into agreements that govern the sharing and use of documents, materials and other information and that are consistent with this section.
J. A disclosure to or by the director pursuant to this section or as a result of sharing information pursuant to subsection I of this section is not a waiver of any applicable privilege or claim of confidentiality in the documents, materials or other information disclosed or shared.
Sec. 26. Section 20-167, Arizona Revised Statutes, is amended to read:
20-167. Fees; definition
A. The director shall collect in advance the following fees, as adjusted pursuant to subsection E of this section determined by the director, which are nonrefundable on payment:
Not Less Than: Not More Than:
1. For filing charter documents:
(a) Original charter documents,
articles of incorporation,
bylaws, or record of
organization of insurers,
or certified copies thereof,
required to be filed with
the director and not also
subject to filing in the
office of the corporation
commission $ 40.00 $ 115.00
(b) Amended charter documents 15.00 45.00
(c) No charge or fee shall be
required for filing with
the director any of such
documents also required
by law to be filed in the
office of the corporation
commission
2. Certificate of authority:
(a) Issuance:
Fraternal benefit societies $ 15.00 $ 45.00
Medical or hospital service
corporations, health care
services organizations or
prepaid dental plan
organizations 40.00 115.00
Mechanical
reimbursement reinsurers 150.00 450.00
All other insurers 100.00 295.00
(b) Renewal:
Fraternal benefit societies 15.00 45.00
Medical or hospital service
corporations, health care
services organizations or
prepaid dental plan
organizations 40.00 115.00
Domestic stock life insurers,
domestic stock disability
insurers or domestic stock
life and disability insurers 750.00 2,250.00
Domestic life reinsurers,
domestic disability
reinsurers or domestic
life and disability
reinsurers 2,250.00 5,500.00
Mechanical reimbursement
reinsurers 2,250.00 5,500.00
All other insurers 70.00 205.00
3. Certificate of registration as an
administrator or application for
renewal under section 20‑485.12 $ 100.00 $ 295.00
4. Authority to solicit applications
for and issue policies by means
of mechanical vending machines $ 30.00 $ 90.00
5. Service company permit $ 150.00 $ 450.00
6. Application for motor vehicle
service contract program approval $ 150.00 $ 450.00
7. Life care contract application
or annual report $ 225.00 $ 675.00
8. Filing annual statement $ 150.00 $ 450.00
9. Annual statement filing for
exempt insurer transacting life
insurance, disability insurance
or annuity business pursuant to
section 20‑401.05 $ 65.00 $ 100.00
10. Licenses and examinations:
(a) Licenses:
Surplus lines broker's license,
quadrennially $ 600.00 $1,000.00
All other licenses,
quadrennially 60.00 180.00
(b) Examinations for license:
Examination on laws and one kind
of insurance 8.00 25.00
Examination on laws and two or
more kinds of insurance 15.00 45.00
11. Miscellaneous:
Fee accompanying service of
process on director $ 8.00 $ 25.00
Certificate of director,
under seal 1.50 5.00
Copy of document filed in
director's office, per page 0.50 0.75
B. Except as provided in section 20‑1098.18, the director shall deposit, pursuant to sections 35‑146 and 35‑147, all fees collected pursuant to this section in the state general fund. A refund is not allowed for any unused portion of a fee, and the director shall not prorate fees.
C. The license fees prescribed by this section shall be payment in full of all demands for all state, county, district and municipal license fees, license taxes, business privilege taxes and business privilege fees and charges of every kind.
D. The director may contract for the examination for the licensing of adjusters, insurance producers, bail bond agents, risk management consultants and surplus lines brokers. If the director does so, the fee for examinations for licenses pursuant to this section is payable directly to the contractor by the applicant for examination. The director may agree to a reasonable examination fee to be charged by the contractor. The fee may exceed the amounts prescribed in this section.
E. Each December 1, if the revenue collected from fees during the prior fiscal year is less than ninety‑five percent or more than one hundred ten percent of the appropriated budget for the current fiscal year, the director shall revise all fees within the limits prescribed by subsection A of this section on a uniform percentage basis among all fee categories. The director shall revise the fees in such a manner that the revenue derived from the fees during the subsequent fiscal year equals at least ninety‑five percent but not more than one hundred ten percent of the appropriated budget for the current fiscal year. The revised fee schedule is effective July 1 of the subsequent fiscal year. For the purposes of this subsection, appropriated budget does not include any appropriation for the operation of the captive insurance program established under chapter 4, article 14 of this title. Any fees collected from captive insurers pursuant to subsection G of this section shall not be counted for the purpose of meeting the requirement of this subsection to recover at least ninety‑five but not more than one hundred ten percent of the department's appropriated budget.
F. E. The director may contract with a voluntary domestic organization of surplus lines brokers to perform any transaction prescribed in chapter 2, article 5 of this title, including the acceptance or maintenance of the reports required by section 20‑408. The director may allow the contractor to charge a stamping fee. The surplus lines broker shall pay the stamping fee established pursuant to this section directly to the contractor.
G. F. Captive insurers shall pay certificate of authority issuance and renewal fees as prescribed by the director.
H. G. For the purposes of subsection F of this section, "stamping fee" means a reasonable filing fee charged by a contractor for any transaction prescribed in chapter 2, article 5 of this title, including the acceptance or maintenance of the reports required by section 20‑408.
Sec. 27. Section 20-169, Arizona Revised Statutes, is amended to read:
20-169. Supervision by director
Any other provision of law to the contrary Notwithstanding any other law, if upon on examination pursuant to this article or at any other time it appears to or is in the opinion of the director that any insurance company is insolvent, or its condition is such as to render the continuance of its business hazardous to the public or to holders of its policies or certificates of insurance, or if such the insurance company appears to have exceeded its powers or has failed to comply with the law, or if such the insurance company gives its consent, the director shall upon his, on the director's determination, shall do all of the following:
1. Notify the insurance company of his the director's determination. ,
2. Furnish to the insurance company a written list of the director's requirements to abate his the determination. , and
3. If the director makes a further determination to supervise he, the director shall notify the insurance company that it is under the supervision of the department of insurance and financial institutions and that the director is applying and effecting the provisions of this article. Such The insurance company shall comply with the lawful requirements of the director and, if placed under supervision, shall under supervision have sixty days from the date of notice within which to comply with the requirements of the director, subject however to the provisions of this article. In If the event of such insurance company's failure company fails to comply within such time, the director acting for himself, or through a conservator appointed by the director for that purpose, shall immediately, after due and proper notice and hearing, take charge as conservator of the insurance company and all of the property and effects thereof of the insurance company.
Sec. 28. Section 20-183, Arizona Revised Statutes, is amended to read:
20-183. Report procedures and deadlines
A person or a legislator advocating a legislative proposal pursuant to section 20‑181 shall submit a written report explaining the factors prescribed in section 20‑182 to the joint legislative audit committee established by section 41‑1279. The report must be submitted on or before September 1 before the start of the legislative session for which the legislation is proposed. The joint legislative audit committee shall assign the written report to the appropriate legislative committee of reference established pursuant to section 41‑2954. The legislative committee of reference shall hold at least one hearing and take public testimony after receiving the report. The legislative committee of reference shall study the written report and deliver a report of its recommendations to the joint legislative audit committee, the speaker of the house of representatives, the president of the senate, the governor and the director of the department of insurance and financial institutions on or before December 1 of the year in which the report is submitted.
Sec. 29. Section 20-224, Arizona Revised Statutes, is amended to read:
20-224. Premium tax; reports
A. On or before March 1 of each year, each authorized domestic insurer, each other insurer and each formerly authorized insurer referred to in section 20‑206, subsection B shall file with the director a report in a form prescribed by the director showing total direct premium income including policy membership and other fees and all other considerations for insurance from all classes of business whether designated as a premium or otherwise received by it during the preceding calendar year on account of policies and contracts covering property, subjects or risks located, resident or to be performed in this state, after deducting from such total direct premium income applicable cancellations, returned premiums, the amount of reduction in or refund of premiums allowed to industrial life policyholders for payment of premiums direct to an office of the insurer and all policy dividends, refunds, savings coupons and other similar returns paid or credited to policyholders within this state and not reapplied as premiums for new, additional or extended insurance. No deduction shall be made of the cash surrender values of policies or contracts. Considerations received on annuity contracts, as well as the unabsorbed portion of any premium deposit, shall not be included in total direct premium income, and neither shall be subject to tax. The report shall separately indicate the total direct fire insurance premium income received from property located in the incorporated cities and towns certified by the office of the state fire marshal pursuant to section 9‑951, subsection B, as procuring the services of a private fire company.
B. Coincident with the filing of the tax report, each insurer shall pay to the director for deposit, pursuant to sections 35‑146 and 35‑147, a tax on such net premiums at the following rates:
1. For fire insurance:
(a) On property located in a city or town certified by the office of the state fire marshal pursuant to section 9‑951, subsection B, as procuring the services of a private fire company, .66 percent.
(b) On all other property, 2.2 percent.
2. For disability insurance, 2.0 percent.
3. For health care service plans, the rates prescribed under sections 20‑837, 20‑1010 and 20‑1060.
4. For other insurance:
(a) For premiums received in calendar year 2016, 1.95 percent.
(b) For premiums received in calendar year 2017, 1.90 percent.
(c) For premiums received in calendar year 2018, 1.85 percent.
(d) For premiums received in calendar year 2019, 1.80 percent.
(e) For premiums received in calendar year 2020, 1.75 percent.
(f) For premiums received in calendar year 2021 and for each subsequent calendar year, 1.70 percent.
C. Any payments of tax pursuant to subsection F of this section shall be deducted from the tax payable pursuant to subsection B of this section. Each insurer shall reflect the cost savings attributable to the lower tax in fire insurance premiums charged on property located in an incorporated city or town certified by the office of the state fire marshal pursuant to section 9‑951, subsection B, as procuring the services of a private fire company. No insurer shall be liable to the state or to any other person, or shall be subject to regulatory action, relating to the calculation or submittal of fire insurance premium taxes based in good faith on the office of the state fire marshal's certification.
D. Eighty‑five percent of the tax paid under this section by an insurer on account of premiums received for fire insurance shall be separately specified in the report and shall be apportioned in the manner provided by sections 9‑951, 9‑952 and 9‑972, except that all of the tax so allocated to a fund of a municipality or fire district that has no volunteer firefighters or pension obligations to volunteer firefighters shall be appropriated to the account of the municipality or fire district in the public safety personnel retirement system and all of the tax so allocated to a fund of a municipality or fire district that has both full‑time paid firefighters and volunteer firefighters or pension obligations to full‑time paid firefighters or volunteer firefighters shall be appropriated to the account of the municipality or fire district in the public safety personnel retirement system where it shall be reallocated by actuarial procedures proportionately to the municipality or fire district for the account of the full‑time paid firefighters and to the municipality or fire district for the account of the volunteer firefighters. A municipality or fire district shall provide to the public safety personnel retirement system all information that the system deems necessary to perform the reallocation prescribed by this section. A full accounting of the reallocation shall be forwarded to the municipality or fire district and its local boards.
E. This section shall does not apply to title insurance. , and such Title insurers shall be taxed as provided in section 20‑1566.
F. Any insurer that paid or is required to pay a tax of fifty thousand dollars $50,000 or more on net premiums received during the preceding calendar year, pursuant to subsection B of this section and sections 20‑224.01, 20‑837, 20‑1010, 20‑1060 and 20‑1097.07, shall file on or before the fifteenth day of each month from March through August a report for that month, on a form prescribed by the director, accompanied by a payment in an amount equal to fifteen percent of the amount paid or required to be paid during the preceding calendar year pursuant to subsection B of this section and sections 20‑224.01, 20‑837, 20‑1010, 20‑1060 and 20‑1097.07. The payments are due and payable on or before the fifteenth day of each month and shall be made to the director for deposit, pursuant to sections 35‑146 and 35‑147.
G. Except for the tax paid on fire insurance premiums pursuant to subsections B and D of this section, an insurer may claim a premium tax credit if the insurer qualifies for a credit pursuant to section 20‑224.03, 20‑224.06 or 20‑224.07.
H. On receipt of a properly documented claim, a refund shall be provided to an insurer from available funds for the excess amount of any fire insurance premium improperly paid by the insurer. The insurer shall reflect the refund in the fire insurance premiums charged on the property that was charged the excessive amount.
I. On or before September 30 of each year, the director of the department of insurance and financial institutions shall report to the directors of the joint legislative budget committee and the governor's office of strategic planning and budgeting on the amount of insurance premium tax credits established by sections 20‑224.03, 20‑224.05, 20‑224.06 and 20‑224.07 that were used during the previous fiscal year.
J. For the purposes of:
1. Subsection B of this section, fire insurance is one hundred percent of fire lines, forty percent of commercial multiple peril nonliability lines, thirty‑five percent of homeowners' multiple peril lines, twenty‑five percent of farm owners' multiple peril lines and twenty percent of allied lines.
2. Section 20‑416, fire insurance is eighty‑five percent of fire and allied lines.
K. From and after December 31, 2017, the director may require that reports and payments under this section be submitted electronically. If the director requires electronic submission, the director shall include on the department's official website a list of one or more acceptable third‑party services through which an insurer must submit reports and payments.
Sec. 30. Section 20-224.03, Arizona Revised Statutes, is amended to read:
20-224.03. Premium tax credit for new employment
A. For taxable years beginning from and after June 30, 2011, a credit is allowed against the premium tax liability imposed pursuant to section 20‑224, 20‑837, 20‑1010, 20‑1060 or 20‑1097.07 for net increases in full‑time employees residing in this state and hired in qualified employment positions in this state as computed and certified by the Arizona commerce authority pursuant to section 41‑1525. For the purposes of this section and section 41-1525:
1. A tax credit is not allowed against the portion of the tax payable to the fire fighters' relief and pension fund pursuant to section 20‑224 or the portion of the tax payable to the public safety personnel retirement system pursuant to section 20‑224.01.
2. A reciprocal insurer and its attorney-in-fact are considered to be the same entity for the purposes of calculating the tax credit under this section.
B. Subject to subsection F of this section, the amount of the tax credit is equal to:
1. Three thousand dollars $3,000 for each full‑time employee hired in a qualified employment position in the first year or partial year of employment. Employees hired in the last ninety days of the taxable year are excluded for that taxable year and are considered to be new employees in the following taxable year.
2. Three thousand dollars $3,000 for each full‑time employee in a qualified employment position for the full taxable year in the second year of continuous employment.
3. Three thousand dollars $3,000 for each full‑time employee in a qualified employment position for the full taxable year in the third year of continuous employment.
C. The capital investment and the new qualified employment positions requirements of section 41‑1525, subsection B must be accomplished within twelve months after the start of the required capital investment. A credit may not be claimed until both requirements are met. A business that meets the requirements of section 41‑1525, subsection B for a location is eligible to claim first year credits for three years beginning with the taxable year in which those requirements are completed. Employees hired at the location before the beginning of the taxable year but during the twelve‑month period allowed in this subsection are considered to be new employees for the taxable year in which all of those requirements are completed. The employees that are considered to be new employees for the taxable year under this subsection shall not be included in the average number of full‑time employees during the immediately preceding taxable year until the taxable year in which all of the requirements of section 41‑1525, subsection B are completed. An employee working at a temporary worksite in this state while the designated location is under construction is considered to be working at the designated location if all of the following occur:
1. The employee is hired after the start of the required investment at the designated location.
2. The employee is hired to work at the designated location after it is completed.
3. The payroll for the employees destined for the designated location is segregated from other employees.
4. The employee is moved to the designated location within thirty days after its completion.
D. To qualify for a credit under this section, the insurer and the employment positions must meet the requirements prescribed by section 41‑1525.
E. A credit is allowed for employment in the second and third year only for qualified employment positions for which a credit was claimed and allowed in the first year.
F. The net increase in the number of qualified employment positions is the lesser of the total number of filled qualified employment positions created at the designated location or locations during the taxable year or the difference between the average number of full‑time employees in this state in the current taxable year and the average number of full‑time employees in this state during the immediately preceding taxable year. The net increase in the number of qualified employment positions computed under this subsection may not exceed the difference between the average number of full‑time employees in this state in the current taxable year and the average number of full‑time employees in this state during the immediately preceding taxable year.
G. If the allowable tax credit exceeds the state premium tax liability, the amount of the claim not used as an offset against the state premium tax liability may be carried forward as a tax credit against subsequent years' state premium tax liability for a period not exceeding five taxable years.
H. If the business is sold or changes ownership through reorganization, stock purchase or merger, the new taxpayer may claim first year credits only for the qualified employment positions that it created and filled with an eligible employee after the purchase or reorganization was complete. If a person purchases a taxpayer that had qualified for first or second year credits or if an insurance business changes ownership through reorganization, stock purchase or merger, the new taxpayer may claim the second or third year credits if it meets other eligibility requirements of this section. Credits for which a taxpayer qualified before the changes described in this subsection are terminated and lost at the time the changes are implemented.
I. An insurer that claims a tax credit against state premium tax liability is not required to pay any additional retaliatory tax imposed pursuant to section 20‑230 as a result of claiming that tax credit.
J. A failure to timely report and certify to the Arizona commerce authority the information prescribed by section 41‑1525, subsection E and in the manner prescribed by section 41‑1525, subsection F disqualifies the insurer from the credit under this section. The department of insurance and financial institutions shall require written evidence of the timely report to the Arizona commerce authority.
K. A tax credit under this section is subject to recovery for a violation described in section 41‑1525, subsection H.
L. The department may adopt rules necessary for the administration of this section.
M. For the purposes of subsection B, paragraphs 2 and 3 of this section, if a full‑time employee in the qualified employment position leaves during the taxable year, the employee may be replaced with another new full‑time employee in the same employment position and the new employee will be treated as being in the employee's second or third full year of continuous employment for the purposes of the credit under this section if both of the following apply:
1. The total time the position was vacant from the date the employment position was originally filled to the end of the current tax year totals ninety days or less.
2. The new employee meets all of the same requirements as the original employee was required to meet.
Sec. 31. Section 20-224.06, Arizona Revised Statutes, is amended to read:
20-224.06. Premium tax credit for contributions to school tuition organization; low-income scholarships
A. A credit is allowed against the premium tax liability incurred by an insurer pursuant to section 20‑224, 20‑837, 20‑1010, 20‑1060 or 20‑1097.07 for the amount of voluntary cash contributions made by the insurer during the tax year to a school tuition organization.
B. The amount of the credit is the total amount of the insurer's contributions for the tax year under subsection A of this section that is preapproved by the department of revenue pursuant to section 43‑1183, subsection D.
C. The procedures, conditions, limitations, definitions and other requirements prescribed by section 43‑1183 and title 43, chapter 15 apply to the following:
1. Insurers that claim a credit under this section.
2. Claims for credit under this section.
3. School tuition organizations that receive contributions from insurers for the purposes of this section.
4. Schools that qualify to receive scholarship monies contributed by insurers for the purposes of this section.
5. Students who receive scholarships from monies contributed by insurers for the purposes of this section.
D. If the allowable amount of a credit under this section exceeds the insurer's state premium tax liability, the amount of the claim not used to offset the premium tax liability may be carried forward as a credit against the insurer's subsequent years' premium tax liability for a period not to exceed five taxable years.
E. A credit is not allowed if the insurer designates the contribution for the direct benefit of any specific student.
F. An insurer that claims a tax credit against state premium tax liability is not required to pay any additional retaliatory tax imposed pursuant to section 20‑230 as a result of claiming that tax credit.
G. The department of insurance and financial institutions, with the cooperation of the department of revenue, shall adopt rules and publish and prescribe forms and procedures necessary for the administration of this section.
Sec. 32. Section 20-224.07, Arizona Revised Statutes, is amended to read:
20-224.07. Premium tax credit for contributions to school tuition organization; displaced students and students with disabilities
A. A credit is allowed against the premium tax liability incurred by an insurer pursuant to section 20‑224, 20‑837, 20‑1010, 20‑1060 or 20‑1097.07 for the amount of voluntary cash contributions made by the insurer during the tax year to a school tuition organization.
B. The amount of the credit is the total amount of the insurer's contributions for the tax year under subsection A of this section that is preapproved by the department of revenue pursuant to section 43‑1184, subsection D.
C. The procedures, conditions, limitations, definitions and other requirements prescribed by section 43‑1184 and title 43, chapter 15 apply to:
1. Insurers that claim a credit under this section.
2. Claims for credit under this section.
3. School tuition organizations that receive contributions from insurers for the purposes of this section.
4. Qualified schools that participate under this section.
5. Students who receive scholarships from monies contributed by insurers for the purposes of this section.
D. If the allowable amount of a credit under this section exceeds the insurer's state premium tax liability, the amount of the claim not used to offset the premium tax liability may be carried forward as a credit against the insurer's subsequent years' premium tax liability for a period not to exceed five taxable years.
E. A credit is not allowed if the insurer designates the contribution for the direct benefit of any specific student.
F. An insurer that claims a tax credit against state premium tax liability is not required to pay any additional retaliatory tax imposed pursuant to section 20‑230 as a result of claiming that tax credit.
G. The department of insurance and financial institutions, with the cooperation of the department of revenue, shall adopt rules necessary for the administration of this section.
Sec. 33. Section 20-237, Arizona Revised Statutes, is amended to read:
20-237. Failure to provide information; penalty
If after a hearing and certification by the department of transportation the director of the department of insurance and financial institutions finds that an insurer has failed to comply with the provisions of section 28‑4148, the director of the department of insurance and financial institutions shall impose a civil penalty for each violation of not more than two hundred fifty dollars $250 per day for each day the insurer is in violation of section 28‑4148. The director of the department of insurance and financial institutions also may suspend the insurer's certificate of authority until the insurer complies with the provisions of section 28‑4148. No penalty shall be imposed pursuant to this section if noncompliance is determined by the director of the department of insurance and financial institutions to have been inadvertent or accidental. The burden of proving that the noncompliance was inadvertent or accidental shall be on the insurer.
Sec. 34. Section 20-261.03, Arizona Revised Statutes, is amended to read:
20-261.03. Qualified United States financial institution; definitions
A. For the purposes of section 20‑261.02, subsection B and section 20‑261.06, subsection B, "qualified United States financial institution" means an institution that:
1. Is organized, or in the case of a United States office of a foreign banking organization, licensed, under the laws of the United States or any state of the United States.
2. Is regulated, supervised and examined by federal or state authorities having regulatory authority over banks and trust companies.
3. According to the director of the department of insurance and financial institutions or the securities valuation office of the national association of insurance commissioners, meets the standards of financial condition and standing that are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the director.
B. For the purposes of this article, except for the purposes of section 20‑261.02, subsection B and section 20‑261.06, subsection B, "qualified United States financial institution" means an institution that:
1. Is organized, or in the case of a United States branch or agency office of a foreign banking organization, licensed, under the laws of the United States or any state of the United States that has been granted authority to operate with fiduciary powers.
2. Is regulated, supervised and examined by federal or state authorities having regulatory authority over banks and trust companies.
Sec. 35. Section 20-265, Arizona Revised Statutes, is amended to read:
20-265. Motor vehicle insurance; premium and fee comparisons and complaint ratios
The department of insurance and financial institutions shall compile comparisons of premium premiums and fees charged at policy inception and complaint ratios for motor vehicle insurance policies that insure six or fewer motor vehicles. The comparisons shall reflect premiums and fees associated with the inception of a policy for not fewer than five hypothetical insureds for urban areas and five hypothetical insureds for rural areas. The department of insurance and financial institutions shall forward copies of the comparisons of premium premiums and fees charged at policy inception and complaint ratios to the department of transportation. The director of the department of transportation in consultation with the director of the department of insurance and financial institutions shall make the copies available to the public. The department of insurance and financial institutions may include in the premium comparison information consumer information that describes the nature of bodily injury coverage, property damage coverage, collision coverage, comprehensive coverage, medical payment coverage, uninsured motorist coverage and underinsured motorist coverage.
Sec. 36. Section 20-285, Arizona Revised Statutes, is amended to read:
20-285. Application for license
A. A person who applies for a resident insurance producer license shall apply to the director on a form prescribed by the director and shall declare under penalty of denial, suspension or revocation of the license that the statements made in the application are true, correct and complete to the best of the knowledge and belief of the applicant or the applicant's duly authorized representative. The applicant shall provide information concerning the applicant's identity, personal history, business record and experience in insurance and any other pertinent fact the director requires.
B. Before the director approves the application of the individual, the director shall find that the individual:
1. Is at least eighteen years of age.
2. Has not committed any act that is a ground for denial, suspension or revocation prescribed in section 20‑295.
3. Has paid the fees prescribed in section 20‑167.
4. Has successfully passed the examinations for the lines of authority for which the individual has applied.
C. Before the director approves the application of a business entity, the director shall find that the business entity:
1. Has paid the fees prescribed in section 20‑167.
2. Will be acting within the scope of its partnership agreement, articles of incorporation or other chartering documents when the business entity transacts business under the license.
3. Has designated an individually licensed insurance producer who is responsible for the business entity's compliance with the insurance laws of this state.
D. The application of a business entity shall also include the names of all members, officers and directors of the business entity. For any individual who is identified pursuant to this subsection and pursuant to subsection C, paragraph 3 of this section, the director may require the applicant to provide the information required for a license as an individual.
E. Before the director grants a license, the director may require the applicant to:
1. Provide any document that is reasonably necessary to verify the information that is contained in an application and other information including prior criminal records.
2. Submit a full set of fingerprints to the department. The department of insurance and financial institutions shall submit the fingerprints to the department of public safety for the purpose of obtaining a state and federal criminal records check pursuant to section 41‑1750 and Public Law 92‑544. The department of public safety may exchange this fingerprint data with the federal bureau of investigation.
F. A nonresident person who is licensed as an insurance producer in another state, who becomes a resident of this state and who continues to act as an insurance producer shall apply to become a resident licensee pursuant to this section within ninety days.
Sec. 37. Section 20-289, Arizona Revised Statutes, is amended to read:
20-289. Expiration; surrender; renewal
A. Any license that is issued pursuant to this article, other than a temporary license, continues in force until it expires or the director suspends, revokes or terminates the license. The license is also subject to renewal pursuant to this section.
B. A license that is issued or renewed pursuant to this article or a license that is issued or renewed pursuant to chapter 6, article 9 of this title expires quadrennially as follows:
1. If the licensee is an individual, on the last day of the month of the licensee's birthday, but not less than three years and not more than four years after the last day of the month in which the license is issued or is required to be renewed.
2. If the licensee is a business entity, on the last day of the same month four years after the issuance or renewal due date of the license as provided pursuant to this article.
C. The director may renew a license if the director receives from the licensee all of the following on or before the license expiration date:
1. An application on a form approved by the director.
2. The license fee prescribed in section 20‑167.
3. Evidence that the licensee has complied with the continuing education requirements prescribed in chapter 18 of this title.
D. Before renewing a license, the director may require the applicant to:
1. Provide all documents that are reasonably necessary to verify the information that is contained in the application and any other information including prior criminal records.
2. Submit a full set of fingerprints to the department. The department of insurance and financial institutions shall submit the fingerprints to the department of public safety for the purpose of obtaining a state and federal criminal records check pursuant to section 41‑1750 and Public Law 92‑544. The department of public safety may exchange this fingerprint data with the federal bureau of investigation.
E. Any license for which the director does not receive timely application for renewal and full payment of fees expires at midnight on the renewal date. During the year after the expiration of a license under this section, a person who otherwise meets the qualifications for a license may renew an expired license by filing with the director a renewal application, the quadrennial license fee and an additional one hundred dollars $100 as a late renewal fee. Any application that is received during this one year one-year period for the same license that expired under this section is deemed a renewal application. Any application that is received after the one year one-year period for the same license that expired under this section is deemed a new application.
F. On the written request of a person who is licensed pursuant to this article, the director may accept the voluntary surrender of the person's authority to transact one or more lines of insurance or of the person's entire license. A person who surrenders an authority or a license under this subsection shall not reapply for the same authority or license for at least one year after the date of the surrender.
Sec. 38. Section 20-336.03, Arizona Revised Statutes, is amended to read:
20-336.03. Navigators; licensing
A. A person who applies for a navigator license shall apply to the director on a form prescribed by the director and shall declare under penalty of license denial, suspension or revocation that the statements made in the application are true, correct and complete to the best of the knowledge and belief of the applicant or the applicant's duly authorized representative. The applicant shall provide information concerning the applicant's identity, personal history, business record and experience in insurance and any other pertinent fact the director requires.
B. Before the director approves an individual's navigator application, the director shall find that the individual:
1. Is at least eighteen years of age.
2. Has not committed any act that is a ground for license denial, suspension or revocation as prescribed in section 20‑295 and has not been convicted of a misdemeanor involving fraud or dishonesty.
3. Has provided evidence of navigator certification from the United States department of health and human services.
4. Has submitted a full set of fingerprints to the director and successfully completed a criminal history records check in a manner prescribed by the director.
5. Has identified the entity with which it is affiliated and supervised.
C. A business entity that acts as a navigator, supervises the activities of individual navigators or receives funding to perform navigator activities shall obtain a navigator entity license. Before the director approves a business entity's navigator application, the director shall find that the business entity:
1. Has not committed any act that is a ground for license denial, suspension or revocation as prescribed in section 20‑295 and has not been convicted of a misdemeanor involving fraud or dishonesty.
2. Has designated an individually licensed navigator who is responsible for the business entity's compliance with the insurance laws of this state.
D. A business entity's navigator application shall also include the names of all members, officers and directors of the business entity. For any individual who is identified pursuant to this subsection, the director may require the applicant to provide the information required for a license as an individual.
E. The department of insurance and financial institutions shall submit the fingerprints received pursuant to subsection B of this section to the department of public safety for the purpose of obtaining a state and federal criminal records check pursuant to section 41‑1750 and Public Law 92‑544. The department of public safety may exchange the fingerprint data it receives pursuant to this subsection with the federal bureau of investigation.
F. Unless the person is licensed for that line of authority pursuant to this title, a navigator may not:
1. Sell, solicit or negotiate insurance in this state for any class or classes of insurance.
2. Recommend, endorse or offer opinions about the benefits, terms and features of a particular health benefit plan or offer an opinion about which health benefit plan is better or worse for a particular individual or employer.
3. Provide any information or services related to a health benefit plan or another product not offered in the exchange.
4. Engage in any unfair method of competition or any fraudulent, deceptive or dishonest act or practice.
G. The expiration date for a navigator license issued to a person who also holds a license pursuant to this title is the same as the expiration date for the insurance producer license.
Sec. 39. Section 20-336.04, Arizona Revised Statutes, is amended to read:
20-336.04. Certified application counselors; licensing
A. An individual who applies for a certified application counselor license shall apply to the director on a form prescribed by the director and shall declare under penalty of license denial, suspension or revocation that the statements made in the application are true, correct and complete to the best of the knowledge and belief of the applicant or the applicant's duly authorized representative. The applicant shall provide information concerning the applicant's identity, personal history, business record and experience in insurance and any other pertinent fact the director requires.
B. Before the director approves an individual's certified application counselor application, the director shall find that the individual:
1. Is at least eighteen years of age.
2. Has not committed any act that is a ground for license denial, suspension or revocation as prescribed in section 20‑295 and has not been convicted of a misdemeanor involving fraud or dishonesty.
3. Has met the standards and provided evidence of certification as prescribed by 45 Code of Federal Regulations section 155.225.
4. Has submitted a full set of fingerprints to the director and successfully completed a criminal history records check in a manner prescribed by the director.
5. Has identified the entity with which the individual is affiliated and supervised.
C. The department of insurance and financial institutions shall submit the fingerprints received pursuant to subsection B of this section to the department of public safety for the purpose of obtaining a state and federal criminal records check pursuant to section 41‑1750 and Public Law 92‑544. The department of public safety may exchange the fingerprint data it receives pursuant to this subsection with the federal bureau of investigation.
D. Unless the person is licensed for that line of authority pursuant to this title, a certified application counselor may not:
1. Sell, solicit or negotiate insurance in this state for any class or classes of insurance.
2. Recommend, endorse or offer opinions about the benefits, terms and features of a particular health benefit plan or offer an opinion about which health benefit plan is better or worse for a particular individual or employer.
3. Provide any information or services related to a health benefit plan or another product not offered in the exchange.
4. Engage in any unfair method of competition or any fraudulent, deceptive or dishonest act or practice.
E. The expiration date for a certified application counselor license issued to a person who also holds a license pursuant to this title is the same as the expiration date for the insurance producer license.
Sec. 40. Section 20-340.01, Arizona Revised Statutes, is amended to read:
20-340.01. Bail bond agents; licensure; business entities; place of business; receipt; maintenance of records
A. A person shall not act as a bail bond agent in this state unless the person is licensed by the director in accordance with this article. An applicant for a bail bond agent license shall submit an affidavit attesting to the applicant's residency in this state for at least one year immediately preceding the date of application.
B. Each applicant for a bail bond agent license shall submit a full set of fingerprints to the department of insurance and financial institutions for the purpose of obtaining a state and federal criminal records check pursuant to section 41‑1750 and Public Law 92‑544. The department of public safety may exchange this fingerprint data with the federal bureau of investigation. The department of insurance and financial institutions shall not issue a license until it receives the state and federal criminal history records check and the applicant is qualified for licensure.
C. The director shall not license a resident business entity as a bail bond agent unless each owner and shareholder is individually licensed as a bail bond agent.
D. A person who is licensed as a bail bond agent in this state is not authorized in this state to transact civil bonds in connection with contracts, administrative proceedings or other noncriminal matters on behalf of a surety insurer unless the bail bond agent is also licensed as a casualty producer in this state.
E. Each bail bond agent shall have and maintain a place of business in this state that is accessible to the public and where the bail bond agent principally conducts transactions under the agent's license.
F. As a minimum requirement for permanent office records, each bail bond agent and general lines agent who is engaged in the bail bond business shall maintain a daily bond register that is the original and permanent record of all bonds or undertakings executed by the licensee and that states all of the following:
1. The number of the power of attorney form.
2. The date the bond was executed.
3. The name of the principal.
4. The amount of the bond.
5. The premium charged.
6. The premium reported to the surety company.
7. The security or collateral received.
8. The date the security or collateral was received and the date released.
9. The indemnity agreements.
10. The disposition of the bond.
11. The date of disposition.
G. Each bail bond agent and general lines agent who is engaged in the bail bond business and who accepts monies or any other consideration for any bail bond undertaking shall for each payment received give to the person paying the monies or giving the consideration a prenumbered receipt as evidence of payment. The receipt must state the date, the name of the principal, a description of the consideration or amount of monies received and the purpose for which received, the number of the power of attorney form attached to the bond, the penal sum of the bond, the name of the person making the payment or giving the consideration and the terms under which the monies or other consideration shall be released. Each bail bond agent shall retain a duplicate copy of each receipt issued as part of the agent's records.
H. The bail bond agent shall keep at the agent's place of business the usual and customary records pertaining to transactions made under the license. The licensee shall keep all the records as to any particular transaction available and open to the inspection of the director at any business time during the three years immediately after the date of completion of the transaction.
I. The director may examine the business practices, books and records of any bail bond agent as often as the director deems appropriate. The bail bond agent shall pay the costs incurred for the examination.
Sec. 41. Section 20-340.04, Arizona Revised Statutes, is amended to read:
20-340.04. Bail recovery agent prohibitions; criminal records checks
A. No A person who has been convicted in any jurisdiction of theft, any felony or any crime involving the carrying or illegal use or possession of a deadly weapon or dangerous instrument may not act as a bail recovery agent.
B. A person shall submit a full set of fingerprints to the department before acting as a bail recovery agent and shall submit a new set of fingerprints on or before September 1 of every third year after initial identification by the bail bond agent in the report that is filed with the director pursuant to section 13‑3885, subsection C. The department of insurance and financial institutions shall submit the fingerprints to the department of public safety for the purpose of obtaining a state and federal criminal records check pursuant to section 41‑1750 and Public Law 92‑544. The fingerprint processing fee collected by the department shall be an amount that does not exceed the cost to the department that is charged by the federal bureau of investigation for the fingerprint processing to obtain federal criminal history record information. The department of public safety may exchange this fingerprint data with the federal bureau of investigation. The department of public safety shall provide the criminal history record information to the director pursuant to section 41‑1750.
C. Any person who acts as a bail recovery agent on behalf of any bail bond agent and any person who conducts any action relating to a bail recovery or apprehension must be identified by the bail bond agent in the report that is filed with the director pursuant to section 13‑3885, subsections C and D.
D. A bail bond agent may not employ a bail recovery agent who does not comply with this section and who has not been identified by the bail bond agent in the report that is filed with the director pursuant to section 13‑3885, subsection C. A bail bond agent who is not licensed in this state shall contract with a bail bond agent in this state to retain the services of a bail recovery agent in this state.
Sec. 42. Section 20-367, Arizona Revised Statutes, is amended to read:
20-367. Workers' compensation appeals board; composition
A. A workers' compensation appeals board is established in the department.
B. The board director shall have appoint at least nine but not more than eleven members who are appointed by to the director board. The members shall serve three year three-year terms. A member shall not serve more than two consecutive terms.
C. The board shall be comprised of at least:
1. The following voting members:
(a) Five representatives of insurers, one of which is the insurer with the largest Arizona workers' compensation market share as reported by the department of insurance and financial institutions in its latest annual report. Any licensed rating organization that meets the requirements prescribed in section 20‑363, subsection E may nominate from its membership in this state one representative for each complete twenty per cent percent share of the total statewide workers' compensation net written premium for the preceding calendar year attributable to its membership. The director shall appoint any remaining insurer representatives needed to constitute five members as ratably as possible based on distribution of the total statewide workers' compensation net written premium for the preceding calendar year.
(b) Four representatives of the public. At least two shall be representatives of employers, and the remaining public members shall be persons who are knowledgeable about workers' compensation insurance.
2. One representative from any designated statistical agent who shall serve as a nonvoting advisory member.
D. The board members shall select a chairperson who shall call meetings as needed to consider requests made pursuant to section 20‑367.01 or on request of the director.
E. The board shall submit to the director a plan of operation and all amendments that are necessary or suitable to ensure the fair, reasonable and equitable administration of the appeals process. The plan of operation and all amendments are effective on approval by the director.
F. Subject to the powers of the director, the board shall review appeals that are filed pursuant to section 20‑367.01. The board may affirm the action of the rating organization or insurer or direct any rating organization or insurer to modify or reverse its application of the rating system that resulted in the appeal.
G. Members of the board are not eligible to receive compensation or travel expenses under title 38, chapter 4, article 2.
Sec. 43. Section 20-398, Arizona Revised Statutes, is amended to read:
20-398. Policy forms; approval or disapproval; exemption
A. Except for fidelity, surety or guaranty bonds or industrial insurance as provided in section 20‑400.10, except for any portion of a property insurance policy that contains wildfire protection services, and except as to inland marine risks that by general custom of the business are not written according to manual rates or rating plans, no a policy form applying to insurance on risks or operations covered by this article may not be delivered or issued for delivery unless the form has been filed with the director and either the director has issued, within thirty days, an order affirmatively approving or disapproving the form or, the thirty‑day period has elapsed and the director has not disapproved the form as ambiguous, misleading or deceptive. On written notice given within the thirty‑day period to the person making the filing, the director may extend the period for up to fifteen additional days to enable the director to complete the review of the filing.
B. The director may, by order, may exempt from the requirements of this section, for as long as the director deems proper, any insurance document or form as specified in the order, to which, in the director's opinion, this section may not practicably be applied, or the filing and approval of which are, in the director's opinion, not desirable or necessary for the protection of the public.
C. Any property insurance policy containing wildfire protection services, including wildfire mitigation and wildfire suppression services conducted by a private entity, that is issued for delivery to an insured in this state, shall contain a conspicuously stamped or written notice in bold‑faced type that states that the wildfire protection services are not subject to review by the department of insurance.
Sec. 44. Repeal
Section 20-400.08, Arizona Revised Statutes, is repealed.
Sec. 45. Section 20-400.10, Arizona Revised Statutes, is amended to read:
20-400.10. Industrial insureds
A. An industrial insured as defined in section 20‑401.07 may purchase and an admitted insurer may sell to an industrial insured a policy of insurance that is subject to article 4.1 of this chapter and that is on a form that has not been filed for review or approval by the director pursuant to article 4.1 of this chapter. The admitted insurer may use rates for a policy provided pursuant to this section that have not been filed for review or approval by the director pursuant to article 4.1 of this chapter.
B. At the inception of each new policy and at the time of each renewal, but not less than annually during the term of the policy, each industrial insured that purchases a policy as provided in this section shall certify to the insurer on a form prescribed by the director that the insured meets the definition of industrial insured prescribed in section 20‑401.07.
C. Except as otherwise provided in section 20‑407, subsection B, the insurer shall maintain the certification described in subsection B of this section in the insurer's policy file.
D. The following provisions do not apply to insurance issued to industrial insureds pursuant to this section:
1. Section 20‑229.
2. Section 20‑400.
3. Sections 20‑400.01 through 20‑400.05 and 20‑400.07.
4. Section 20‑448, subsection C.
5. Section 20‑451.
6. Section 20‑452.
7. Section 20‑465.
8. Sections 20‑1111 through 20‑1117.
9. Sections 20‑1120, 20‑1121 and 20‑1122.
10. Chapter 2, Article 4.1 of this title chapter.
11. Chapter 3, article 6 of this title.
12. Chapter 6, articles 7 and 14 of this title.
E. Any policy issued for delivery to an industrial insured in this state by an insurer pursuant to this section shall contain a conspicuously stamped or written notice in bold‑faced type that states:
Pursuant to Arizona Revised Statutes section 20‑400.10, this policy and the rates charged for it have not been filed with or approved by the director of the Arizona department of insurance and financial institutions. Certain provisions of Arizona law, specified in Arizona Revised Statutes section 20‑400.10, do not apply to this policy. If the insurer that issued this policy becomes insolvent, insureds or claimants will not be eligible for insurance guaranty fund protection pursuant to Arizona Revised Statutes title 20.
F. An insurer shall annually file with the insurer's annual statement filed pursuant to section 20‑223 on a form prescribed by the director the following information for the prior year ending December 31 for all policies issued to industrial insureds pursuant to this section:
1. The total number of policies written.
2. The total premiums written.
3. The total premiums earned.
4. The total losses paid.
5. The total losses incurred.
6. The total number of claims incurred.
7. Any other information the director deems appropriate.
Sec. 46. Section 20-401.03, Arizona Revised Statutes, is amended to read:
20-401.03. Service of process in an action by the director
A. Any act of transacting an insurance business in violation of section 20‑401.01 by any unauthorized insurer is equivalent to and shall constitute constitutes an irrevocable appointment by such insurer, binding upon him, his on the insurer, the insurer's executor or administrator, or successor in interest if a corporation, of the secretary of state or his the secretary of state's successor in office to be the true and lawful attorney of such insurer upon on whom may be served all lawful process in any action, suit or proceeding in any court by the director of insurance, through the attorney general, and upon on whom may be served any notice, order, pleading or process in any proceeding before the director of insurance and which arises out of transacting an insurance business in this state by such insurer. Any act of transacting an insurance business in this state by any unauthorized insurer shall be signification of its agreement that any such lawful process in such court action, suit or proceedings and any such notice, order, pleading or process in such administrative proceeding before the director of insurance so served shall be of the same legal force and validity as personal service of process in this state upon on such insurer.
B. Service of process in an action prescribed by subsection A of this section shall be made by delivering to and leaving with the secretary of state, or some person in apparent charge of his the secretary of state's office, two copies of such process. Service upon on the secretary of state as such attorney shall be service upon on the principal.
C. The secretary of state shall forthwith immediately forward, by registered or certified mail, one copy of such process or such notice, order, pleading or process in proceedings before the director to the defendant in such court proceeding or to whom the notice, order, pleading or process in such administrative proceeding is addressed or directed at its last known principal place of business and shall keep a record of all process so served on him the secretary of state which shall show the day and hour of service. Such service shall be sufficient, provided:
1. Notice of such service and a copy of the court process or the notice, order, pleading or process in such administrative proceeding are sent within ten days thereafter by registered or certified mail by the director of insurance or the attorney general in the court proceeding or by the director of insurance in the administrative proceeding to the defendant in the court proceeding or to whom the notice, order, pleading or process in such administrative proceeding is addressed or directed at the last known principal place of business of the defendant in the court or administrative proceeding.
2. The defendant's receipt or receipts, issued by the post office with which the letter is registered or certified, showing the name of the sender of the letter and the name and address of the person or insurer to whom the letter is addressed, and an affidavit of the director of insurance or the attorney general in court proceeding or of the director of insurance in administrative proceeding, showing compliance therewith, are filed with the clerk of the court in which such action, suit or proceeding is pending or with the director in administrative proceedings, on or before the date the defendant in the court or administrative proceeding is required to appear or respond thereto, or within such further time as the court or director of insurance may allow.
D. The director of insurance or the attorney general shall not be entitled to a judgment or a determination by default in any court or administrative proceeding in which court process or notice, order, pleading or process in proceedings before the director of insurance is served under this section until the expiration of thirty days from the date of filing of the affidavit of compliance.
E. Nothing in This section shall does not limit or affect the right to serve any process, notice, order or demand upon on any person or insurer in any other manner now or hereafter permitted allowed by law or rules of the courts.
Sec. 47. Section 20-401.04, Arizona Revised Statutes, is amended to read:
20-401.04. Action by attorney general to enforce order or decision of court or director; foreign decrees
A. The attorney general upon, on request of the director, may proceed in the courts of this state or any reciprocal state to enforce an order or decision in any court proceeding, in or any administrative proceeding before the director of insurance or any foreign decree.
B. The director of insurance of this state shall determine which states and territories qualify as reciprocal states and shall maintain at all times an up‑to‑date list of such those states.
C. A copy of any foreign decree authenticated as provided by the laws of this state may be filed in the office of the clerk of any superior court of in this state. The clerk, upon on verifying with the director of insurance that the decree or order qualified as a foreign decree, shall treat the foreign decree in the same manner as a decree of a superior court of in this state. A foreign decree so filed has the same effect and shall be deemed as a decree of a superior court of in this state, and is subject to the same procedures, defenses and proceedings for reopening, vacating, or staying as a decree of a superior court of in this state and may be enforced or satisfied in like manner.
D. At the time of the filing of the foreign decree, the attorney general shall make and file with the clerk of the court an affidavit setting forth the name and last known post office address of the defendant.
E. Promptly upon on the filing of the foreign decree and the affidavit, the clerk shall mail notice of the filing of the foreign decree to the defendant at the address given and to the director of insurance of this state and shall make a note of the mailing in the docket. In addition, the attorney general may mail a notice of the filing of the foreign decree to the defendant and to the director of insurance of this state and may file proof of mailing with the clerk. Lack of mailing notice of filing by the clerk shall does not affect the enforcement proceedings if proof of mailing by the attorney general has been filed.
F. No An execution or other process for enforcement of a foreign decree filed under this section shall not issue until thirty days after the date the decree is filed.
G. If the defendant shows the superior court that an appeal from the foreign decree is pending or will be taken, or that a stay of execution has been granted, the court shall stay enforcement of the foreign decree until the appeal is concluded, the time for appeal expires, or the stay of execution expires or is vacated, upon on proof that the defendant has furnished the security for the satisfaction of the decree required by the state in which it was rendered.
H. If the defendant shows the superior court any ground upon on which enforcement of a decree of any superior court of in this state would be stayed, the court shall stay enforcement of the foreign decree for an appropriate period, upon on requiring the same security for satisfaction of the decree which that is required in this state.
Sec. 48. Section 20-401.05, Arizona Revised Statutes, is amended to read:
20-401.05. Certificate of exemption; definitions
A. On July 1 of each year, the director shall grant a certificate of exemption to any insurer, employee benefit trust or voluntary employees' beneficiary association transacting life insurance, disability insurance or annuity business, or providing other health or welfare benefits, under the laws of its domicile that:
1. Is organized and operated without profit to any person, firm, partnership, association, corporation or other entity.
2. Is organized and operated exclusively for either of the following purposes:
(a) Aiding educational or scientific institutions that are also organized and operated without profit to any person, firm, partnership, association, corporation or other entity.
(b) Aiding agricultural institutions if the grantee is subject to regulation either as an insurer, a multiple employer welfare arrangement or an employee benefit trust by its state of domicile.
3. Serves a purpose prescribed in paragraph 2 of this subsection by issuing insurance, annuity and employee benefits contracts only to or for the benefit of the educational, scientific or agricultural institutions or their respective members or to individuals engaged in the service of those institutions.
4. Appoints the secretary of state, and the secretary of state's successors in office, as its true and lawful attorney on whom may be served all lawful process in any action, suit or proceeding in any court by the director of the department of insurance and financial institutions, through the attorney general, or any action or proceeding against the insurer, employee benefit trust or voluntary employees' beneficiary association brought by someone other than the director of the department of insurance and financial institutions, which appointment is irrevocable, binds the insurer, employee benefit trust or voluntary employees' beneficiary association or any successor in interest, remains in effect as long as there is in force in this state any contract or policy made or issued by the insurer, employee benefit trust or voluntary employees' beneficiary association or any obligation arising therefrom and must be processed in accordance with sections 20‑401.03 and 20‑403.
5. Is fully and legally organized and qualified to do business and has been actively doing business under the laws of the state of its domicile for a period of at least twenty years before its application for a certificate of exemption.
6. Files with the director for the director's approval a copy of any policy or contract form issued to residents of this state.
7. Files with the director on or before March 1 of each year a copy of its annual statement prepared pursuant to the laws of its state of domicile, as well as any other financial material as may be requested, including the annual statement or such other financial materials as may be requested relating to any subsidiary or other legal entity operated by the insurer, employee benefit trust or voluntary employees' beneficiary association under a management contract or other form of agreement, and coincident with the filing of its annual statement, pays the filing fee prescribed in section 20‑167.
8. Agrees to submit to periodic examinations as may be deemed necessary by the director.
B. On or before March 1 of each year, any insurer holding a certificate of exemption shall file with the director a form of premium tax return prescribed by the director and shall pay the premium tax imposed by section 20‑224 on all policies of life insurance and disability insurance in force with residents of this state.
C. After a hearing, the director may refuse to renew, or may revoke or suspend, a certificate of exemption if the director finds that the insurer, employee benefit trust or voluntary employees' beneficiary association no longer meets the requirements of this section, or finds that the insurer, employee benefit trust or voluntary employees' beneficiary association has violated any provisions provision of article 6 of this chapter.
D. For the purposes of this section:
1. "Agricultural institutions" means agricultural growers, shippers, packers, brokers, distributors, wholesalers, receivers and jobbers, or affiliated, associated and related suppliers, industries or firms.
2. "Voluntary employees’ beneficiary association" means an association described in 26 United States Code section 501(c)(9).
Sec. 49. Section 20-403, Arizona Revised Statutes, is amended to read:
20-403. Service of process in an action by someone other than the director
A. The transaction of an insurance business in this state, as provided in section 20‑106, by, or on behalf of, an unauthorized nonresident insurer shall be deemed to constitute an appointment by the insurer of the director and his the director's successors in office as its attorney, upon on whom may be served all lawful process issued within this state in any action or proceeding against such insurer brought by someone other than the director of insurance and arising out of any such transaction.
B. Such service of process shall be made by delivering to and leaving with the director two copies thereof. At the time of service the plaintiff shall pay five dollars $5 to the director, taxable as costs in the action. The director shall forthwith immediately mail by registered or certified mail one of the copies of process to the defendant at its principal place of business as last known to the director, and shall keep a record of all process so served.
C. Notice of service and a copy of process shall be sent by the plaintiff's attorney to the defendant insurer at its last known principal place of business by registered or certified mail. The defendant insurer's receipt, or registry receipt as to the mailing issued by the post office where registered or certified, showing the name of the sender and name and address of the addressee, and the affidavit of plaintiff's attorney showing compliance with this subsection, shall be filed in the court in which the action is pending on or before the date the defendant insurer is required to appear, or within such further time as the court may allow. No A judgment by default against the insurer may not be taken under this section until the expiration of thirty days from after the date of filing of the affidavit of compliance.
D. Service of process in such an action or proceeding against an unauthorized resident insurer shall be valid if served upon on any person within this state who transacts an insurance business in this state on behalf of such insurer. The requirements of Subsection C of this section shall likewise apply applies with respect to such service of process.
E. Service of process upon such on an insurer in accordance with this section shall be as valid and effective as if served upon on a defendant personally present in this state.
F. Means provided in this section for service of process upon on the insurer shall not be deemed to prevent service of process upon on the insurer by any other lawful means.
G. An insurer which that has been so served with process, subject to section 20‑405, shall have the right to appear in and defend the action and employ attorneys and other persons in this state to assist in its the action's defense thereto or settlement thereof.
Sec. 50. Section 20-410, Arizona Revised Statutes, is amended to read:
20-410. Validity of surplus lines insurance; disclosure; policy fees
A. Insurance contracts procured as surplus lines coverage are fully valid and enforceable as to all parties and shall be recognized in all matters in the same manner as like contracts issued by authorized insurers.
B. Any policy and any evidence of surplus lines coverage that is are issued by an unauthorized insurer pursuant to this article and that is are issued for delivery to the insured shall contain a conspicuously stamped or written notice in bold‑faced type that states one of the following:
1. If the surplus lines policy or and any evidence of coverage is are issued by a surplus lines insurer that is not a domestic surplus lines insurer:
Pursuant to section 20‑401.01, subsection B, paragraph 1, Arizona Revised Statutes, this policy is issued by an insurer that does not possess a certificate of authority from the director of the Arizona department of insurance and financial institutions. If the insurer that issued this policy becomes insolvent, insureds or claimants will not be eligible for insurance guaranty fund protection pursuant to title 20, Arizona Revised Statutes.
2. If the surplus lines policy or and any evidence of coverage is are issued by a domestic surplus lines insurer:
If the insurer that issued this policy becomes insolvent, insureds or claimants will not be eligible for insurance guaranty fund protection pursuant to title 20, Arizona Revised Statutes.
C. A surplus lines broker may charge and receive a fee in addition to the premium for services provided in the transaction of surplus lines insurance if before effecting any coverage both of the following conditions are met:
1. The service fees and the specific services for which the fees are charged are disclosed to the insured or the insured's representative and are agreed to in writing by the insured or the insured's representative.
2. The taxes prescribed in section 20‑416 are paid on any fees charged to the insured.
Sec. 51. Section 20-422, Arizona Revised Statutes, is amended to read:
20-422. Alien insurance for coverage in Mexico
A. A person shall not solicit or accept applications in this state for insurance or collect a commission on a policy that is to be effective in Mexico and only outside the geographical limits of this state and that is to be issued by an alien insurer or insurers not authorized to transact insurance in this state, unless that person is licensed pursuant to section 20‑411, 20‑411.01 or 20‑411.02 or any agent or employee of that licensed person or any other authorized insurance producer in this state provided that the insurance producer obtains the coverage through that licensed person.
B. Except for sections 20‑411, 20‑411.01, 20‑411.02, 20‑414 and 20‑418, the insurance prescribed in this section is not subject to this article.
C. Any policy and any evidence of coverage that is are issued by an alien insurer and that is are issued pursuant to this section for delivery to the insured in this state shall contain a conspicuously stamped or written notice in bold‑faced type that states:
This policy is issued by an insurance company that is not regulated by the Arizona department of insurance and financial institutions. The insurance company may not provide claims service and may not be subject to service of process in Arizona. If the insurance company becomes insolvent, insureds or claimants will not be eligible for protection under Arizona law.
Sec. 52. Section 20-423, Arizona Revised Statutes, is amended to read:
20-423. Voluntary domestic organization of surplus lines brokers; membership; stamping fee collection; meetings; definition
A. A voluntary domestic organization of surplus lines brokers that contracts with the director pursuant to section 20‑167, subsection G F shall be incorporated in this state as a nonprofit corporation. A surplus lines broker who is licensed and in good standing in this state may be a member in the organization if the broker pays any required membership fee and dues required to be paid by all members.
B. The organization may collect stamping fees pursuant to section 20‑167 from any of the following:
1. A member of the organization.
2. A licensed surplus lines broker who is not a member of the organization.
3. A person who is no longer a licensed surplus lines broker if the stamping fee is paid in connection with transactions that the person effectuated while licensed as a surplus lines broker.
C. The organization shall hold an annual meeting of its members and may hold special meetings of its members. Members may participate in annual and special member meetings through the use of any means of communication if the communication allows all members participating in the meeting to simultaneously hear each other during the meeting and the organization provides a meeting notice that specifies how members can participate. Any member participating by this alternate means of communication is deemed to be present in person at the meeting for purposes of determining a quorum and voting and for any other purpose authorized or required by law.
D. Two percent of the total membership of the organization present in person or by proxy and entitled to vote at a meeting constitutes a quorum for the transaction of business at the meeting.
E. For the purposes of this section, "stamping fee" has the same meaning prescribed in section 20‑167.
Sec. 53. Section 20-466, Arizona Revised Statutes, is amended to read:
20-466. Fraud unit; investigators; peace officer status; powers; information sharing; assessment
A. A The fraud unit is established in the department of insurance and financial institutions. The director of the department of insurance and financial institutions shall appoint an individual to operate the fraud unit in conjunction with operating the automobile theft authority established by section 41‑3451.
B. The fraud unit shall work in conjunction with the department of public safety.
C. The director may investigate any act or practice of fraud prohibited by section 20‑466.01 and any other act or practice of fraud against an insurer or entity licensed under this title. The director shall administer the fraud unit.
D. The director may employ investigators for the fraud unit. A fraud unit investigator has and shall exercise the law enforcement powers of a peace officer of this state but only while acting in the course and scope of employment for the department. The director shall adopt guidelines for the conduct of investigations that are substantially similar to the investigative policy and procedural guidelines of the department of public safety for peace officers. Fraud unit investigators shall not preempt the authority and jurisdiction of other law enforcement agencies of this state or its political subdivisions. Fraud unit investigators:
1. Shall have at least the qualifications prescribed by the Arizona peace officer standards and training board pursuant to section 41‑1822.
2. Are not eligible to participate in the public safety personnel retirement system established by title 38, chapter 5, article 4 due solely to employment as fraud unit investigators.
E. The director may request the submission of papers, documents, reports or other evidence relating to an investigation under this section. The director may issue subpoenas and take other actions pursuant to section 20‑160. The materials are privileged and confidential until the director completes the investigation. Any documents, materials or other information that is provided to the director pursuant to this section is not subject to discovery or subpoena until opened for public inspection by the director or, after notice and a hearing, a court determines that the director would not be unduly burdened by compliance with the subpoena. The director shall keep the identity of an informant confidential, including any information that might identify the informant, unless the request for information is made by a law enforcement agency, the attorney general or a county attorney for purposes of a criminal investigation or prosecution. The director may use the documents, materials or other information in the furtherance of any regulatory or legal action brought as a part of the director's official duties.
F. If the documents, materials or other information the director seeks to obtain by request is located outside this state, the person requested to provide the documents, materials or other information shall arrange for the fraud unit or a representative, including an official of the state in which the documents, materials or other information is located, to examine the documents, materials or other information where it is located. The director may respond to similar requests from other states.
G. An insurer that believes a fraudulent claim has been or is being made shall send to the director, on a form prescribed by the director, information relative to the claim including the identity of parties claiming loss or damage as a result of an accident and any other information the fraud unit may require. The director shall review the report and determine if further investigation is necessary. If the director determines that further investigation is necessary, the director may conduct an independent investigation to determine if fraud, deceit or intentional misrepresentation in the submission of the claim exists. If the director is satisfied that fraud, deceit or intentional misrepresentation of any kind has been committed in the submission of a claim, the director may report the violations of the law to the reporting insurer, to the appropriate licensing agency as defined in section 20‑466.04 and to the appropriate county attorney or the attorney general for prosecution.
H. The director may:
1. Share nonpublic documents, materials or other information with other state, federal and international regulatory agencies, with the national association of insurance commissioners and its affiliates and subsidiaries and with state, federal and international law enforcement authorities if the recipient agrees and warrants that it has the authority to maintain the confidentiality and privileged status of the documents, materials or other information.
2. Receive documents, materials and other information from the national association of insurance commissioners and its affiliates and subsidiaries and from regulatory and law enforcement officials of other jurisdictions and shall maintain as confidential or privileged any document, material or other information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material or other information.
3. Enter into agreements that govern the sharing and use of documents, materials and other information and that are consistent with this section.
I. A disclosure to or by the director pursuant to this section or as a result of sharing information pursuant to subsection G H of this section is not a waiver of any applicable privilege or claim of confidentiality in the documents, materials or other information disclosed or shared.
J. The director shall annually assess each insurer as defined in section 20‑441, subsection B authorized to transact business in this state up to one thousand fifty dollars $1,050, as annually adjusted pursuant to this subsection for the administration and operation of the fraud unit and the prosecution of fraud pursuant to this section. Monies collected shall be deposited, pursuant to sections 35‑146 and 35‑147, in the state general fund. The director shall annually revise the assessment amount in such a manner that the revenue derived from the assessment equals at least ninety‑five per cent but not more than one hundred ten per cent of the appropriated budget of the fraud unit for the prior fiscal year. Monies appropriated to the department for the fraud unit shall be included as a separate line item in the general appropriations act. The department shall use all appropriated monies exclusively to operate the fraud unit.
K. A person, or an officer, employee or agent of the person acting within the scope of employment or agency of that officer, employee or agent, who in good faith files a report or provides other information to the fraud unit pursuant to this section is not subject to civil or criminal liability for reporting that information to the fraud unit.
Sec. 54. Section 20-481.08, Arizona Revised Statutes, is amended to read:
20-481.08. Appointment of director as agent for service of process; forwarding of process; consent to jurisdiction
Any person who is not a resident, domiciled in this state, or authorized to do business in this state and who files a statement as required by section 20‑481.02 shall be deemed to have:
1. Consented to the jurisdiction of the courts of this state for all actions arising under the provisions of this article.
2. Appointed the director of insurance as his the person's lawful agent for the purpose of accepting service of process in any action, suit or proceeding that may arise under this article. Copies of all such lawful process accepted by the director as an agent shall be transmitted by the director by registered or certified mail to such the person at his the person's last known address.
Sec. 55. Section 20-481.25, Arizona Revised Statutes, is amended to read:
20-481.25. Acquisitions involving insurers not otherwise covered; anticompetitive considerations; civil penalty; definitions
A. Except as provided in subsection B of this section, this section applies to any acquisition in which there is a change in control of an insurer authorized to do business in this state.
B. This section does not apply to the following, except as provided under subsections C and D of this section:
1. A purchase of securities solely for investment purposes as long as the securities are not used by voting or otherwise to cause or attempt to cause the substantial lessening of competition in any insurance market in this state. If a purchase of securities results in a presumption of control as defined in section 20‑481, the purchase of securities is not solely for investment purposes unless the insurance director of insurance of the insurer's state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and the disclaimer action or affirmative finding is communicated by the domiciliary insurance director to the director of the department of insurance and financial institutions of this state.
2. The acquisition of a person by another person if both persons are neither directly nor through affiliates primarily engaged in the business of insurance and if preacquisition notification is filed with the director pursuant to subsection C of this section thirty days before the proposed effective date of the acquisition. Preacquisition notification is not required if the acquisition would otherwise be excluded from this section by any other provision of this subsection.
3. The acquisition of already affiliated persons.
4. If, as an immediate result of an acquisition, the combined market share of the involved insurers in any market would not exceed five per cent percent of the total market, there would not be an increase in any market share or the combined market share of the involved insurers in any market would not exceed twelve per cent percent of the total market and the market share increases by more than two per cent percent of the total market. For the purposes of this paragraph, "market" means direct written insurance premiums in this state for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this state.
5. An acquisition for which a preacquisition notification is required pursuant to this section because of the resulting effect on the ocean marine insurance line of business.
6. An acquisition of an insurer whose domiciliary insurance director of insurance finds that the insurer is failing, that there is no feasible alternative to improve the insurer's condition and that the public benefits that would result from improving the insurer's condition through the acquisition exceed the public benefits that would result from not lessening competition and the domiciliary insurance director of insurance communicates these findings to the director of the department of insurance and financial institutions of this state.
C. An acquisition under subsection B of this section may be subject to an order pursuant to subsection F of this section unless the acquiring person files a preacquisition notification and the waiting period has expired. The acquired person may file a preacquisition notification. Information submitted under this subsection is confidential. The preacquisition notification shall be in a form and contain the information that is prescribed by the national association of insurance commissioners relating to those markets that are not exempt from the provisions of this section. The director may require additional material and information that the director deems necessary in order to determine if the proposed acquisition, if consummated, would lessen competition or tend to create a monopoly. The information may include an economist's opinion on the competitive impact of the acquisition in this state and a summary of the economist's education and experience that indicates the economist's ability to render an informed opinion. The waiting period begins on the date the director receives a preacquisition notification and ends thirty days after the date of receipt or on termination of the waiting period by the director, whichever is earlier. Before the waiting period ends, the director on a one‑time basis may require the submission of additional information that is relevant to the proposed acquisition. The waiting period shall end thirty days after the director receives the additional information or terminates the waiting period, whichever is earlier.
D. No An acquisition subject to the provisions of this section shall not substantially lessen competition in any line of insurance in this state or tend to create a monopoly. The director may enter a cease and desist order under subsection F of this section if there is substantial evidence that the effect of the acquisition may be to substantially lessen competition in any line of insurance in this state or may tend to create a monopoly or if the insurer fails to file adequate information pursuant to subsection C of this section. The director has the burden of showing prima facie evidence of a violation of this subsection. In determining if a proposed acquisition would lessen competition or tend to create a monopoly, the director shall consider the following:
1. An acquisition covered under subsection B of this section that involves two or more insurers competing in the same market is prima facie evidence of a violation of this subsection if:
(a) The market is highly concentrated and the involved insurers possess the following market shares:
Insurer A Insurer B
(i) four per cent percent four per cent percent or more
(ii) ten per cent percent two per cent percent or more
(iii) fifteen per cent percent one per cent percent or more
(b) The market is not highly concentrated and the involved insurers possess the following market shares:
Insurer A Insurer B
(i) five per cent percent five per cent percent or more
(ii) ten per cent percent four per cent percent or more
(iii) fifteen per cent percent three per cent percent or more
(iv) nineteen per cent percent one per cent percent or more
A highly concentrated market is a market in which the share of the four largest insurers is seventy‑five per cent percent or more of the market. Percentages not shown in the tables are interpolated proportionately to the percentages that are shown. If more than two insurers are involved, exceeding the total of the two columns in the table is prima facie evidence of a violation of this subsection. For the purposes of this paragraph, the insurer with the largest market share is deemed to be insurer A.
2. A significant trend toward increased concentration exists if the aggregate market share of any grouping of the largest insurers in the market, from the two largest to the eight largest, has increased by seven per cent percent or more of the market over a period of time that extends from a base year five to ten years before the acquisition up to the time of the acquisition. Any acquisition or merger under subsection B of this section that involves two or more insurers competing in the same market is prima facie evidence of a violation of this subsection if:
(a) There is a significant trend toward increased concentration in the market.
(b) One of the insurers involved is one of the insurers in a grouping of large insurers whose market share has increased by seven per cent percent or more.
(c) Another involved insurer's market is two per cent percent or more.
E. If an acquisition is not prima facie evidence of a violation of subsection D of this section, the director may establish the requisite anticompetitive effect based on other substantial evidence. If an acquisition is prima facie evidence of a violation of subsection D of this section, a party may establish the absence of the requisite anticompetitive effect based on other substantial evidence. Relevant factors in making a determination under this subsection include market shares, volatility of ranking of market leaders, number of competitors, concentration, trend of concentration in the industry and ease of entry into and exit from the market.
F. If an acquisition violates this section, the director may enter an order:
1. Requiring an involved insurer to cease and desist from doing business in this state with respect to the line or lines of insurance involved in the violation.
2. Denying the application of an acquired or acquiring insurer for a license to do business in this state.
G. The director shall not enter an order pursuant to subsection F of this section unless a hearing is held and notice of the hearing is issued before the end of the waiting period prescribed in subsection C of this section and not less than fifteen days before the hearing. The hearing shall be concluded and the order shall be issued no not later than sixty days after the end of the waiting period. The director shall include with each order a written decision setting forth the director's findings of fact and conclusions of law. The order does not become final earlier than thirty days after it is issued. Before the order becomes final the involved insurer may submit a plan to remedy within a reasonable time the anticompetitive impact of the acquisition. Based on the submitted plan or other information, the director shall specify the conditions, if any, that would remedy the aspects of the acquisition causing the violation and shall vacate or modify the order. An order does not apply if the acquisition is not consummated.
H. An order shall not be entered under subsection F of this section if:
1. The acquisition will yield substantial economies of scale or economies in resource utilization that cannot be achieved feasibly in any other way and the public benefits that would arise from the economies exceed the public benefits that would arise from not lessening competition.
2. The acquisition will increase substantially the availability of insurance and the public benefits of the increase exceed the public benefits that would arise from not lessening competition.
I. The director, after notice and a hearing, may impose one or more of the following civil penalties against a person who violates a cease and desist order that is in effect:
1. Up to and including ten thousand dollars $10,000 for every day of violation.
2. Suspension or revocation of the person's license.
J. An insurer or other person who fails to make a filing required by this section and who fails to demonstrate a good faith effort to comply with the filing requirement is subject to a civil penalty of not more than fifty thousand dollars $50,000.
K. For the purposes of subsection D of this section:
1. "Insurer" means a company or group of companies under common management, ownership or control.
2. "Market" means the relevant product and geographical markets. In determining the relevant product and geographical markets, the director shall consider the definitions or guidelines adopted by the national association of insurance commissioners and to information submitted by the parties to the acquisition. In the absence of sufficient information to the contrary, the relevant product market is assumed to be the direct written insurance premium for a line of business that is used in the annual statement required to be filed by insurers doing business in this state. The relevant geographical market is this state.
L. For the purposes of this section:
1. "Acquisition" means any agreement, arrangement or activity that results in a person acquiring directly or indirectly the control of another person, including the acquisition of voting securities, assets, bulk reinsurance and mergers.
2. "Involved insurer" means an insurer that acquires or is acquired, is affiliated with an acquirer or acquired or is the result of a merger.
Sec. 56. Section 20-485, Arizona Revised Statutes, is amended to read:
20-485. Definitions; scope
A. In this article, unless the context otherwise requires:
1. "Administrator" means any person who collects charges or premiums from or paid on behalf of, or who adjusts or settles claims by, residents of this state in connection with life or health insurance coverage or annuities other than any of the following:
(a) An employer on behalf of the employer's employees or the employees of one or more subsidiary or affiliated corporations of the employer.
(b) A union on behalf of its members.
(c) An insurer authorized to transact insurance in this state, including its employees and sales representatives, to the extent that it collects charges or premiums from or paid on behalf of, or adjusts or settles claims by, residents of this state in connection with life or health insurance coverage or annuities lawfully issued and delivered or assumed in this state and pursuant to the laws of this state or another state and for which the insurer or an affiliated insurer is presently directly liable.
(d) An insurer authorized to transact insurance in this state, including its employees and sales representatives, to the extent that it collects charges or premiums from or paid on behalf of, or adjusts or settles claims by, residents of this state in connection with life or health insurance coverage or annuities lawfully issued and delivered or assumed in this state and pursuant to the laws of this state or another state and for which an unaffiliated insurer is presently directly liable.
(e) A person other than an insurer, to the extent that the person's activities are limited to the collection of charges or premiums from or paid on behalf of, or the adjustment or settlement of claims by, residents of this state in connection with life and health insurance coverage issued and delivered or assumed by an affiliated insurer authorized to transact insurance in this state and for which the affiliated insurer is presently directly liable.
(f) A life or disability insurance producer who is licensed in this state or an employee of a licensed producer working at the direction and under the supervision of a licensed producer if the producer or the producer's employee does not adjust or settle claims.
(g) A creditor on behalf of the creditor's debtors with respect to insurance covering a debt between the creditor and its debtors.
(h) A trust and its trustees, agents and employees acting pursuant to the trust established in conformity with 29 United States Code section 186.
(i) A trust exempt from taxation under section 501(a) of the internal revenue code and its trustees and employees acting pursuant to the trust, or a custodian and its agents and employees acting pursuant to a custodian account that meets the requirements of section 401(f) of the internal revenue code.
(j) A financial institution or money transmitter that is subject to supervision or examination by federal or state banking authorities if the financial institution or money transmitter does not adjust or settle claims.
(k) A credit card issuing company that advances for and collects premiums or charges from its credit card holders who have authorized such collection, if the company does not adjust or settle claims.
(l) A person who adjusts or settles claims in the normal course of the person's practice or employment as an attorney and who does not collect charges or premiums in connection with life or health insurance coverage or annuities.
(m) An adjuster who is licensed in this state while acting in accordance with an adjuster's license.
(n) A person who acts only as an administrator of one or more bona fide employee benefit plans established by an employer or an employee organization, or both, for which the insurance laws of this state are preempted pursuant to the employee retirement income security act of 1974 (P.L. 93‑406; 88 Stat. 829; 29 United States Code sections 1001 through 1461).
(o) A credit card processing company that processes payments or charges for premiums if the company does not adjust or settle claims.
(p) A qualified marketplace platform on behalf of qualified marketplace contractors that have executed a written contract with the qualified marketplace platform that complies with the requirements of section 23‑1603, subsection A.
(q) An employee of the group policyholder who collects or remits premiums for group life insurance, group annuities or group or blanket disability insurance if the person does not adjust claims or receive any commissions.
(r) An administrator of a trust that was established to provide life insurance, disability insurance or annuities to participants in the trust and that is also a group policyholder. The administrator may act only as an administrator of the trust and may not adjust or settle claims.
2. "Affiliate" or "affiliated" means a person who directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with a specified person.
3. "Charges" means cost sharing requirements, including applicable coinsurance, copayments, deductibles or other amounts payable by an insured under the terms of an insurance contract.
3. 4. "Control" means the direct or ultimate possession of the power to direct or cause the direction of the management and policies of a person whether through voting rights, contracts, other than commercial contracts for goods or nonmanagement services, or otherwise, unless the power is the result of an official position or corporate office. Control exists if any person, directly or indirectly, owns, controls, holds with the power to vote or holds proxies representing ten percent or more of the voting rights of any other person, including the right to elect or appoint the officers or directors of a nonprofit corporation.
4. 5. "Insurer" means any person who provides life or health insurance coverage in this state or who transacts annuity business in this state. Insurer includes an authorized insurer, hospital, medical, dental or optometric service corporation or health care services organization or any other person providing a plan of insurance subject to the laws of insurance of this state. Insurer does not include a self‑insured or a self‑funded employee benefit plan if regulation of that plan is preempted pursuant to section 1144(a) of the employee retirement income security act of 1974 (29 United States Code section 1144(a)) but does include an insurer who provides coverage as part of an employee benefit plan.
5. 6. "Principal" means a person who has the authority to enter into written agreements on behalf of the administrator pursuant to section 20‑485.01.
6. 7. "Qualified marketplace contractor":
(a) Means any person or organization, including an individual, corporation, limited liability company, partnership, sole proprietor or other entity, that enters into an agreement with a qualified marketplace platform to use the qualified marketplace platform's digital platform to provide services to third-party individuals or entities seeking those services.
(b) Does not include a contractor if the services performed consist of transporting freight, sealed and closed envelopes, boxes or parcels or other sealed and closed containers for compensation.
7. 8. "Qualified marketplace platform":
(a) Means an organization, including a corporation, limited liability company, partnership, sole proprietor or other entity, that both:
(i) Operates a digital website or digital smartphone application that facilitates the provision of services by qualified marketplace contractors to individuals or entities seeking those services.
(ii) Accepts service requests from the public only through its digital website or digital smartphone application and does not accept service requests by telephone, by fax or in person at physical retail locations.
(b) Does not include any digital website or smartphone application if the services facilitated consist of transporting freight, sealed and closed envelopes, boxes or parcels or other sealed and closed containers for compensation.
B. To the extent that an insurer is subject to subsection A, paragraph 1, subdivision (d) of this section, it shall comply with this article except sections 20‑485.10 and 20‑485.12.
C. This article does not apply to a person acting exclusively as a third party intermediary entity as prescribed in section 20‑120.
Sec. 57. Section 20-485.09, Arizona Revised Statutes, is amended to read:
20-485.09. Adjustment or settlement of claims or charges; compensation
A. Compensation to an administrator for any policies where such administrator adjusts or settles claims shall in no way not be contingent on claim experience. This section shall subsection does not prevent the compensation of an administrator from being based on premiums or charges collected or number of claims paid or processed.
B. An administrator may collect charges in accordance with the written agreement between the administrator and the insurer. The written agreement must prescribe the applicable standards for the permissible collection of charges by the administrator. Unless the administrator is licensed as a collection agency pursuant to title 32, chapter 9, the administrator may not collect charges that have remained unpaid on an account that has been inactive for more than twelve months.
Sec. 58. Section 20-489.01, Arizona Revised Statutes, is amended to read:
20-489.01. Application of other laws
To the extent permitted allowed by this article, section 20‑142, subsection E F applies to this article.
Sec. 59. Section 20-612, Arizona Revised Statutes, is amended to read:
20-612. Delinquency proceedings; jurisdiction; venue; nature of remedy; appeal
A. The superior court is vested with exclusive original jurisdiction of delinquency proceedings under this article, and is authorized to make all necessary and proper orders to carry out the purposes of this article.
B. The venue of delinquency proceedings against a domestic, foreign or alien insurer shall be in Maricopa county.
C. Delinquency proceedings pursuant to this article shall constitute the sole and exclusive method of liquidating, rehabilitating, reorganizing or conserving an insurer, and no a court shall not entertain a petition for the commencement of such proceedings unless it has been filed in the name of the state on the relation of the director of the department of insurance and financial institutions.
D. An appeal shall lie to the supreme court from an order granting or refusing rehabilitation, liquidation or conservation, and from every other order in delinquency proceedings having the character of a final order as to the particular portion of the proceedings embraced therein.
Sec. 60. Section 20-613, Arizona Revised Statutes, is amended to read:
20-613. Commencement of delinquency proceedings
A. The director of insurance shall commence any such delinquency proceeding, the attorney general representing him the director, by an application to the court for an order directing the insurer to show cause why the director should not have the relief prayed for. On the return of the order to show cause, and after a full hearing, the court shall either deny the application or grant the application, together with such other relief as the nature of the case and the interests of policyholders, creditors, stockholders, members, subscribers or the public requires.
B. The director may file with the superior court a certificate stating that the delinquency proceeding is of special public importance. On receipt of the certificate the presiding judge of the superior court immediately shall designate a judge to hear and determine the proceeding. The designated judge shall assign the proceeding for hearing at the earliest practicable date and cause the proceeding to be expedited in every way, including applications for temporary restraining orders, preliminary injunctions and orders appointing receivers. An expedited hearing under this subsection is in addition to the requirements of section 20‑172, subsection A.
C. Pending proceedings commenced under section 20‑169, the director is not precluded from commencing a delinquency proceeding under this article. The pendency of proceedings under section 20‑169 is not a ground for denying an application for an order under this article.
Sec. 61. Section 20-624, Arizona Revised Statutes, is amended to read:
20-624. Conduct of delinquency proceedings against domestic and alien insurers
A. When If under this article a receiver is to be appointed in delinquency proceedings for a domestic or alien insurer, the court shall appoint the director of insurance as receiver. The court shall order the receiver to take immediate possession of the assets of the insurer and to administer them under the orders of the court.
B. As domiciliary receiver, the director shall be is vested by operation of law with the title to all of the property, contracts and rights of action and all of the books and records of the insurer, wherever located, as of the date of entry of the order directing him the director to rehabilitate or liquidate a domestic insurer or to liquidate the United States branch of an alien insurer domiciled in this state, and he the director shall have the right to recover the assets and reduce them to possession, except that ancillary receivers in reciprocal states shall have, as to assets located in their respective states, shall have the rights and powers which that are prescribed in this article for ancillary receivers appointed in this state as to assets located in this state.
C. The recording of a certified copy of the order directing possession to be taken in the office of the county recorder of the county where the proceedings are pending shall impart the same notice as would be imparted by a deed, a bill of sale or any other evidence of title duly recorded or filed.
D. The director as domiciliary receiver shall be responsible for the proper administration of all assets coming into his the director's possession or control. The court may at any time require a bond from him the director or his the director's deputies if deemed desirable for the protection of the assets.
E. Upon On taking possession of the assets of an insurer, the domiciliary receiver shall, subject to the direction of the court, shall immediately proceed to conduct the business of the insurer or to take such steps as are authorized by this article for the purpose of rehabilitating, liquidating or conserving the affairs or assets of the insurer.
Sec. 62. Section 20-625, Arizona Revised Statutes, is amended to read:
20-625. Conduct of delinquency proceedings against foreign insurers
A. When If under this article an ancillary receiver is to be appointed in delinquency proceedings for an insurer not domiciled in this state, the court shall appoint the director of insurance as ancillary receiver. The director shall file a petition requesting the appointment on the grounds set forth in section 20‑619 if he the director finds that there are sufficient assets of the insurer located in this state to justify the appointment of an ancillary receiver, or if ten or more persons resident in this state having claims against such the insurer file a petition with the director requesting the appointment of an ancillary receiver.
B. The domiciliary receiver, for the purpose of liquidating an insurer domiciled in a reciprocal state, shall be vested by operation of law with the title to all of the property, contracts and rights of action and all of the books and records of the insurer located in this state, and he the domiciliary receiver shall have the immediate right to recover balances due from local agents and to obtain possession of any books and records of the insurer found in this state. He The domiciliary receiver shall also be entitled to recover the other assets of the insurer located in this state, except that upon on the appointment of an ancillary receiver in this state, the ancillary receiver shall during the ancillary receivership proceedings have the sole right to recover such other assets. The ancillary receiver shall, as soon as practicable, shall liquidate from their its respective securities those special deposit claims and secured claims which that are proved and allowed in the ancillary proceedings in this state, and shall pay the necessary expenses of the proceedings. All remaining assets he The ancillary receiver shall promptly transfer all remaining assets to the domiciliary receiver. Subject to the foregoing provisions, the ancillary receiver and his the ancillary receiver's deputies shall have the same powers and be subject to the same duties with respect to the administration of such assets as a receiver of an insurer domiciled in this state.
C. The domiciliary receiver of an insurer domiciled in a reciprocal state may sue in this state to recover any assets of the insurer to which he the domiciliary receiver may be entitled under the laws of this state.
Sec. 63. Section 20-662, Arizona Revised Statutes, is amended to read:
20-662. Arizona property and casualty insurance guaranty fund
A. The Arizona property and casualty insurance guaranty fund is established within the department of insurance. The fund shall be deposited in a depository designated by the director and shall exercise its powers through a board established pursuant to section 20‑663.
B. For the purpose of assessment, the fund shall be divided into three separate accounts:
1. The automobile insurance account.
2. The workers' compensation insurance account.
3. The account for all other insurance to which this article applies.
C. All costs, expenses and liabilities of the fund shall be paid by the fund and shall not be a general obligation of the this state.
D. All monies placed in the accounts of the fund may be expended only for the purposes of this article and only for the purposes of the account into which the monies were placed. No Monies placed in one of the three separate accounts established by this section may not be used directly or indirectly for any other purpose, including to satisfy an obligation attributable to another account.
Sec. 64. Section 20-663, Arizona Revised Statutes, is amended to read:
20-663. Guaranty fund board; composition; compensation
A. The guaranty fund board is established within the department of insurance and financial institutions consisting of eleven members who are appointed by the governor. Membership on the board shall be for a term of three years.
B. The members of the board shall be appointed from a list of persons submitted to the governor by the director of the department of insurance and financial institutions and shall be representative of a cross section of the industry that is authorized to transact property or casualty insurance within this state. The board shall be composed of:
1. Nine members, each representing a different insurer that is authorized to transact property or casualty insurance business in this state, including at least one member who represents a workers' compensation insurer that has been authorized to transact workers' compensation insurance business in this state for at least ten consecutive years.
2. One member who is a casualty insurance producer residing in this state.
3. One member who represents the general public.
C. The board shall conduct periodic meetings in Phoenix. Meetings shall be held on the call of the director or on the written request of any two members of the board.
D. Subject to the powers of the director, the board shall administer, operate and manage the fund pursuant to this article. The board shall advise and counsel with the director on matters relating to the solvency of insurers.
E. Members of the board shall receive no are not entitled to receive compensation and shall not be entitled to travel expenses as authorized by title 38, chapter 4, article 2, but shall be are entitled to be reimbursed for expenses incurred by them as members of the board from the assets of the fund.
Sec. 65. Section 20-671, Arizona Revised Statutes, is amended to read:
20-671. Special meetings closed
Notwithstanding any provision of law to the contrary, special meetings of the board in which the financial condition of any member insurer is discussed, shall not be open to the public and only members of the board, the director of the department of insurance and financial institutions and other persons specifically authorized by the board may attend such meetings.
Sec. 66. Section 20-678, Arizona Revised Statutes, is amended to read:
20-678. Examination of the fund; annual report
The fund shall be is subject to examination by the director. The fund shall, annually, report its financial condition for the preceding year, to the legislature, member insurers and the director. At the conclusion of the fund's handling of each insolvency, an audit of the financial transactions relating to such insolvency shall be made by the director of insurance or an independent accounting firm.
Sec. 67. Section 20-683, Arizona Revised Statutes, is amended to read:
20-683. Life and disability insurance guaranty fund
A. The life and disability insurance guaranty fund is established in the department of insurance. The fund shall be deposited in a depository designated by the director. All member insurers shall be members of the fund as a condition of their authority to transact insurance or a health care services organization business in this state. For the purposes of administration and assessment, the fund shall maintain three accounts:
1. The disability account.
2. The life insurance account.
3. The annuity account.
B. The fund is under the immediate supervision of the director and is subject to the applicable provisions of the insurance laws of this state.
C. All costs, expenses and liabilities of the fund shall be paid by the fund and shall not be a general obligation of the state.
D. All monies placed in the accounts of the fund may be expended for the purposes of this article.
Sec. 68. Section 20-684, Arizona Revised Statutes, is amended to read:
20-684. Life and disability insurance guaranty fund board; composition; compensation
A. Subject to the powers of the director, the life and disability insurance guaranty fund shall be administered by a board of eleven members. Each member of the board shall serve for a term of three years. Of the members first appointed, three shall serve for terms of one year, three shall serve for terms of two years and three shall serve for terms of three years.
B. The members of the board shall be appointed by the governor from a list of persons submitted to the governor by the director of the department of insurance and financial institutions. In submitting selections for the board, the director shall consider whether all member insurers are fairly represented.
C. Members of the board are not entitled to receive compensation and travel expenses as authorized by title 38, chapter 4, article 2 but are entitled to be reimbursed for expenses incurred by them as members of the board from the assets of the fund.
Sec. 69. Section 20-706, Arizona Revised Statutes, is amended to read:
20-706. Filing and publication of articles; appointment of agent to receive process; issuance of certificate
A. The articles of incorporation shall be filed in the office of the corporation commission, and certified copies thereof of the articles of incorporation shall be filed with the director of the department of insurance and financial institutions.
B. The articles of incorporation shall be published as required by title 10.
C. The corporation shall appoint a statutory agent located in this state on whom all process in any action or proceeding may be served and shall file originals of such the appointment in the director's office and in the corporation commission's office. Any termination of such the statutory agent shall not take effect until the corporation has appointed a new, valid statutory agent.
D. The corporation shall not transact business as an insurer until it has applied for and received from the director a certificate of authority as provided by this title.
Sec. 70. Section 20-713, Arizona Revised Statutes, is amended to read:
20-713. Bylaws of mutual insurer
A. The initial board of directors of a domestic mutual insurer shall adopt original bylaws for the government of the corporation and conduct of its business. The bylaws shall be subject to the approval of the insurer's members at the next succeeding annual meeting of members, and no bylaw provision shall thereafter be effective which that is not so approved. Bylaws shall be revoked or modified only by vote of the insurer's members at a meeting of which notice was given as provided in the bylaws.
B. The bylaws shall provide that each member of the insurer is entitled to one vote in the election of corporate directors and on all matters coming before membership meetings, and that such each vote may be exercised in person or by proxy.
C. The insurer shall promptly file with the director of the department of insurance and financial institutions a copy, certified by the insurer's secretary, of such the bylaws and of every modification thereof of or of addition thereto to the bylaws. The director shall disapprove any bylaw provision deemed by him the director to be unlawful, inadequate, unfair or detrimental to the proper interests and protection of the insurer's members or any class thereof of the insurer's members. The insurer shall not, after receiving written notice of such disapproval and during the existence thereof, effectuate any disapproved bylaw provision so disapproved.
Sec. 71. Section 20-714, Arizona Revised Statutes, is amended to read:
20-714. Quorum of members of mutual insurer
A domestic mutual insurer may in its bylaws adopt a reasonable provision for determining a quorum of members at any meeting thereof of the insurer, but no provision recognizing a quorum of fewer than a simple majority of all the insurer's members shall be effective unless approved as reasonable by the director of the department of insurance and financial institutions. This section shall does not affect any other provision of law requiring a vote of a larger percentage of members for a specified purpose.
Sec. 72. Section 20-718, Arizona Revised Statutes, is amended to read:
20-718. Enforcement of contingent liability
A. If at any time the assets of a domestic mutual insurer are less than its liabilities and the minimum amount of surplus required of it by this title for authority to transact the kinds of insurance being transacted, and the deficiency is not cured from other sources, its directors shall levy an assessment only upon on its members who, at any time within the twelve months immediately preceding the date notice of such assessment was mailed to them, held policies providing for contingent liability, and such members shall be liable to the insurer for the amount so assessed.
B. The assessment shall be for such an amount as is required to cure such deficiency and to provide a reasonable amount of working funds above such minimum amount of surplus, but such working funds so provided shall not exceed five per cent percent of the insurer's liabilities as of the date upon on which the amount of such deficiency was determined.
C. No one policy or member as to such policy shall be assessed or charged with an aggregate of contingent liability as to obligations incurred by the insurer in any one calendar year, in excess of the number of times the premium as stated in the policy as computed solely upon on premium earned on such policy during that year.
D. No member shall have an offset against any assessment for which he the member is liable, on account of any claim for unearned premium or loss payable.
E. As to life insurance, any part of such an assessment upon on a member which that remains unpaid following notice of assessment, demand for payment and lapse of a reasonable waiting period as specified in such notice, may, if approved by the director of the department of insurance and financial institutions as being in the best interests of the insurer and its members, may be secured by placing a lien upon on the cash surrender values and accumulated dividends held by the insurer to the credit of such member.
Sec. 73. Section 20-724, Arizona Revised Statutes, is amended to read:
20-724. Illegal dividends; violation; classification
A. Any director of a domestic stock or mutual insurer who knowingly votes for or concurs in declaration or payment of an illegal dividend to stockholders or members is guilty of a class 2 misdemeanor, and is jointly and severally liable, together with other such directors, for any loss thereby sustained by the insurer.
B. The stockholders or members knowingly receiving such an illegal dividend shall be liable in the amount thereof of the illegal dividend to the insurer.
C. The director of the department of insurance and financial institutions may revoke or suspend the certificate of authority of an insurer which that has declared or paid an illegal dividend.
Sec. 74. Section 20-727, Arizona Revised Statutes, is amended to read:
20-727. Management and exclusive agency contracts
A. No A domestic stock or mutual insurer shall not make any contract whereby any person or persons are granted or are to enjoy in fact the management of the insurer to the substantial exclusion of its board of directors, or are to have the controlling or preemptive right to produce substantially all insurance business for the insurer, unless such the contract is filed with the director of the department of insurance and financial institutions and be is subject to his the director's approval. The contract shall be deemed approved unless disapproved by the director within twenty days after date of filing, subject to such reasonable extension of time as the director may require by notice given within such twenty days. Any disapproval shall be delivered to the insurer in writing, stating the grounds therefor for the disapproval.
B. The director shall disapprove any such contract if he the director finds that it:
1. Subjects the insurer to excessive charges.
2. Is to extend for an unreasonable length of time.
3. Does not contain fair and adequate standards of performance.
4. Contains other inequitable provisions or provisions which that impair the proper interests of stockholders or members of the insurer.
Sec. 75. Section 20-729, Arizona Revised Statutes, is amended to read:
20-729. Conversion of stock insurer to mutual insurer
A. A domestic stock insurer other than a title insurer may become a domestic mutual insurer pursuant to such plan and procedure as may be approved in advance by the director of insurance.
B. The director shall not approve any such plan, procedure or mutualization unless:
1. It is equitable to both stockholders and policyholders.
2. It is subject to approval by a vote of the holders of not less than three‑fourths of the insurer's capital stock having voting rights and by a vote of not less than two‑thirds of the insurer's policyholders who vote on such plan in person, by proxy or by mail pursuant to such notice and procedure as may be approved by the director.
3. If a life insurer, the right to vote thereon is limited to those policyholders whose policies have face amounts of not less than one thousand dollars $1,000 and have been in force for one year or more.
4. Mutualization will result in retirement of shares of the insurer's capital stock at a price not in excess of the fair market value thereof as determined by competent disinterested appraisers.
5. The plan provides for the purchase of the shares of any non‑consenting nonconsenting stockholder in accordance with the provisions of title 10, chapter 13 and such nonconsenting stockholders shall have all the rights and restrictions applicable under such section to stockholders of a private corporation who do not consent to the agreed manner of converting the shares of stock of such private corporation upon on proposal for consolidation.
6. The plan provides for definite conditions to be fulfilled by a designated early date upon on which such mutualization will be deemed effective.
7. The mutualization leaves the insurer with surplus funds reasonably adequate for the security of its policyholders and to continue successfully in business in the states in which it is then authorized to transact insurance, and for the kinds of insurance included in its certificate of authority.
C. This section shall does not apply to mutualization under order of court pursuant to rehabilitation or reorganization of an insurer under article 4 of chapter 3, article 4 of this title.
Sec. 76. Section 20-730, Arizona Revised Statutes, is amended to read:
20-730. Conversion of mutual insurer to stock insurer
A. A domestic mutual insurer may become a domestic stock insurer pursuant to such plan and or procedure as it is approved in advance by the director of insurance.
B. The director shall not approve any such plan or procedure unless:
1. It is equitable to the insurer's members.
2. It is subject to approval by vote of not less than three fourths three-fourths of the insurer's current members voting thereon in person, by proxy, or by mail at a meeting of members called for the purpose pursuant to such notice and procedure as may be approved by the director. If a life insurer, the right to vote may be limited to members whose policies have face amounts of not less than one thousand dollars $1,000 and have been in force one year or more.
3. The equity of each policyholder in the insurer is determinable under a fair formula approved by the director, which equity shall be based upon on not less than the insurer's entire surplus, after deducting contributed or borrowed surplus funds, plus a reasonable present equity in its reserves and in all nonadmitted assets.
4. The policyholders entitled to participate in the purchase of stock or distribution of assets shall include all current policyholders and all existing persons who had been a policyholder of the insurer within three years prior to before the date such plan was submitted to the director.
5. The plan gives to each policyholder of the insurer as specified in paragraph 4 of this section subsection a preemptive right to acquire his the policyholder's proportionate part of all of the proposed capital stock of the insurer, within a designated reasonable period, and to apply upon on the purchase thereof the amount of his the policyholder's equity in the insurer as determined under paragraph 3 of this section subsection.
6. Shares are so offered to policyholders at a price not greater than that thereafter offered to others nor at more than double the par value of the shares.
7. The plan provides for payment to each policyholder not electing to apply his the policyholder's equity in the insurer for or upon on the purchase price of stock to which preemptively entitled, of cash in the amount of not less than fifty per cent percent of the amount of his the policyholder's equity not so used for the purchase of stock, and which cash payment together with stock so purchased, if any, shall constitute full payment and discharge of the policyholder's equity as an owner of such mutual insurer.
8. The plan, when completed, would provide for the converted insurer paid‑in capital stock in an amount not less than the minimum paid‑in capital required of a domestic stock insurer transacting like kinds of insurance, together with surplus funds in amount not less than one half one-half of such required capital.
Sec. 77. Section 20-731, Arizona Revised Statutes, is amended to read:
20-731. Merger or consolidation of stock insurers; hearings; notice
A. Any domestic stock insurer except a title insurer may merge or consolidate with another domestic or foreign stock insurer by complying with the provisions of general law governing the merger or consolidation of stock corporations formed for profit, but subject to subsection B of this section.
B. No A merger or consolidation is not effective under this section unless in advance of the merger or consolidation the plan and agreement have been filed with and approved in writing by the director of insurance. The director may hold a public hearing on the plan and agreement as prescribed in section 20‑161, and the director shall approve the merger or consolidation unless the director finds the plan or agreement:
1. Is contrary to law.
2. Is unfair in the terms and conditions of the issuance and exchange of securities.
3. Would substantially reduce the security of and service to be rendered to policyholders of the domestic insurer in this state or elsewhere.
C. Any public hearing referred to in subsection B of this section shall be held within thirty days after the plan and agreement of merger is filed, and at least twenty‑five days' written notice thereof shall be given by the director to the insurer corporations involved. Not less than ten days' written notice of the hearing shall be given by the insurer corporations to their shareholders. The insurers filing the plan and agreement, shareholders, any person to whom written notice of hearing was sent and any other person whose interest may be affected thereby shall have the right to present evidence, examine and cross‑examine the witnesses and offer oral and written arguments at the hearing. The director shall make a determination within thirty days after the conclusion of the hearing. Except as otherwise provided in this subsection, the provisions of title 41, chapter 6, article 10 shall apply to hearings, orders and appeals.
D. A domestic title insurer may merge or consolidate with another domestic or foreign title insurer by complying with the provisions of section 20‑1576.
Sec. 78. Section 20-733, Arizona Revised Statutes, is amended to read:
20-733. Merger or consolidation of mutual insurers
A. A domestic mutual insurer shall not merge or consolidate with a stock insurer.
B. A domestic mutual insurer may merge or consolidate with another mutual insurer in accordance with procedures prescribed by general laws applying to corporations formed for profit, except as provided by this section.
C. The plan and agreement for merger or consolidation shall be submitted to and approved by at least two thirds two-thirds of the members of each mutual insurer involved voting thereon at meetings called for the purpose pursuant to such reasonable notice and procedure as has been approved by the director of the department of insurance and financial institutions. If a life insurer, the right to vote may be limited to members whose policies are in a face amount of not less than one thousand dollars $1,000 and have been in force one year or more.
D. No such A merger or consolidation shall not be effectuated unless in advance thereof the plan and agreement therefor have been filed with and approved in writing by the director of the department of insurance and financial institutions. The director shall give his approval within a reasonable time after filing unless he the director finds the plan or agreement:
1. Inequitable to the policyholders of any domestic insurer involved.
2. Would substantially reduce the security of and service to be rendered to policyholders of the domestic insurer in this state or elsewhere.
E. If the director does not approve the plan or agreement he the director shall so notify the insurer in writing specifying his the reasons therefor for the disapproval.
Sec. 79. Section 20-735, Arizona Revised Statutes, is amended to read:
20-735. Distribution of assets of mutual insurer on liquidation
A. Upon On any liquidation of a domestic mutual insurer, its assets remaining after discharge of its indebtedness, policy obligations, repayment of contributed or borrowed surplus, if any, and expenses of administration, shall be distributed to existing persons who were its members at any time within thirty‑six months next preceding the date the liquidation was authorized or ordered, or the date of last termination of the insurer's certificate of authority, whichever date is the earliest.
B. The distributive share of each such member shall be in the proportion that the aggregate premiums earned by the insurer on the policies of the member during the combined periods of his the member's membership bear to the aggregate of all premiums so earned on the policies of all such members. The insurer may, and if the insurer is a life insurer shall, make a reasonable classification of its policies so held by such members and a formula based upon on such classification for determining the equitable distributive share of each such member. Such classification and formula shall be subject to the approval of the director of the department of insurance and financial institutions.
Sec. 80. Section 20-776, Arizona Revised Statutes, is amended to read:
20-776. Service of legal process; liabilities under judgment on such service
A. Legal process shall be served upon on a domestic reciprocal insurer by serving the insurer's attorney at his the attorney's principal offices or by serving the director of the department of insurance and financial institutions as the insurer's attorney‑in‑fact.
B. Any judgment based upon on legal process so served shall be binding upon on each of the insurer's subscribers as their respective interests may appear, but in an amount not exceeding their respective contingent liabilities, if any, the same as though personal service of process was had upon on each such subscriber.
Sec. 81. Section 20-822, Arizona Revised Statutes, is amended to read:
20-822. Definitions
In this article, unless the context otherwise requires, :
1. "Department" means the department of insurance.
2. "Director" means the director of the department of insurance.
3. "hospital service corporations", "medical service corporations", "dental service corporations", "optometric service corporations" and "hospital, medical, dental and optometric service corporations" mean corporations organized under the laws of this state for the purpose of establishing, maintaining, and operating nonprofit hospital service or medical or dental or optometric service plans, or a combination of such plans, whereby hospital, medical or dental or optometric service may be provided by hospitals, which within the meaning of this article may include extended care facilities and home health agencies, or by physicians, which within the meaning of this article may include professional and technical personnel under the direction of a physician, or by podiatrists, or by dentists which may include those engaged in the general practice of dentistry as well as the specialized or restricted practice of dentistry, or by optometrists which may include those engaged in the general practice of optometry as well as the specialized or restricted practice of optometry, with which the corporations have contracted for such purpose, to such of the public as become subscribers to the corporations under contracts which that entitle each subscriber to certain hospital, medical, dental or optometric service, or in the case of hospital service corporations or medical service corporations, all such services, or whereby as operating expense or refunds, payments may be made to subscribers with respect to any such service that is rendered by a hospital, physician, podiatrist, dentist or optometrist with which the corporations have not so contracted.
Sec. 82. Section 20-824, Arizona Revised Statutes, is amended to read:
20-824. Application for certificate; fee
Such a corporation may issue contracts to its subscribers only when the director of insurance has, by certificate of authority, authorized it so to do. Application for a certificate of authority shall be made on forms supplied or approved by the director containing such information as he the director deems necessary. Each application for a certificate of authority shall be accompanied by the fee prescribed by article 2 of chapter 1, article 2 of this title for medical, hospital, dental and optometric service corporations and copies of the following documents:
1. Articles of incorporation.
2. Bylaws.
3. Proposed contracts between the applicant and participating hospitals, physicians, dentists or optometrists showing the terms under which service is to be furnished to subscribers.
4. Proposed contracts to be issued to subscribers.
5. A table of rates to be charged to subscribers.
6. Financial statement of the corporation, including the amounts of contributions paid or agreed to be paid to the corporation for working capital, and the name or names of each contributor and the terms of each contribution.
7. A statement of the area in which the corporation proposes to operate.
Sec. 83. Section 20-835, Arizona Revised Statutes, is amended to read:
20-835. Judicial review of decisions of director
All orders of the director of insurance made pursuant to this article shall be are subject to the provisions of article 2 of chapter 1, article 2 of this title, including the right of hearing, rehearing and appeal.
Sec. 84. Section 20-873, Arizona Revised Statutes, is amended to read:
20-873. Consolidation or merger
A. A domestic fraternal benefit society may consolidate or merge with any other society if it complies with this section. The society shall file the following with the director:
1. A certified copy of the written contract that contains in full the terms and conditions of the consolidation or merger.
2. A sworn statement by the president and secretary or other corresponding officers of each society that shows the financial condition of each society on a date designated by the director. The date shall not be earlier than December 31 next preceding the date of the contract.
3. A verified certificate of the president and secretary or other corresponding officers of each society stating that the consolidation or merger has been approved by a two‑thirds vote of the supreme governing body of each society and that the vote was conducted at a regular or special meeting of each society, or if permitted allowed by the laws of the society, by mail.
4. Evidence that at least sixty days before the action of the supreme governing body of each society the text of the contract was furnished to all members of each society either by mail or publication in full in the official publication of each society. The affidavit of any officer of the society or of any person who is authorized by the society to mail any notice or document stating that the notice or document was addressed and mailed is prima facie evidence that the notice or document was furnished to the addressees.
B. The director shall approve the consolidation or merger and shall issue a certificate of approval if the director finds that the contract conforms with the requirements of this section, that the financial statements are correct and that the consolidation or merger is just and equitable to the members of each society. On the director's approval, the contract is in full force and effect, except that if one of the parties to the contract is incorporated under the laws of any other state or territory, the consolidation or merger does not become effective until the consolidation or merger is approved pursuant to the laws of that state or territory and a certificate of approval is filed with the director of the department of insurance and financial institutions in this state. If the laws of the other state or territory do not provide for consolidation or merger, the consolidation or merger does not become effective until it has been approved by and a certificate of approval is filed with the insurance director of insurance in that state or territory.
C. After the consolidation or merger becomes effective, all of the rights, franchises and interests of the consolidated or merged societies in and to real, personal and mixed property are vested in the society resulting from or remaining after the consolidation or merger. No other instrument is necessary to convey any property interests, except that conveyances of real property shall be evidenced by proper deeds. The title to any real estate or any interest in real estate that is vested under the laws of this state in any of the societies that are consolidated or merged does not revert or is not impaired in any way by reason of the merger or consolidation but vests absolutely in the society that results from or remains after the consolidation or merger.
Sec. 85. Section 20-884, Arizona Revised Statutes, is amended to read:
20-884. Valuation
A. The standards of valuation for certificates that are issued before January 1, 1996 are the standards of valuation that were in effect immediately before January 1, 1995.
B. The minimum standards of valuation for certificates that are issued on or after January 1, 1996 shall be based on the following tables:
1. For certificates of life insurance: the commissioner's 1941 standard ordinary mortality table, the commissioner's 1941 standard industrial mortality table, the commissioner's 1958 standard ordinary mortality table, the commissioner's 1980 standard ordinary mortality table or a more recent table that applies to life insurers.
2. For annuity and pure endowment certificates, total and permanent disability benefits, accidental death benefits and noncancellable accident and health benefits: the tables that are authorized for use by like insurers in this state.
C. The tables listed under subsection B of this section shall be under the valuation methods and standards, including interest assumptions, that are in accordance with the laws of this state applicable to life insurers issuing policies containing like benefits.
D. The director may accept other standards for valuation if the director finds that the reserves produced by those standards will not be less in the aggregate than the reserves computed in accordance with the minimum valuation standards prescribed by this section. The director may vary the standards of mortality that apply to all benefit contracts on substandard lives or other extra hazardous lives issued by a society authorized to do business in this state.
E. With the consent of the insurance director of insurance in the domiciliary state of the society and under any conditions that the director of the department of insurance and financial institutions in this state may impose, a society may establish and maintain reserves on its certificates in excess of the reserves required by the standards of valuation, except that the contractual rights of a benefit member are not affected by the excess reserves.
Sec. 86. Section 20-885, Arizona Revised Statutes, is amended to read:
20-885. Reports
Each fraternal benefit society shall file reports as follows:
1. Unless the director extends the time for filing for good cause shown, on or before March 1, each society transacting business in this state shall annually file with the director a true statement of its financial condition, transactions and affairs for the preceding calendar year and shall pay the fee prescribed by section 20‑167 for filing the statement. The statement shall be in the general form and context that is approved by the national association of insurance commissioners for fraternal benefit societies, supplemented by any additional information that the director requires.
2. At the time of filing its annual statement pursuant to paragraph 1 of this section, each society shall also file with the director a valuation of its certificates in force as of the preceding December 31. On a showing of good cause, the director may extend the time for filing the valuation for a period of not more than two calendar months. The valuation shall be conducted pursuant to section 20‑884. A qualified actuary shall certify the valuation and underlying data, or, at the expense of the society, an actuary of the insurance department of insurance in the domiciliary state of the society shall verify the valuation and underlying data.
Sec. 87. Section 20-893, Arizona Revised Statutes, is amended to read:
20-893. Exemption of societies and associations and orders from insurance laws
A. The following fraternal benefit societies and associations or orders are exempt from compliance with this article and all other insurance laws of this state:
1. Fraternal benefit societies that were doing business in this state on January 1, 1955 and that provide benefits exclusively through local or subordinate lodges.
2. Fraternal benefit societies that admit to membership only those persons who are engaged in one or more crafts or hazardous occupations, in the same or similar lines of business, and that insure only their own members, their families, the descendants of members and the ladies' auxiliaries to those societies.
3. Any association or order, with respect to the sale of life insurance and annuities, only if any policy or contract issued pursuant to the exemption prescribed in this subsection contains a conspicuously stamped or written notice in bold type that states:
This policy is issued by an association or order that does not possess a certificate of authority from the director of the Arizona department of insurance and financial institutions. If the association or order that issued this policy becomes insolvent, members or claimants will not be eligible for insurance guaranty fund protection pursuant to title 20, Arizona Revised Statutes.
B. Each association or order that intends on doing business in this state and that is not licensed under this title shall provide proof satisfactory to the department that it is a nonprofit organization that is exempt from taxation under section 501(c) of the internal revenue code and is subject to the following:
1. On or before June 1 of each preceding year, each association and order shall file with the director a true and complete statement of its statutory financial condition, transactions and affairs for the preceding calendar year, audited by an independent certified public accountant, together with an actuarial memorandum issued by a qualified actuary pursuant to section 20‑696.04, and shall pay a filing fee at the determination of the director. The statement and actuarial memorandum are approved thirty days after filing unless the director, within the thirty‑day period, has issued an order affirmatively approving or disapproving the filing.
2. The director may require an association or order to file financial statements on a quarterly basis and may require an association or order to file financial statements on other than an annual or quarterly basis due to factors or trends affecting insurers writing a particular class or classes of business or because of changes in the management or financial or operating condition of the association or order.
3. If, in the opinion of the director, an association or order does not possess sufficient capital and surplus based on eligible assets pursuant to chapter 3, article 2 of this title to meet its liabilities, the director may order the association or order to increase its capital or surplus, or both, to amounts the director deems sufficient. If the association or order fails to comply with the order, the director may order the association or order to cease and desist from assuming any additional liabilities in this state until such time as the association or order is able to comply with the capital and surplus requirements.
C. Except for a society prescribed by subsection A of this section, a fraternal benefit society or association or order that is exempt from the requirements of this article pursuant to this section shall not give to or allow any person any compensation for procuring new members.
D. A society that is organized and incorporated before January 1, 1955, that provides for benefits in case of death or disability resulting solely from an accident and that does not obligate itself to pay natural death or sick benefits may secure a certificate of authority under this article if it was authorized before January 1, 1955. The society has all of the privileges and is subject to all of the provisions of this article, except that the provisions of this article relating to medical examinations, standard provisions, prohibited provisions, valuations of certificates and incontestability do not apply.
E. The director by examination or otherwise may require any information that will enable the director to determine if the society or association or order is exempt from this article.
Sec. 88. Section 20-1008, Arizona Revised Statutes, is amended to read:
20-1008. Examination of prepaid dental plan organization
A. The director may once in each six months for the first three years after organization and once each year thereafter, or more often if deemed necessary by the director, visit each prepaid dental plan organization organized under the laws of this state and examine its financial condition and its ability to meet its liabilities and its compliance with the laws of this state affecting the conduct of its business. The director may annually visit and examine each prepaid dental plan organization not organized under the laws of this state but authorized to transact business in this state.
B. The director may in like manner examine each prepaid dental plan organization applying for an initial certificate of authority to do business in this state.
C. In lieu of making an examination, the director may accept a full report of the most recent examination of a foreign or alien prepaid dental plan organization, certified to by the appropriate examining official of another state, territory, commonwealth or district of the United States.
D. On request by the director of the department of insurance and financial institutions, the director of the department of health services or another person the director of the department of insurance and financial institutions determines to be qualified may participate in the examinations and visits described in this section to verify the existence of an effective prepaid dental plan and to review the delivery of services by the prepaid dental plan organization.
Sec. 89. Section 20-1051, Arizona Revised Statutes, is amended to read:
20-1051. Definitions
In this article, unless the context otherwise requires:
1. "Director" means the director of the department of insurance.
2. 1. "Enrollee" means an individual who has been enrolled in a health care plan.
3. 2. "Evidence of coverage" means any certificate, agreement or contract issued to an enrollee and setting out the coverage to which the enrollee is entitled.
4. 3. "Genetic information" means information about genes, gene products and inherited characteristics that may derive from the individual or a family member, including information regarding carrier status and information derived from laboratory tests that identify mutations in specific genes or chromosomes, physical medical examinations, family histories and direct analysis of genes or chromosomes.
5. 4. "Health care plan" means any contractual arrangement whereby any health care services organization undertakes to provide directly or to arrange for all or a portion of contractually covered health care services and to pay or make reimbursement for any remaining portion of the health care services on a prepaid basis through insurance or otherwise. A health care plan shall include those health care services required in this article or in any rule adopted pursuant to this article.
6. 5. "Health care services" means services for the purpose of diagnosing, preventing, alleviating, curing or healing human illness or injury.
7. 6. "Health care services organization" means any person that undertakes to conduct one or more health care plans. Unless the context otherwise requires, health care services organization includes a provider sponsored health care services organization.
8. 7. "Health status‑related factor" means any factor in relation to the health of the individual or a dependent of the individual enrolled or to be enrolled in a health care services organization including:
(a) Health status.
(b) Medical condition, including physical and mental illness.
(c) Claims experience.
(d) Receipt of health care.
(e) Medical history.
(f) Genetic information.
(g) Evidence of insurability, including conditions arising out of acts of domestic violence as defined in section 20‑448.
(h) The existence of a physical or mental disability.
9. 8. "Network plan" means health care services that are provided by a health care services organization under which the financing and delivery of health care services are provided, in whole or in part, through a defined set of providers under contract with the health care services organization.
10. 9. "Person" means any natural or artificial person including, but not limited to, individuals, partnerships, associations, providers of health care, trusts, insurers, hospital or medical service corporations or other corporations, prepaid group practice plans, foundations for medical care and health maintenance organizations.
11. 10. "Provider" means any physician, hospital or other person that is licensed or otherwise authorized to furnish health care services in this state.
12. 11. "Provider sponsored health care services organization" means a provider sponsored organization that provides at least one health care plan only to medicare beneficiaries under the medicare‑plus‑choice program established under the balanced budget act of 1997 (42 United States Code sections 1395w‑21 through 1395w‑28 and title XVIII, part C of the social security act, sections 1851 through 1859).
13. 12. "Provider sponsored organization" means an entity that:
(a) Is a legal aggregation of providers that operate collectively to provide health care services to medicare beneficiaries under the medicare‑plus‑choice program established under the balanced budget act of 1997 (42 United States Code sections 1395w‑21 through 1395w‑28 and title XVIII, part C of the social security act, sections 1851 through 1859).
(b) Acts through a licensed firm or corporation that has authority over the entity's activities and responsibility for satisfying the requirements of this article relating to the operation of a provider sponsored health care services organization.
(c) Provides a substantial proportion of the health care services required to be provided under the medicare‑plus‑choice program established under the balanced budget act of 1997 (42 United States Code sections 1395w‑21 through 1395w‑28 and title XVIII, part C of the social security act, sections 1851 through 1859) directly through providers or affiliated groups of providers.
14. 13. "Registered nurse practitioner" has the same meaning prescribed in section 32‑1601.
Sec. 90. Section 20-1057, Arizona Revised Statutes, is amended to read:
20-1057. Evidence of coverage by health care services organizations; renewability; definitions
A. Every enrollee in a health care plan shall be issued an evidence of coverage by the responsible health care services organization.
B. Any contract, except accidental death and dismemberment, applied for that provides family coverage shall also provide, as to such coverage of family members, that the benefits applicable for children shall be payable with respect to a newly born child of the enrollee from the instant of such child's birth, to a child adopted by the enrollee, regardless of the age at which the child was adopted, and to a child who has been placed for adoption with the enrollee and for whom the application and approval procedures for adoption pursuant to section 8‑105 or 8‑108 have been completed to the same extent that such coverage applies to other members of the family. The coverage for newly born or adopted children or children placed for adoption shall include coverage of injury or sickness including necessary care and treatment of medically diagnosed congenital defects and birth abnormalities. If payment of a specific premium is required to provide coverage for a child, the contract may require that notification of birth, adoption or adoption placement of the child and payment of the required premium must be furnished to the insurer within thirty‑one days after the date of birth, adoption or adoption placement in order to have the coverage continue beyond the thirty‑one day period.
C. Any contract, except accidental death and dismemberment, that provides coverage for psychiatric, drug abuse or alcoholism services shall require the health care services organization to provide reimbursement for such services in accordance with the terms of the contract without regard to whether the covered services are rendered in a psychiatric special hospital or general hospital.
D. No evidence of coverage or amendment to the coverage shall be issued or delivered to any person in this state until a copy of the form of the evidence of coverage or amendment to the coverage has been filed with and approved by the director.
E. An evidence of coverage shall contain a clear and complete statement if a contract, or a reasonably complete summary if a certificate of contract, of:
1. The health care services and the insurance or other benefits, if any, to which the enrollee is entitled under the health care plan.
2. Any limitations of the services, kind of services, benefits or kind of benefits to be provided, including any deductible or copayment feature.
3. Where and in what manner information is available as to how services may be obtained.
4. The enrollee's obligation, if any, respecting charges for the health care plan.
F. An evidence of coverage shall not contain provisions or statements that are unjust, unfair, inequitable, misleading or deceptive, that encourage misrepresentation or that are untrue.
G. The director shall approve any form of evidence of coverage if the requirements of subsections E and F of this section are met. It is unlawful to issue such form until approved. If the director does not disapprove any such form within forty‑five days after the filing of the form, it is deemed approved. If the director disapproves a form of evidence of coverage, the director shall notify the health care services organization. In the notice, the director shall specify the reasons for the director's disapproval. The director shall grant a hearing on such disapproval within fifteen days after a request for a hearing in writing is received from the health care services organization.
H. A health care services organization shall not cancel or refuse to renew an enrollee's evidence of coverage that was issued on a group basis without giving notice of the cancellation or nonrenewal to the enrollee and, on request of the director, to the department of insurance and financial institutions. A notice by the organization to the enrollee of cancellation or nonrenewal of the enrollee's evidence of coverage shall be mailed to the enrollee at least sixty days before the effective date of such cancellation or nonrenewal. The notice shall include or be accompanied by a statement in writing of the reasons as stated in the contract for such action by the organization. Failure of the organization to comply with this subsection shall invalidate any cancellation or nonrenewal except a cancellation or nonrenewal for nonpayment of premium, for fraud or misrepresentation in the application or other enrollment documents or for loss of eligibility as defined in the evidence of coverage. A health care services organization shall not cancel an enrollee's evidence of coverage issued on a group basis because of the enrollee's or dependent's age, except for loss of eligibility as defined in the evidence of coverage, sex, health status‑related factor, national origin or frequency of utilization of health care services of the enrollee. An evidence of coverage issued on a group basis shall clearly delineate all terms under which the health care services organization may cancel or refuse to renew an evidence of coverage for an enrollee or dependent. Nothing in this subsection prohibits the cancellation or nonrenewal of a health benefits plan contract issued on a group basis for any of the reasons allowed in section 20‑2309. A health care services organization may cancel or nonrenew an evidence of coverage issued to an individual on a nongroup basis only for the reasons allowed by subsection N of this section.
I. A health care plan that provides coverage for surgical services for a mastectomy shall also provide coverage incidental to the patient's covered mastectomy for surgical services for reconstruction of the breast on which the mastectomy was performed, surgery and reconstruction of the other breast to produce a symmetrical appearance, prostheses, treatment of physical complications for all stages of the mastectomy, including lymphedemas, and at least two external postoperative prostheses subject to all of the terms and conditions of the policy.
J. A contract that provides coverage for surgical services for a mastectomy shall also provide coverage for mammography screening performed on dedicated equipment for diagnostic purposes on referral by a patient's physician, subject to all of the terms and conditions of the policy and according to the following guidelines:
1. A baseline mammogram for a woman from age thirty‑five to thirty‑nine.
2. A mammogram for a woman from age forty to forty‑nine every two years or more frequently based on the recommendation of the woman's physician.
3. A mammogram every year for a woman fifty years of age and over.
K. Any contract that is issued to the enrollee and that provides coverage for maternity benefits shall also provide that the maternity benefits apply to the costs of the birth of any child legally adopted by the enrollee if all the following are true:
1. The child is adopted within one year of birth.
2. The enrollee is legally obligated to pay the costs of birth.
3. All preexisting conditions and other limitations have been met and all deductibles and copayments have been paid by the enrollee.
4. The enrollee has notified the insurer of the enrollee's acceptability to adopt children pursuant to section 8‑105 within sixty days after such approval or within sixty days after a change in insurance policies, plans or companies.
L. The coverage prescribed by subsection K of this section is excess to any other coverage the natural mother may have for maternity benefits except coverage made available to persons pursuant to title 36, chapter 29 but not including coverage made available to persons defined as eligible under section 36‑2901, paragraph 6, subdivisions (b), (c), (d) and (e). If such other coverage exists the agency, attorney or individual arranging the adoption shall make arrangements for the insurance to pay those costs that may be covered under that policy and shall advise the adopting parent in writing of the existence and extent of the coverage without disclosing any confidential information such as the identity of the natural parent. The enrollee adopting parents shall notify their health care services organization of the existence and extent of the other coverage. A health care services organization is not required to pay any costs in excess of the amounts it would have been obligated to pay to its hospitals and providers if the natural mother and child had received the maternity and newborn care directly from or through that health care services organization.
M. Each health care services organization shall offer membership to the following in a conversion plan that provides the basic health care benefits required by the director:
1. Each enrollee including the enrollee's enrolled dependents leaving a group.
2. Each enrollee and the enrollee's dependents who would otherwise cease to be eligible for membership because of the age of the enrollee or the enrollee's dependents or the death or the dissolution of marriage of an enrollee.
N. A health care services organization shall not cancel or nonrenew an evidence of coverage issued to an individual on a nongroup basis, including a conversion plan, except for any of the following reasons and in compliance with the notice and disclosure requirements contained in subsection H of this section:
1. The individual has failed to pay premiums or contributions in accordance with the terms of the evidence of coverage or the health care services organization has not received premium payments in a timely manner.
2. The individual has performed an act or practice that constitutes fraud or the individual made an intentional misrepresentation of material fact under the terms of the evidence of coverage.
3. The health care services organization has ceased to offer coverage to individuals that is consistent with the requirements of sections 20‑1379 and 20‑1380.
4. If the health care services organization offers a health care plan in this state through a network plan, the individual no longer resides, lives or works in the service area served by the network plan or in an area for which the health care services organization is authorized to transact business but only if the coverage is terminated uniformly without regard to any health status‑related factor of the covered individual.
5. If the health care services organization offers health coverage in this state in the individual market only through one or more bona fide associations, the membership of the individual in the association has ceased but only if that coverage is terminated uniformly without regard to any health status‑related factor of any covered individual.
O. A conversion plan may be modified if the modification complies with the notice and disclosure provisions for cancellation and nonrenewal under subsection H of this section. A modification of a conversion plan that has already been issued shall not result in the effective elimination of any benefit originally included in the conversion plan.
P. Any person who is a United States armed forces reservist, who is ordered to active military duty on or after August 22, 1990 and who was enrolled in a health care plan shall have the right to reinstate such coverage upon on release from active military duty subject to the following conditions:
1. The reservist shall make written application to the health plan within ninety days of discharge from active military duty or within one year of hospitalization continuing after discharge. Coverage shall be effective upon on receipt of the application by the health plan.
2. The health plan may exclude from such coverage any health or physical condition arising during and occurring as a direct result of active military duty.
Q. The director shall adopt emergency rules that are applicable to persons who are leaving active service in the armed forces of the United States and returning to civilian status consistent with subsection P of this section and that include:
1. Conditions of eligibility.
2. Coverage of dependents.
3. Preexisting conditions.
4. Termination of insurance.
5. Probationary periods.
6. Limitations.
7. Exceptions.
8. Reductions.
9. Elimination periods.
10. Requirements for replacement.
11. Any other conditions of evidences of coverage.
R. Any contract that provides maternity benefits shall not restrict benefits for any hospital length of stay in connection with childbirth for the mother or the newborn child to less than forty‑eight hours following a normal vaginal delivery or ninety‑six hours following a cesarean section. The contract shall not require the provider to obtain authorization from the health care services organization for prescribing the minimum length of stay required by this subsection. The contract may provide that an attending provider in consultation with the mother may discharge the mother or the newborn child before the expiration of the minimum length of stay required by this subsection. The health care services organization shall not:
1. Deny the mother or the newborn child eligibility or continued eligibility to enroll or to renew coverage under the terms of the contract solely for the purpose of avoiding the requirements of this subsection.
2. Provide monetary payments or rebates to mothers to encourage those mothers to accept less than the minimum protections available pursuant to this subsection.
3. Penalize or otherwise reduce or limit the reimbursement of an attending provider because that provider provided care to any insured under the contract in accordance with this subsection.
4. Provide monetary or other incentives to an attending provider to induce that provider to provide care to an insured under the contract in a manner that is inconsistent with this subsection.
5. Except as described in subsection S of this section, restrict benefits for any portion of a period within the minimum length of stay in a manner that is less favorable than the benefits provided for any preceding portion of that stay.
S. Nothing in subsection R of this section:
1. Requires a mother to give birth in a hospital or to stay in the hospital for a fixed period of time following the birth of the child.
2. Prevents a health care services organization from imposing deductibles, coinsurance or other cost sharing in relation to benefits for hospital lengths of stay in connection with childbirth for a mother or a newborn child under the contract, except that any coinsurance or other cost sharing for any portion of a period within a hospital length of stay required pursuant to subsection R of this section shall not be greater than the coinsurance or cost sharing for any preceding portion of that stay.
3. Prevents a health care services organization from negotiating the level and type of reimbursement with a provider for care provided in accordance with subsection R of this section.
T. Any contract or evidence of coverage that provides coverage for diabetes shall also provide coverage for equipment and supplies that are medically necessary and that are prescribed by a health care provider including:
1. Blood glucose monitors.
2. Blood glucose monitors for the legally blind.
3. Test strips for glucose monitors and visual reading and urine testing strips.
4. Insulin preparations and glucagon.
5. Insulin cartridges.
6. Drawing up devices and monitors for the visually impaired.
7. Injection aids.
8. Insulin cartridges for the legally blind.
9. Syringes and lancets including automatic lancing devices.
10. Prescribed oral agents for controlling blood sugar that are included on the plan formulary.
11. To the extent coverage is required under medicare, podiatric appliances for prevention of complications associated with diabetes.
12. Any other device, medication, equipment or supply for which coverage is required under medicare from and after January 1, 1999. The coverage required in this paragraph is effective six months after the coverage is required under medicare.
U. Nothing in subsection T of this section:
1. Entitles a member or enrollee of a health care services organization to equipment or supplies for the treatment of diabetes that are not medically necessary as determined by the health care services organization medical director or the medical director's designee.
2. Provides coverage for diabetic supplies obtained by a member or enrollee of a health care services organization without a prescription unless otherwise permitted allowed pursuant to the terms of the health care plan.
3. Prohibits a health care services organization from imposing deductibles, coinsurance or other cost sharing in relation to benefits for equipment or supplies for the treatment of diabetes.
V. Any contract or evidence of coverage that provides coverage for prescription drugs shall not limit or exclude coverage for any prescription drug prescribed for the treatment of cancer on the basis that the prescription drug has not been approved by the United States food and drug administration for the treatment of the specific type of cancer for which the prescription drug has been prescribed, if the prescription drug has been recognized as safe and effective for treatment of that specific type of cancer in one or more of the standard medical reference compendia prescribed in subsection W of this section or medical literature that meets the criteria prescribed in subsection W of this section. The coverage required under this subsection includes covered medically necessary services associated with the administration of the prescription drug. This subsection does not:
1. Require coverage of any prescription drug used in the treatment of a type of cancer if the United States food and drug administration has determined that the prescription drug is contraindicated for that type of cancer.
2. Require coverage for any experimental prescription drug that is not approved for any indication by the United States food and drug administration.
3. Alter any law with regard to provisions that limit the coverage of prescription drugs that have not been approved by the United States food and drug administration.
4. Notwithstanding section 20‑1057.02, require reimbursement or coverage for any prescription drug that is not included in the drug formulary or list of covered prescription drugs specified in the contract or evidence of coverage.
5. Notwithstanding section 20‑1057.02, prohibit a contract or evidence of coverage from limiting or excluding coverage of a prescription drug, if the decision to limit or exclude coverage of the prescription drug is not based primarily on the coverage of prescription drugs required by this section.
6. Prohibit the use of deductibles, coinsurance, copayments or other cost sharing in relation to drug benefits and related medical benefits offered.
W. For the purposes of subsection V of this section:
1. The acceptable standard medical reference compendia are the following:
(a) The American hospital formulary service drug information, a publication of the American society of health system pharmacists.
(b) The national comprehensive cancer network drugs and biologics compendium.
(c) Thomson Micromedex compendium DrugDex.
(d) Elsevier gold standard's clinical pharmacology compendium.
(e) Other authoritative compendia as identified by the secretary of the United States department of health and human services.
2. Medical literature may be accepted if all of the following apply:
(a) At least two articles from major peer reviewed professional medical journals have recognized, based on scientific or medical criteria, the drug's safety and effectiveness for treatment of the indication for which the drug has been prescribed.
(b) No article from a major peer reviewed professional medical journal has concluded, based on scientific or medical criteria, that the drug is unsafe or ineffective or that the drug's safety and effectiveness cannot be determined for the treatment of the indication for which the drug has been prescribed.
(c) The literature meets the uniform requirements for manuscripts submitted to biomedical journals established by the international committee of medical journal editors or is published in a journal specified by the United States department of health and human services as acceptable peer reviewed medical literature pursuant to section 186(t)(2)(B) of the social security act (42 United States Code section 1395x(t)(2)(B)).
X. A health care services organization shall not issue or deliver any advertising matter or sales material to any person in this state until the health care services organization files the advertising matter or sales material with the director. This subsection does not require a health care services organization to have the prior approval of the director to issue or deliver the advertising matter or sales material. If the director finds that the advertising matter or sales material, in whole or in part, is false, deceptive or misleading, the director may issue an order disapproving the advertising matter or sales material, directing the health care services organization to cease and desist from issuing, circulating, displaying or using the advertising matter or sales material within a period of time specified by the director but not less than ten days and imposing any penalties prescribed in this title. At least five days before issuing an order pursuant to this subsection, the director shall provide the health care services organization with a written notice of the basis of the order to provide the health care services organization with an opportunity to cure the alleged deficiency in the advertising matter or sales material within a single five day period for the particular advertising matter or sales material at issue. The health care services organization may appeal the director's order pursuant to title 41, chapter 6, article 10. Except as otherwise provided in this subsection, a health care services organization may obtain a stay of the effectiveness of the order as prescribed in section 20‑162. If the director certifies in the order and provides a detailed explanation of the reasons in support of the certification that continued use of the advertising matter or sales material poses a threat to the health, safety or welfare of the public, the order may be entered immediately without opportunity for cure and the effectiveness of the order is not stayed pending the hearing on the notice of appeal but the hearing shall be promptly instituted and determined.
Y. Any contract or evidence of coverage that is offered by a health care services organization and that contains a prescription drug benefit shall provide coverage of medical foods to treat inherited metabolic disorders as provided by this section.
Z. The metabolic disorders triggering medical foods coverage under this section shall:
1. Be part of the newborn screening program prescribed in section 36‑694.
2. Involve amino acid, carbohydrate or fat metabolism.
3. Have medically standard methods of diagnosis, treatment and monitoring including quantification of metabolites in blood, urine or spinal fluid or enzyme or DNA confirmation in tissues.
4. Require specially processed or treated medical foods that are generally available only under the supervision and direction of a physician who is licensed pursuant to title 32, chapter 13 or 17 or a registered nurse practitioner who is licensed pursuant to title 32, chapter 15, that must be consumed throughout life and without which the person may suffer serious mental or physical impairment.
AA. Medical foods eligible for coverage under this section shall be prescribed or ordered under the supervision of a physician licensed pursuant to title 32, chapter 13 or 17 or a registered nurse practitioner who is licensed pursuant to title 32, chapter 15 as medically necessary for the therapeutic treatment of an inherited metabolic disease.
BB. A health care services organization shall cover at least fifty per cent percent of the cost of medical foods prescribed to treat inherited metabolic disorders and covered pursuant to this section. An organization may limit the maximum annual benefit for medical foods under this section to five thousand dollars $5,000, which applies to the cost of all prescribed modified low protein foods and metabolic formula.
CC. Unless preempted under federal law or unless federal law imposes greater requirements than this section, this section applies to a provider sponsored health care services organization.
DD. For the purposes of:
1. This section:
(a) "Inherited metabolic disorder" means a disease caused by an inherited abnormality of body chemistry and includes a disease tested under the newborn screening program prescribed in section 36‑694.
(b) "Medical foods" means modified low protein foods and metabolic formula.
(c) "Metabolic formula" means foods that are all of the following:
(i) Formulated to be consumed or administered enterally under the supervision of a physician who is licensed pursuant to title 32, chapter 13 or 17 or a registered nurse practitioner who is licensed pursuant to title 32, chapter 15.
(ii) Processed or formulated to be deficient in one or more of the nutrients present in typical foodstuffs.
(iii) Administered for the medical and nutritional management of a person who has limited capacity to metabolize foodstuffs or certain nutrients contained in the foodstuffs or who has other specific nutrient requirements as established by medical evaluation.
(iv) Essential to a person's optimal growth, health and metabolic homeostasis.
(d) "Modified low protein foods" means foods that are all of the following:
(i) Formulated to be consumed or administered enterally under the supervision of a physician who is licensed pursuant to title 32, chapter 13 or 17 or a registered nurse practitioner who is licensed pursuant to title 32, chapter 15.
(ii) Processed or formulated to contain less than one gram of protein per unit of serving, but does not include a natural food that is naturally low in protein.
(iii) Administered for the medical and nutritional management of a person who has limited capacity to metabolize foodstuffs or certain nutrients contained in the foodstuffs or who has other specific nutrient requirements as established by medical evaluation.
(iv) Essential to a person's optimal growth, health and metabolic homeostasis.
2. Subsection B of this section, "child", for purposes of initial coverage of an adopted child or a child placed for adoption but not for purposes of termination of coverage of such child, means a person who is under eighteen years of age.
Sec. 91. Section 20-1098.17, Arizona Revised Statutes, is amended to read:
20-1098.17. Effect of fees payment; premium tax
A. The fees paid by a captive insurer pursuant to section 20‑167, subsection G F are payment in full and in lieu of all other demands for all state, county, district, municipal and school taxes, licenses and excises of whatever kind or character, except for:
1. A tax on real and tangible personal property that is located within this state.
2. The transaction privilege tax and the use tax that is imposed pursuant to title 42, chapter 5, articles 1 and 4.
3. The transaction privilege tax and use tax that is imposed by any county, city or town.
B. Notwithstanding subsection A of this section, an agency captive insurer that insures risks on policies as specified in section 20‑1098.01, subsection A, paragraph 3, subdivision (b) shall pay the premium tax prescribed in section 20‑224 for such policies that is in excess of any fees paid pursuant to section 20‑167.
Sec. 92. Section 20-1098.23, Arizona Revised Statutes, is amended to read:
20-1098.23. Confidentiality of information; exceptions
A. Notwithstanding title 39, chapter 1, information submitted pursuant to this article is confidential and the director and the director's employees and agents shall not provide the information to any other person without the permission of the captive insurer, except that:
1. This section does not apply to the department's use of information submitted by a captive insurer for any regulatory purpose, disciplinary action or hearing. The director shall provide the captive insurer with a copy of any document that the director believes supports a violation of this title or that justifies any regulatory or other action against the captive insurer. a disclosure pursuant to this paragraph is not a waiver of any applicable privilege or claim of confidentiality in the disclosed document.
2. The director shall provide information submitted by a captive insurer that is required by subpoena issued in connection with an administrative, civil or criminal investigation by a government agency.
3. The information may be discoverable by a party in a civil action or contested case to which the captive insurer that submitted the information is a party, if the party seeking to discover the information demonstrates all of the following:
(a) The information sought is relevant to and necessary for the furtherance of the action or case.
(b) The information sought is unavailable from other nonconfidential sources.
(c) A subpoena issued by a judicial or administrative officer of competent jurisdiction has been submitted to the director.
4. The director may disclose the information to a public official that has jurisdiction over the regulation of insurance in another state if the public official agrees in writing to maintain the confidentiality of the information and the laws of the state in which the public official serves allow or require the information to be and remain confidential.
5. The director may provide the information to the industrial commission of Arizona. The industrial commission shall maintain the confidentiality of the information pursuant to this section.
6. For the purpose of administering this article and promoting this state's captive insurance industry, the director may disclose only the following information about licensed captive insurers:
(a) The name of the captive insurer.
(b) The date licensed.
(c) The type of captive insurer.
(d) The business or industry of the owners or members.
(e) The captive insurer's license status.
B. This section does not apply to risk retention groups.
Sec. 93. Section 20-1379, Arizona Revised Statutes, is amended to read:
20-1379. Guaranteed availability of individual health insurance coverage; prior group coverage; definitions
A. Every health care insurer that offers individual health insurance coverage in the individual market in this state shall provide guaranteed availability of coverage to an eligible individual who desires to enroll in individual health insurance coverage and shall not:
1. Decline to offer that coverage to, or deny enrollment of, that individual.
2. Impose any preexisting condition exclusion for that coverage.
B. Every health care insurer that offers individual health insurance coverage in the individual market in this state shall offer all policy forms of health insurance coverage that are designed for, that are made generally available and actively marketed to and that enroll both eligible or other individuals. A health care insurer that offers only one policy form in the individual market complies with this section by offering that form to eligible individuals. A health care insurer also may comply with the requirements of this section by electing to offer at least two different policy forms to eligible individuals as provided by subsection C of this section.
C. A health care insurer shall meet the requirements prescribed in subsection B of this section if:
1. The health care insurer offers at least two different policy forms, both of which are designed for, are made generally available and actively marketed to and enroll both eligible and other individuals.
2. The offer includes at least either:
(a) The policy forms with the largest and next to the largest earned premium volume of all policy forms offered by the health care insurer in this state in the individual market during a period not to exceed the preceding two calendar years.
(b) A choice of two policy forms with representative coverage, consisting of a lower level of coverage policy form and a higher level of coverage policy form, each of which includes benefits that are substantially similar to other individual health insurance coverage offered by the health care insurer in this state and each of which is covered by a method that provides for risk adjustment, risk spreading or a risk spreading mechanism among the health care insurer's policies.
D. The health care insurer's election pursuant to subsection C of this section is effective for policies offered during a period of at least two years.
E. If a health care insurer offers individual health insurance coverage in the individual market through a network plan, the health care insurer may do both of the following:
1. Limit the individuals who may be enrolled under health insurance coverage to those who live, reside or work within the service area for a network plan.
2. Within the service area of a network plan, deny health insurance coverage to individuals if the health care insurer has demonstrated, if required, to the director that both:
(a) The health care insurer will not have the capacity to deliver services adequately to additional individual enrollees because of the health care insurer's obligations to existing group contract holders and enrollees and individual enrollees.
(b) The health care insurer is applying this paragraph uniformly to individuals without regard to any health status‑related factor of the individuals and without regard to whether the individuals are eligible individuals.
F. A health care insurer may deny individual health insurance coverage in the individual market to an eligible individual if the health care insurer demonstrates to the director that the health care insurer:
1. Does not have the financial reserves necessary to underwrite additional coverage.
2. Is denying coverage uniformly to all individuals in the individual market in this state pursuant to state law and without regard to any health status‑related factor of the individuals and without regard to whether the individuals are eligible individuals.
G. If a health care insurer denies health insurance coverage in this state pursuant to subsection F of this section, the health care insurer shall not offer that coverage in the individual market in this state for one hundred eighty days after the date the coverage is denied or until the health care insurer demonstrates to the director that the health care insurer has sufficient financial reserves to underwrite additional coverage, whichever is later.
H. An accountable health plan as defined in section 20‑2301 that offers conversion policies on an individual or group basis in connection with a health benefits plan pursuant to this title is not a health care insurer that offers individual health insurance coverage solely because of the offer of a conversion policy.
I. Nothing in this section:
1. Creates additional restrictions on the amount of the premium rates that a health care insurer may charge an individual for health insurance coverage provided in the individual market.
2. Prevents a health care insurer that offers health insurance coverage in the individual market from establishing premium rates or modifying otherwise applicable copayments or deductibles in return for adherence to programs of health promotion and disease prevention.
3. Requires a health care insurer that offers only short‑term limited duration insurance or limited benefit coverage to individuals and no other coverage to individuals in the individual market to offer individual health insurance coverage in the individual market.
4. Requires a health care insurer offering health care coverage only on a group basis or through one or more bona fide associations, or both, to offer health insurance coverage in the individual market.
J. A health care insurer shall provide, without charge, a written certificate of creditable coverage as described in this section for creditable coverage occurring after June 30, 1996 if the individual:
1. Ceases to be covered under a policy offered by a health care insurer. An individual who is covered by a policy that is issued on a group basis by a health care insurer, that is terminated or not renewed at the choice of the sponsor of the group and where the replacement of the coverage is without a break in coverage is not entitled to receive the certification prescribed in this paragraph but is instead entitled to receive the certification prescribed in paragraph 2 of this subsection.
2. Requests certification from the health care insurer within twenty‑four months after the coverage under a health insurance coverage policy offered by a health care insurer ceases.
K. The certificate of creditable coverage provided by a health care insurer is a written certification of the period of creditable coverage of the individual under the health insurance coverage offered by the health care insurer. The department may enforce and monitor the issuance and delivery of the notices and certificates by health care insurers as required by this section, section 20‑1380, the health insurance portability and accountability act of 1996 (P.L. 104-191; 110 Stat. 1936) and any federal regulations adopted to implement the health insurance portability and accountability act of 1996.
L. Any health care insurer, accountable health plan or other entity that issues health care coverage in this state, as applicable, shall issue and accept a certificate of creditable coverage of the individual that contains at least the following information:
1. The date that the certificate is issued.
2. The name of the individual or dependent for whom the certificate applies and any other information that is necessary to allow the issuer providing the coverage specified in the certificate to identify the individual, including the individual's identification number under the policy and the name of the policyholder if the certificate is for or includes a dependent.
3. The name, address and telephone number of the issuer providing the certificate.
4. The telephone number to call for further information regarding the certificate.
5. One of the following:
(a) A statement that the individual has at least eighteen months of creditable coverage. For the purposes of this subdivision, "eighteen months" means five hundred forty‑six days.
(b) Both the date that the individual first sought coverage, as evidenced by a substantially complete application, and the date that creditable coverage began.
6. The date creditable coverage ended, unless the certificate indicates that creditable coverage is continuing from the date of the certificate.
7. The consumer assistance telephone number for the department.
8. The following statement in at least fourteen point fourteen‑point type:
Important Notice!
Keep this certificate with your important personal records to protect your rights under the health insurance portability and accountability act of 1996 ("HIPAA"). This certificate is proof of your prior health insurance coverage. You may need to show this certificate to have a guaranteed right to buy new health insurance ("Guaranteed issue"). This certificate may also help you avoid waiting periods or exclusions for preexisting conditions. Under HIPAA, these rights are guaranteed only for a very short time period. After your group coverage ends, you must apply for new coverage within 63 days to be protected by HIPAA. If you have questions, call the Arizona department of insurance and financial institutions.
M. A health care insurer has satisfied the certification requirement under this section if the insurer offering the health benefits plan provides the certificate of creditable coverage in accordance with this section within thirty days after the event that triggered the issuance of the certificate.
N. Periods of creditable coverage for an individual are established by the presentation of the certificate described in this section and section 20‑2310. In addition to the written certificate of creditable coverage as described in this section, individuals may establish creditable coverage through the presentation of documents or other means. In order to make a determination that is based on the relevant facts and circumstances of the amount of creditable coverage that an individual has, a health care insurer shall take into account all information that the insurer obtains or that is presented to the insurer on behalf of the individual.
O. A health care insurer shall calculate creditable coverage according to the following rules:
1. The health care insurer shall allow an individual credit for each day the individual was covered by creditable coverage.
2. The health care insurer shall not count a period of creditable coverage for an individual enrolled under any form of health insurance coverage if after the period of coverage and before the enrollment date there were sixty‑three consecutive days during which the individual was not covered by any creditable coverage.
3. The health care insurer shall not include any period that an individual is in a waiting period or an affiliation period for any health coverage or is awaiting action by a health care insurer on an application for the issuance of health insurance coverage when the health care insurer determines the continuous period pursuant to paragraph 1 of this subsection.
4. The health care insurer shall not include any period that an individual is waiting for approval of an application for health care coverage, provided the individual submitted an application to the health care insurer for health care coverage within sixty‑three consecutive days after the individual's most recent creditable coverage.
5. The health care insurer shall not count a period of creditable coverage with respect to enrollment of an individual if, after the most recent period of creditable coverage and before the enrollment date, sixty‑three consecutive days lapse during all of which the individual was not covered under any creditable coverage. The health care insurer shall not include in the determination of the period of continuous coverage described in this section any period that an individual is in a waiting period for health insurance coverage offered by a health care insurer, is in a waiting period for benefits under a health benefits plan offered by an accountable health plan or is in an affiliation period.
6. In determining the extent to which an individual has satisfied any portion of any applicable preexisting condition period the health care insurer shall count a period of creditable coverage without regard to the specific benefits covered during that period.
P. An individual is an eligible individual if, on the date the individual seeks coverage pursuant to this section, the individual has an aggregate period of creditable coverage as defined and calculated pursuant to this section of at least eighteen months and all of the following apply:
1. The most recent creditable coverage for the individual was under a plan offered by:
(a) An employee welfare benefit plan that provides medical care to employees or the employees' dependents directly or through insurance, reimbursement or otherwise pursuant to the employee retirement income security act of 1974 (P.L. 93‑406; 88 Stat. 829; 29 United States Code sections 1001 through 1461).
(b) A church plan as defined in the employee retirement income security act of 1974.
(c) A governmental plan as defined in the employee retirement income security act of 1974, including a plan established or maintained for its employees by the government of the United States or by any agency or instrumentality of the United States.
(d) An accountable health plan as defined in section 20‑2301.
2. The individual is not eligible for coverage under:
(a) An employee welfare benefit plan that provides medical care to employees or the employees' dependents directly or through insurance, reimbursement or otherwise pursuant to the employee retirement income security act of 1974.
(b) A health benefits plan issued by an accountable health plan as defined in section 20‑2301.
(c) Part A or part B of title XVIII of the social security act.
(d) Title 36, chapter 29 or any other plan established under title XIX of the social security act, and the individual does not have other health insurance coverage.
3. The most recent coverage within the coverage period was not terminated based on any factor described in section 20‑2309, subsection B, paragraph 1 or 2 relating to nonpayment of premiums or fraud.
4. The individual was offered and elected the option of continuation coverage under a COBRA continuation provision pursuant to the consolidated omnibus budget reconciliation act of 1985 (P.L. 99‑272; 100 Stat. 82) or a similar state program.
5. The individual exhausted the continuation coverage pursuant to the consolidated omnibus budget reconciliation act of 1985.
Q. Notwithstanding subsection P of this section, an individual is an eligible individual if:
1. The individual is an individual enrollee in a health care services organization that is domiciled in this state on the date that the health care services organization is declared insolvent, including any health care services organization that is not an accountable health plan as defined in section 20‑2301.
2. The individual's coverage terminates during the delinquency proceeding, after the health care services organization is declared insolvent.
3. The individual satisfies the requirements of an eligible individual as prescribed in this section other than the required period of creditable coverage.
R. Notwithstanding subsection P of this section, a newborn child, adopted child or child placed for adoption is an eligible individual if the child was timely enrolled and otherwise would have met the definition of an eligible individual as prescribed in this section other than the required period of creditable coverage and the child is not subject to any preexisting condition exclusion or limitation if the child has been continuously covered under health insurance coverage or a health benefits plan offered by an accountable health plan since birth, adoption or placement for adoption.
S. If a health care insurer imposes a waiting period for coverage of preexisting conditions, within a reasonable period of time after receiving an individual's proof of creditable coverage and not later than the date by which the individual must select an insurance plan, the health care insurer shall give the individual written disclosure of the insurer's determination regarding any preexisting condition exclusion period that applies to that individual. The disclosure shall include all of the following information:
1. The period of creditable coverage allowed toward the waiting period for coverage of preexisting conditions.
2. The basis for the insurer's determination and the source and substance of any information on which the insurer has relied.
3. A statement of any right the individual may have to present additional evidence of creditable coverage and to appeal the insurer's determination, including an explanation of any procedures for submission and appeal.
T. This section and section 20‑1380 apply to all health insurance coverage that is offered, sold, issued, renewed, in effect or operated in the individual market after June 30, 1997, regardless of when a period of creditable coverage occurs.
U. For the purposes of this section and section 20‑1380 as applicable:
1. "Affiliation period" has the same meaning prescribed in section 20‑2301.
2. "Bona fide association" means, for health care coverage issued by a health care insurer, an association that meets the requirements of section 20‑2324.
3. "Creditable coverage" means coverage solely for an individual, other than limited benefits coverage, under any of the following:
(a) An employee welfare benefit plan that provides medical care to employees or the employees' dependents directly or through insurance, reimbursement or otherwise pursuant to the employee retirement income security act of 1974.
(b) A church plan as defined in the employee retirement income security act of 1974.
(c) A health benefits plan issued by an accountable health plan as defined in section 20‑2301.
(d) Part A or part B of title XVIII of the social security act.
(e) Title XIX of the social security act, other than coverage consisting solely of benefits under section 1928.
(f) Title 10, chapter 55 of the United States Code.
(g) A medical care program of the Indian health service or of a tribal organization.
(h) A health benefits risk pool operated by any state of the United States.
(i) A health plan offered pursuant to title 5, chapter 89 of the United States Code.
(j) A public health plan as defined by federal law.
(k) A health benefit plan pursuant to section 5(e) of the peace corps act (P.L. 87‑293; 75 Stat. 612; 22 United States Code sections 2501 through 2523).
(l) A policy or contract, including short‑term limited duration insurance, issued on an individual basis by an insurer, a health care services organization, a hospital service corporation, a medical service corporation or a hospital, medical, dental and optometric service corporation.
(m) A policy or contract issued by a health care insurer or an accountable health plan to a member of a bona fide association.
4. "Delinquency proceeding" has the same meaning prescribed in section 20‑611.
5. "Different policy forms" means variations between policy forms offered by a health care insurer, including policy forms that have different cost sharing arrangements or different riders.
6. "Genetic information" means information about genes, gene products and inherited characteristics that may derive from the individual or a family member, including information regarding carrier status and information derived from laboratory tests that identify mutations in specific genes or chromosomes, physical medical examinations, family histories and direct analyses of genes or chromosomes.
7. "Health care insurer" means a disability insurer, group disability insurer, blanket disability insurer, health care services organization, hospital service corporation, medical service corporation or hospital, medical, dental and optometric service corporation.
8. "Health status‑related factor" means any factor in relation to the health of the individual or a dependent of the individual enrolled or to be enrolled in a health care services organization including:
(a) Health status.
(b) Medical condition, including physical and mental illness.
(c) Claims experience.
(d) Receipt of health care.
(e) Medical history.
(f) Genetic information.
(g) Evidence of insurability, including conditions arising out of acts of domestic violence as defined in section 20‑448.
(h) The existence of a physical or mental disability.
9. "Higher level of coverage" means a policy form for which the actuarial value of the benefits under the health insurance coverage offered by a health care insurer is at least fifteen percent more than the actuarial value of the health insurance coverage offered by the health care insurer as a lower level of coverage in this state but not more than one hundred twenty percent of a policy form weighted average.
10. "Individual health insurance coverage" means health insurance coverage offered by a health care insurer to individuals in the individual market but does not include limited benefit coverage or short‑term limited duration insurance. A health care insurer that offers limited benefit coverage or short‑term limited duration insurance to individuals and no other coverage to individuals in the individual market is not a health care insurer that offers health insurance coverage in the individual market.
11. "Limited benefit coverage" has the same meaning prescribed in section 20‑1137.
12. "Lower level of coverage" means a policy form offered by a health care insurer for which the actuarial value of the benefits under the health insurance coverage is at least eighty‑five percent but not more than one hundred percent of the policy form weighted average.
13. "Network plan" means a health care plan provided by a health care insurer under which the financing and delivery of health care services are provided, in whole or in part, through a defined set of providers either under contract with a health care insurer licensed pursuant to chapter 4, article 3 of this title or under contract with a health care insurer in accordance with the determination made by the director pursuant to section 20‑1053 regarding the geographic or service area in which a health care insurer may operate.
14. "Policy form weighted average" means the average actuarial value of the benefits provided by a health care insurer that issues health coverage in this state that is provided by either the health care insurer or, if the data are available, by all health care insurers that issue health coverage in this state in the individual health coverage market during the previous calendar year, except coverage pursuant to this section, weighted by the enrollment for all coverage forms.
15. "Preexisting condition" means a condition, regardless of the cause of the condition, for which medical advice, diagnosis, care or treatment was recommended or received within not more than six months before the date of the enrollment of the individual under the health insurance policy or other contract that provides health coverage benefits. A genetic condition is not a preexisting condition in the absence of a diagnosis of the condition related to the genetic information and shall not result in a preexisting condition limitation or preexisting condition exclusion.
16. "Preexisting condition limitation" or "preexisting condition exclusion" means a limitation or exclusion of benefits for a preexisting condition under a health insurance policy or other contract that provides health coverage benefits.
17. "Short‑term limited duration insurance" has the same meaning prescribed in section 20‑1384 and is not intended or marketed as health insurance coverage subject to guaranteed issuance or guaranteed renewal provisions of the laws of this state but that is creditable coverage within the meaning of this section and section 20‑2301.
Sec. 94. Section 20-1556, Arizona Revised Statutes, is amended to read:
20-1556. Contingency reserve
A. In addition to the paid in capital and surplus provided in section 20‑1542 each mortgage guaranty insurer shall establish a contingency reserve after establishment of establishing the unearned premium reserve. The mortgage guaranty insurer shall annually contribute to the contingency reserve an amount which that in the aggregate is the greater of either fifty per cent percent of the net earned premium or the minimum policyholder position required by section 20‑1550 divided by ten. The annual contributions to the contingency reserve made during each calendar year shall be maintained for a period of one hundred twenty months, except that the insurer may make withdrawals may be made by the insurer in any year in which the actual incurred losses and loss expenses exceed thirty‑five per cent percent of the corresponding net earned premiums, and these releases shall not be made without prior approval by the insurance director of insurance or commissioner of the insurer's state of domicile.
B. In addition to withdrawals made pursuant to subsection A of this section, with the prior approval of the insurance director or commissioner of the department of insurance of the insurer's state of domicile, the mortgage guaranty insurer may withdraw from the contingency reserve an amount that is not more than the amount by which the policyholder position exceeds the minimum policyholder position prescribed in section 20‑1550. The mortgage guaranty insurer shall provide or identify any information, analysis and other necessary documentation that supports the request submitted to the director or commissioner.
Sec. 95. Section 20-1603, Arizona Revised Statutes, is amended to read:
20-1603. Definitions
In this article, unless the context otherwise requires:
1. "Consumer credit insurance" means any one or a combination of the following:
(a) Credit life insurance.
(b) Credit disability insurance.
(c) Credit unemployment insurance.
2. "Credit disability insurance" means insurance on a debtor to provide indemnity for payments becoming due or outstanding on a specific loan or other credit transaction while the debtor is a person with has a disability as defined in the policy or certificate.
3. "Credit life insurance" means insurance on the life of a debtor pursuant to or in connection with a specific loan or other credit transaction that provides for the satisfaction of a debt, in whole or in part, on the death of an insured debtor.
4. "Credit property insurance" has the same meaning prescribed in section 20‑1621.01.
5. 4. "Credit unemployment insurance" means casualty insurance on a debtor to provide indemnity for payments or debt becoming due on a specific loan or other credit transaction while the debtor is involuntarily unemployed as defined in the policy.
6. 5. "Creditor" means the lender of money or vendor or lessor of goods, services, property, rights or privileges, including a lessor under a lease intended as a security, where payment is arranged through a credit transaction. "Creditor" means also any successor to the right, title or interest of any such lender, vendor or lessor or an affiliate, associate or subsidiary of any of them or any director, officer or employee of any of them or any other person in any way associated with any of them.
7. 6. "Debtor" means a borrower of money or a person possessing a commitment for a loan of certain funds or a purchaser or lessee of goods, services, property, rights or privileges for which payment is arranged through a credit transaction.
8. "Director" means the director of insurance.
9. 7. "Gross debt" means the sum of the remaining payments that a debtor owes a creditor.
10. 8. "Identifiable charge" means a charge for a type of consumer credit insurance that is made to debtors having that insurance and not made to debtors not having the insurance, and that includes a charge for insurance that is disclosed in the credit or other instrument furnished to the debtor that states the financial elements of the credit transaction and any difference in the finance, interest, service or other similar charge made to debtors in like circumstances except for the insured or noninsured status of the debtor or of the property used as security for the credit transaction.
11. 9. "Loan" means an advance or commitment of certain funds pursuant to a repayment agreement.
12. 10. "Net debt" means the amount necessary to liquidate a debt in a single lump sum payment, excluding all unearned interest and other unearned finance charges.
Sec. 96. Section 20-1634, Arizona Revised Statutes, is amended to read:
20-1634. Immunity
The director of insurance or any person who in good faith furnishes to the insured or insurer information as to reasons for cancellation or non‑renewal nonrenewal of a motor vehicle policy, shall not be liable to any party for providing such information.
Sec. 97. Section 20-1652, Arizona Revised Statutes, is amended to read:
20-1652. Grounds for valid notice of cancellation; inquiries; definitions
A. After a policy has been in effect for sixty days or, if the policy is a renewal, effective immediately, no a notice of cancellation may be is not effective unless it is based on the occurrence, after the effective date of the policy, of one or more of the following:
1. Nonpayment of premium.
2. Conviction of the named insured of a crime arising out of acts increasing the hazard insured against.
3. Acts or omissions by the insured or the insured's representative constituting fraud or material misrepresentation in obtaining the policy, continuing the policy or presenting a claim under the policy.
4. Discovery of grossly negligent acts or omissions by the insured substantially increasing any of the hazards insured against.
5. Substantial change in the risk assumed by the insurer, since the policy was issued, except to the extent that the insurer should reasonably have forseen foreseen the change or contemplated the risk in writing the contract.
6. A determination by the director of insurance that the continuation of the policy would place the insurer in violation of the insurance laws of this state.
7. Failure of the insured to take reasonable steps to eliminate or reduce any conditions in or on the insured premises that contributed to a loss in the past or will increase the probability of future losses.
B. In the event of If nonrenewal is based on the condition of the premises, the insured shall be given thirty days' notice to remedy the identified conditions. In the event that If the identified conditions are remedied, coverage shall be renewed. In the event that If the identified conditions are not satisfactorily remedied, the insured shall be given an additional thirty days, upon on payment of premium, to cure the defective condition. Any insured who believes nonrenewal under this subsection is arbitrary or capricious may utilize use the appeal procedures set forth in section 20‑1633.
C. If an insurer uses for underwriting purposes information from a report provided by, or database maintained by, an insurance support organization or consumer reporting agency related to the premises that is the subject of the application or to the person applying for insurance, the insurer shall obtain that information as soon as practicable on application by a person for insurance coverage and before the issuance of a binder of insurance coverage. Failure of the insurer to timely obtain the information required by this subsection precludes the insurer from declining insurance coverage or terminating a binder of insurance coverage based on the information. This subsection does not apply to a policy renewal.
D. This section does not affect the provisions of section 20‑1120.
E. After thirty days from the application by an insured for insurance coverage, no declination of insurance coverage or termination of a binder shall be based on information from a consumer report, including a consumer report provided by, or database maintained by, an insurance support organization or consumer reporting agency related to the premises that is the subject of the application or to the person applying for insurance. Notwithstanding any other law, an insurer may decline or terminate insurance coverage based on the condition of the premises as determined through a physical inspection of the premises.
F. An insurer shall not consider as a claim any inquiry by an insured into whether a policy will cover a loss or about the type or level of coverage. An insurer shall not use such an inquiry, regardless of the source of the information that an inquiry was made, as a basis for declining, nonrenewing or canceling insurance coverage or a binder of insurance coverage. An insurer shall not submit to any insurance support organization or consumer reporting agency that a mere inquiry was made to the insurer as to the terms or coverage of a policy of insurance. An inquiry into coverage on a property insurance policy is not a claim activity unless an actual claim is filed by the insured that results in an investigation of the claim by the insurer.
G. For the purposes of this section:
1. "Consumer reporting agency" has the same meaning prescribed in section 20‑2102.
2. "Insurance support organization" has the same meaning prescribed in section 20‑2102.
Sec. 98. Section 20-1673, Arizona Revised Statutes, is amended to read:
20-1673. Grounds for valid cancellation
A. No insurer may cancel an insurance policy before the expiration of the agreed term or one year from the effective date of the policy or renewal, whichever is less, if one of the following is true:
1. The policy has been in effect for sixty days.
2. The policy is a renewal, effective immediately.
B. Notwithstanding subsection A of this section, an insurer may cancel a policy for either of the following:
1. Nonpayment of a premium.
2. One of the following grounds, which must be stated in the policy:
(a) Conviction of the named insured of a crime arising out of acts increasing the hazard insured against.
(b) Acts or omissions by the insured or his the insured's representative constituting fraud or material misrepresentation in obtaining the policy, in continuing the policy or in presenting a claim under the policy.
(c) A substantial change in the risk assumed, except to the extent that the insurer should reasonably have foreseen the change or contemplated the risk in writing the contract.
(d) A substantial breach of contractual duties or conditions.
(e) Loss of reinsurance applicable to the risk insured against, but only if the absence of reinsurance has resulted from termination of treaty or facultative reinsurance initiated or implemented by the reinsurer or reinsurers of the company issuing the policy.
(f) A determination by the director of insurance that the continuation of the policy would place the insurer in violation of the insurance laws of this state or would jeopardize the solvency of the insurer.
(g) Acts or omissions by the insured or his the insured's representative which that materially increase the hazard insured against.
Sec. 99. Section 20-1691, Arizona Revised Statutes, is amended to read:
20-1691. Definitions
In this article, unless the context otherwise requires:
1. "Applicant" means:
(a) In the case of an individual long‑term care insurance policy, the person who seeks to contract for such benefits.
(b) In the case of a group long‑term care insurance policy, the proposed certificate holder.
2. "Certificate" means a certificate issued under a group long‑term care insurance policy, which group policy has been delivered or issued for delivery in this state.
3. "Chronically ill individual" means any individual who has been certified by a licensed health care practitioner as meeting the definition of illness established by title III of the health insurance portability and accountability act of 1996 (P.L. 104‑191; 110 Stat. 1936).
4. "Director" means the director of the department of insurance.
5. 4. "Group" means any of the following:
(a) One or more employers or labor organizations, or a trust or the trustees of a fund established by one or more employers or labor organizations for employees or former employees or members or former members of the labor organization.
(b) A professional, trade or occupational association for its members or former or retired members if the association is composed of individuals who were all actively engaged in the same profession, trade or occupation and the association has been maintained in good faith for purposes other than obtaining insurance.
(c) An association or a trust or the trustees of a fund established, created or maintained for the benefit of members of one or more associations, subject to compliance with the requirements of section 20‑1691.04, subsection A.
(d) A group other than that described in subdivision (a), (b) or (c) of this paragraph if a policy issued to the group satisfies the criteria under section 20‑1691.04, subsection C.
6. 5. "Group long‑term care insurance" means a long‑term care insurance policy that is delivered or issued for delivery in this state to a group.
7. 6. "Licensed health care practitioner" means any physician licensed pursuant to title 32, chapter 13 or 17, any registered nurse or registered nurse practitioner licensed pursuant to title 32, chapter 15 or any other individual who meets the requirements prescribed by the United States secretary of the treasury.
8. 7. "Long‑term care insurance" means an individual or group insurance policy or rider issued by insurers, fraternal benefit societies, nonprofit health, hospital and medical service corporations, prepaid health plans, health care services organizations or any similar organization and advertised, marketed, offered or designed to provide coverage for each covered person on an expense‑incurred, indemnity, prepaid or other basis for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, personal or custodial care services provided in a setting other than an acute care unit of a hospital. Long‑term care insurance includes group and individual annuities, life insurance policies or riders that provide or supplement long‑term care insurance and qualified long‑term care insurance contracts. Long‑term care insurance also includes a policy or rider that provides for payment of benefits based on cognitive impairment or loss of functional capacity. Long‑term care insurance does not include any insurance policy that is offered primarily to provide basic medicare supplement coverage, basic hospital expense coverage, basic medical and surgical expense coverage, major medical expense coverage, disability income or related asset protection coverage, hospital confinement indemnity coverage, accident only coverage, specified disease coverage, specified accident coverage or limited benefit health coverage or riders to the insurance policy or a life insurance policy that accelerates the death benefit for terminal illness, medical conditions requiring extraordinary medical intervention or permanent institutional confinement, that provides the option of a lump sum payment for those benefits and in which the benefits or the eligibility for the benefits is not conditioned on the receipt of long‑term care.
9. 8. "Long-term care partnership program" means a qualified state long‑term care insurance partnership as defined in section 1917(b) of the social security act (42 United States Code section 1396p).
10. 9. "Maintenance or personal care services" means any care the primary purpose of which is to provide assistance needed with any disability that results in the individual being a chronically ill individual, including the protection from threats to health and safety due to severe cognitive impairment.
11. 10. "Policy" means an individual or group policy, contract, subscriber agreement, rider or endorsement delivered or issued for delivery in this state by an insurer, fraternal benefit society, nonprofit health, hospital or medical service corporation, prepaid health plan or health care services organization or any similar organization.
12. 11. "Preexisting condition" means a condition for which medical advice or treatment was recommended by or received from a health care services provider within six months before the effective date of coverage of an insured person.
13. 12. "Qualified long‑term care insurance contract" means:
(a) Any insurance policy that meets the requirements of section 7702B(b) of the internal revenue code of 1986, as amended.
(b) The portion of a life insurance policy that provides long‑term care insurance coverage by rider or as a part of the policy and that satisfies the requirements of section 7702B(b) and (e) of the internal revenue code of 1986, as amended.
14. 13. "Qualified long‑term care services" means necessary diagnostic, preventive, therapeutic, curing, treating, mitigating and rehabilitative services and maintenance or personal care services to which the insured is eligible under a qualified long‑term care insurance contract and that are provided pursuant to a plan of care prescribed by a licensed health care practitioner.
15. 14. "Severe cognitive impairment" means an impairment determined by a licensed health care practitioner as meeting the definition of an impairment as established by title III of the health insurance portability and accountability act of 1996 (P.L. 104‑191; 110 Stat. 1936).
Sec. 100. Section 20-1691.04, Arizona Revised Statutes, is amended to read:
20-1691.04. Requirements for certain group coverage
A. Before advertising, marketing or offering a policy within this state issued to a group defined in section 20‑1691, paragraph 5 4, subdivision (c), the association or the insurer of the association shall file evidence with the director that the association meets all of the following requirements:
1. Consists of at least one hundred persons.
2. Has been organized and maintained in good faith for purposes other than obtaining insurance.
3. Has been in active existence for at least one year.
4. Has a constitution and bylaws that prescribe all of the following:
(a) That the association holds regular meetings at least annually to further the purposes of the members.
(b) Except for credit unions, that the association collects dues or solicits contributions from members.
(c) That the members have voting privileges and representation on the governing board and committees.
B. Thirty days after filing the evidence required by subsection A of this section, an association is deemed to satisfy the organizational requirements of subsection A of this section unless the director notifies the association or its insurer in writing that the association does not satisfy those organizational requirements.
C. An insurer may offer a group long‑term care insurance policy to a group defined in section 20‑1691, paragraph 5 4, subdivision (d) if the director finds all of the following:
1. Issuance of the group policy is not contrary to the best interest of the public.
2. Issuance of the group policy would result in economies of acquisition or administration.
3. The benefits of the policy are reasonable in relation to the premium charged.
D. A person shall not offer long‑term care insurance coverage for a resident of this state under a group policy issued in another state to a group defined in section 20‑1691, paragraph 5 4, subdivision (d) unless the state of issuance has statutory and regulatory long‑term care insurance requirements substantially similar to the requirements in this state and either this state or the state of issuance has made a determination that the requirements have been met.
E. The director may prohibit further offering to a resident of this state a policy that was issued to a group as defined in section 20‑1691, paragraph 5 4, subdivision (c) or (d) and that was initially authorized for issuance, if the director finds that the insurer does not currently meet the requirements of this article.
Sec. 101. Section 20-1691.06, Arizona Revised Statutes, is amended to read:
20-1691.06. Outline of coverage; certificate
A. An outline of coverage shall be delivered to an applicant for a long‑term care insurance policy at the time of initial solicitation through means that prominently direct the recipient’s attention to the document and its purpose. In the case of direct response solicitations, the outline of coverage shall be presented in conjunction with an application or enrollment form. In the case of insurance producer solicitations, the insurance producer shall deliver the outline of coverage before the presentation of an application or enrollment form. The outline of coverage shall include all of the following:
1. A description of the principal benefits and coverage provided in the policy.
2. A statement of the principal exclusions, reductions and limitations contained in the policy.
3. A statement of the renewal provisions, including any reservation in the policy of a right to change premiums, and any continuation or conversion provisions of group coverage.
4. A statement that the outline of coverage is a summary of the policy issued or applied for and that the policy should be consulted to determine governing contractual provisions.
5. A description of the terms under which the policy or certificate may be returned and the premium refunded.
6. A description of the relationship of cost of care and benefits.
7. A statement and description of whether the policy constitutes a qualified long‑term care insurance contract.
B. For a long‑term care insurance policy that is issued to a group as defined in section 20‑1691, paragraph 5 4, subdivision (a), an outline of coverage is not required to be delivered if the information listed in subsection A of this section is contained in other materials related to enrollment. On request, an insurer shall make the other materials available to the director.
C. On delivery of an individual life insurance policy that provides long‑term care benefits within the policy or by rider, a policy summary shall be delivered to the policyholder. In the case of direct response solicitations, the insurer shall deliver the policy summary on the applicant's request. If an applicant does not request the delivery of a policy summary, the insurer shall deliver the policy summary no later than at the time the policy is delivered. A policy summary shall include:
1. An explanation of how the long‑term care benefits interact with other components of the policy, including deductions from death benefits.
2. An explanation of the amount of benefits, the length of benefits and the guaranteed lifetime benefits, if any, for each covered person.
3. Any exclusions, reductions or limitations on benefits of long‑term care.
4. A statement that any long‑term care inflation protection option required by state law is not available under the policy.
5. If applicable to the type of policy that is issued:
(a) A disclosure of the effects of exercising other rights under the policy.
(b) A disclosure of guarantees that are related to long‑term care costs of insurance charges.
(c) Current and projected maximum lifetime benefits.
6. An explanation of the monthly reporting requirements for life insurance policies with an accelerated death benefits option.
D. The provisions of the policy summary required under subsection C of this section may be incorporated into any required life insurance illustration or policy summary.
E. The insurer shall provide a monthly report to the insured any time a long‑term care benefit that is funded through a life insurance vehicle by the acceleration of the death benefit is in benefit payment status and the report shall include:
1. Any long‑term care benefits paid out during the month.
2. An explanation of any changes in the policy, including death benefits or cash values, due to long‑term care benefits paid out.
3. The amount of long‑term care benefits existing or remaining.
F. A certificate issued pursuant to a group long‑term care insurance policy that is delivered or issued for delivery in this state shall include all of the following:
1. A description of the principal benefits and coverage provided in the policy.
2. A statement of the principal exclusions, reductions and limitations contained in the policy.
3. A statement that the group master policy should be consulted to determine governing contractual provisions.
G. If an application for a long‑term care insurance contract or certificate is approved, the issuer shall deliver the contract or certificate of insurance to the applicant within thirty days of after approval.
H. An insurer shall notify a claimant that a claim under a long‑term care insurance policy is accepted or denied within fifteen working days of after the insurer's receipt of a claim if the insurer has received the documentation it reasonably requires to determine liability. If the insurer requires longer than fifteen working days, the insurer, within the fifteen days, shall notify the claimant of the need for additional time and shall explain why additional time is required. In no case shall the determination exceed sixty days.
I. If an insurer denies a claim under a long‑term care insurance policy, the insurer shall:
1. Provide the policyholder, certificate holder or designated representative of the policyholder or certificate holder with a written explanation of the reasons for the denial, including a reference to any specific policy provision, condition or exclusion supporting the denial.
2. Make available all information directly related to the denial to the policyholder, certificate holder or designated representative of the policyholder or certificate holder.
Sec. 102. Section 20-1691.08, Arizona Revised Statutes, is amended to read:
20-1691.08. Rate and form review; disapproval
A. A person shall not deliver or issue for delivery in this state any long‑term care insurance policy or rate unless the person has first filed the form or rate with the director and the director has approved the form or rate. Unless the director issues an order affirmatively approving or disapproving the form or rate within thirty sixty days after filing, the form or rate is deemed approved. On written notice given to the insurer within the thirty day sixty-day period, the director may extend the thirty day sixty-day review period for up to fifteen additional days.
B. The director shall disapprove a rate or form if either:
1. The rate is does not in compliance comply with this article or any rules adopted pursuant to this article.
2. The form contains provisions that are ambiguous, misleading or deceptive, that encourage misrepresentation of the coverage or that are contrary to this title or of any rule adopted pursuant to this title.
C. If the director disapproves a rate or form, the director shall send the insurer a written notice specifying the reason for the disapproval. The insurer may request a hearing pursuant to title 41, chapter 6, article 10 to contest the disapproval. It is unlawful for the insurer to issue or use a rate or form that has been disapproved.
D. At any time after notice and for cause shown, the director may issue an order withdrawing approval of any form or rate for any reason listed in subsection B of this section. The insurer may request a hearing pursuant to title 41, chapter 6, article 10 to contest the director's order.
E. An insurer shall not issue or use a rate or form after the effective date of an order withdrawing approval.
F. The director, by order, may exempt from the requirements of this section for as long as the director deems proper any insurance rate or form specified in the order, to which, in the director's opinion, this section may not practicably be applied or the filing and approval of which are, in the director's opinion, not desirable or necessary for the protection of the public.
Sec. 103. Section 20-1691.11, Arizona Revised Statutes, is amended to read:
20-1691.11. Nonforfeiture benefits
A. Except as provided in subsection B of this section, a person shall not deliver or issue for delivery in this state a long‑term care insurance policy unless the policyholder or certificate holder has been offered the option of purchasing a policy or certificate with a nonforfeiture benefit. The offer of the nonforfeiture benefit may be in the form of a rider that is attached to the policy. If the policyholder or certificate holder declines the benefit, the insurer shall provide a contingent benefit on lapse that shall be available for a specified period of time following a substantial increase in premium rates.
B. If a group long‑term care insurance policy is issued, a person shall make the offer of the nonforfeiture benefit to the group policyholder, except that if the policy is issued to a group as defined in section 20‑1691, paragraph 5 4, subdivision (d), other than to a continuing care retirement community or other similar entity, a person shall make the offering to each proposed certificate holder.
Sec. 104. Section 20-1691.12, Arizona Revised Statutes, is amended to read:
20-1691.12. Insurance producer training course requirements
A. An individual may not sell, solicit or negotiate long-term care insurance unless the individual:
1. Is licensed as an insurance producer for accident and health or sickness.
2. Has completed eight hours of initial long-term care training.
3. Has completed four hours of long-term care training in each two‑year period succeeding July 1, 2009, after the two-year period within which the individual completed the initial long-term care training.
B. An individual may satisfy the training requirement prescribed in subsection A of this section only by completing an approved continuing education course that is offered by an approved provider pursuant to chapter 18 of this title. The completion of such a course may also satisfy the insurance continuing education requirement prescribed by chapter 18 of this title.
C. The training courses required by subsection A of this section consist of topics that are related to long-term care insurance, long-term care services and, if applicable, qualified state long-term care insurance partnership programs including, as consistent with the minimum standards that apply to approved continuing education courses developed by the continuing education review committee pursuant to section 20‑2905:
1. State and federal rules and requirements and the relationship between qualified state long-term care insurance partnership programs and other public and private coverage of long-term care services, including medicaid.
2. Available long-term care services and long-term care service providers.
3. Changes or improvements in long-term care services or long-term care service providers.
4. Alternatives to the purchase of private long-term care insurance.
5. The effect of inflation on benefits and the importance of inflation protection.
6. Consumer suitability standards and guidelines.
D. An insurer that is subject to this article shall obtain verification that an insurance producer received training that is required by subsection A of this section before the insurance producer is permitted allowed to sell, solicit or negotiate the insurer's long-term care products.
E. An insurer that is subject to this article shall maintain and make available to the director on request sufficient records with respect to the training of insurance producers who sell, solicit or negotiate the insurer's long-term care insurance products to allow the department to provide assurance to the Arizona health care cost containment system administration that the insurance producers have received the training prescribed by this section.
F. A nonresident insurance producer's satisfaction of a substantially similar long-term care training requirement of any other state satisfies the nonresident insurance producer's long-term care training requirement as prescribed by this section.
Sec. 105. Section 20-1741, Arizona Revised Statutes, is amended to read:
20-1741. Annual statement to include certain claims and premium information
Each licensed insurer that is authorized to transact casualty insurance in this state and which that writes professional liability insurance shall, as part of the annual statement required by section 20‑223, shall report such professional liability claims and premium data as shall be prescribed by the director of insurance.
Sec. 106. Section 20-1742, Arizona Revised Statutes, is amended to read:
20-1742. Insurers to report malpractice claims and actions; definition
A. Each health care insurer providing professional liability insurance to a health professional as defined in section 32‑3201 shall report to the appropriate health profession regulatory board, except the Arizona medical board, within thirty days of its receipt, any written or oral claim or action for damages for personal injury claimed to have been caused by:
1. An error, omission or negligence in the performance of an insured's professional services.
2. The performance of professional services without adequate informed consent.
3. An alleged breach of contract for professional services.
B. The reports required by subsection A of this section shall be confidential, nondiscoverable and nonadmissible as evidence, shall be filed on such forms as the health profession regulatory board, except the Arizona medical board, may require and shall contain:
1. The name and address of the health professional involved in the claim.
2. The name and address of the person on whose behalf the claim is being filed.
3. The date of the occurrence that created the claim.
4. The date of the claim if a complaint is not simultaneously filed.
5. The date the complaint is filed, if applicable.
6. A summary of the occurrence on which the claim is based as stated by the claimant.
7. Such other reasonable information related to the claim as the director may require.
C. Every health care insurer required to report to the health profession regulatory board pursuant to this section is required to advise the health profession regulatory board of any settlements or judgments entered against a health professional as defined in section 32‑3201 within thirty days after the settlement was agreed to or the judgment was entered in superior court.
D. There shall be no liability on the part of and no cause of action shall arise against any health care insurer or its agents or employees reporting as required by this section.
E. The health profession regulatory board shall notify each health care insurer that is required to report pursuant to subsection A of this section of its duty to report.
F. Nothing in This section limits does not limit the director of the department of insurance and financial institutions from obtaining any of the information required to be reported under this section.
G. For the purposes of this section, "health profession regulatory board" means an agency, board or commission that licenses, certifies or registers a health professional as defined by section 32‑3201.
Sec. 107. Section 20-1801, Arizona Revised Statutes, is amended to read:
20-1801. Definitions
In this chapter, unless the context otherwise requires:
1. "Assets of a life care facility" means those assets held in the name of the life care facility only.
2. "Contract holder" means a person who enters into a life care contract with a provider or who is designated, in a life care contract, to be a person provided with services in the person's private residence with the right to future access to services, board and lodging in a facility.
3. "Department" means the department of insurance.
4. "Director" means the director of the department of insurance.
5. 3. "Entrance fee" means an initial or deferred transfer to a provider of a sum of money or property, made or promised to be made by a person entering into a life care contract, which assures a resident or contract holder of services pursuant to a life care contract.
6. 4. "Facility":
(a) Means a place or places in which a provider undertakes to provide a resident with nursing services, medical services or health‑related services, in addition to board and lodging, for a term in excess of one year or for life pursuant to a life care contract.
(b) Does not include a contract holder's private residence.
7. 5. "Life care contract" means a contract to provide to a person for the duration of such the person's life or for a term in excess of one year nursing services, medical services or health‑related services, as defined in section 36‑401, in addition to board and lodging for such the person in a facility or services in the person's private residence with the right to future access to services, board and lodging in a facility, conditioned upon on the transfer of an entrance fee to the provider of such services in addition to or in lieu of the payment of regular periodic charges for the care and services involved.
8. 6. "Living unit" means an apartment, room or other area within a facility set aside for the exclusive use of one or more identified residents.
9. 7. "Manager" means a corporation, partnership, association, joint stock company, trust, or any other unincorporated organization which that is contracted with to manage the residential section or health related health-related section, or both, of a life care facility.
10. 8. "Permit" means a permit to enter into life care contracts issued by the department of insurance.
11. 9. "Promoter" means the primary person who is employed to consult or to promote the establishment of a life care facility.
12. 10. "Provider" means a person who provides services pursuant to a life care contract.
13. 11. "Resident" means a person who enters into a life care contract with a provider or who is designated, in a life care contract, to be a person provided with services, board and lodging in a living unit or at a facility.
Sec. 108. Section 20-1808, Arizona Revised Statutes, is amended to read:
20-1808. Ratio of assets to liabilities; report; rehabilitation of provider
A. The provider shall possess assets in the first year of operation equal to at least seventy‑five per cent percent of the unamortized endowment fees plus all other liabilities including long‑term debt. The unamortized endowment fees shall be based on life expectancy of purchasers. Thereafter, the provider shall at all times possess assets in an amount sufficient to assure full performance of the obligations of the provider pursuant to life care contracts including any reserve fund escrow required by the director pursuant to section 20‑1806.
B. If revenues or funds including reserves are inadequate or projected to be inadequate pursuant to the annual report or an actuarial report or if the provider does not meet the requirements of subsection A of this section, the director may employ an independent management consultant experienced in the operation of life care facilities, at the expense of the provider, who shall examine the financial structure and operations of the provider and make recommendations on remedial action to the director. The director shall not be bound by such recommendations.
C. If at any time the director receives notice from the escrow agent that section 20‑1806 has not been complied with, or if at any other time when the director has reason to believe that the provider is in a financially unsound or unsafe condition, or that its condition is such that it may otherwise be unable to fully perform its obligations pursuant to life care contracts, or when if the provider fails to implement the director's recommendations as a result of a management consultant's report or when if it is obvious to the director that to obtain the services of a financial consultant under subsection B of this section would be futile, the director, through the attorney general, shall apply to the superior court in the county in which the provider's facility is located for an order directing him the director to assume management and possession of the provider's facility and to rehabilitate the provider to enable it to fully perform its obligation pursuant to life care contracts. The court shall act upon on the application upon on notice to the provider, and any objection to the petition shall be filed with the court within the time prescribed by such notice.
D. If the court upon on hearing finds that the provider is in a financially unsound or unsafe condition or that its condition is such that it may otherwise be unable to fully perform its obligations pursuant to life care contracts, the court shall issue an order directing the director to take possession of the property of the provider and to conduct the business thereof, and to take such steps toward removal of the causes and conditions which that have made rehabilitation necessary, as the court may direct. The order shall include a provision directing the issuance of a notice of the rehabilitation proceedings to the residents at such facility, to the provider's contract holders and to such other interested persons as the court shall direct.
E. Appointment of the director to rehabilitate a provider shall authorize the director to:
1. Take possession of and preserve, protect and recover any assets, books and records or property of the provider, including claims or causes of action belonging that belong to or which that may be asserted by the provider, and to deal with such property in his own the director's name in the capacity as director, and purchase at any sale any real estate or other asset upon on which the provider may hold any lien or encumbrance or in which it may have an interest.
2. File, prosecute and defend or compromise any suit or suits which that have been filed or which that may thereafter be filed by or against such the provider which and that are deemed by the director to be necessary to protect the provider or the residents or contract holders or any property affected thereby.
3. Take possession of and deposit and invest any of the provider's available funds.
4. Pay all expenses of the rehabilitation.
5. Exercise such other powers and duties as may be provided by order of the court.
6. Appoint managers, supervisors or employees necessary to properly manage and operate the provider and the provider's facility.
7. Take possession of and, with the prior approval of the court, sell, exchange, lease, mortgage or otherwise dispose of any property of the provider by public sale, bidding or otherwise.
8. With the prior approval of the court, borrow money with or without security for the purpose of facilitating the rehabilitation of the provider.
9. Perform all duties of the provider.
10. Reject any executory contract to which the provider is a party.
11. Withdraw any sums remaining in the escrow account established pursuant to section 20‑1806 for the purpose of rehabilitating the provider's facility.
F. The court may at any time during a rehabilitation proceeding issue such other instructions or orders as are deemed necessary to aid the director in the rehabilitation proceeding.
G. The director, or any interested person upon on due notice to the director, at any time may apply to the court for an order terminating the rehabilitation proceedings and permitting allowing the provider to resume possession of its property and the conduct of its business, but no such order shall be granted except when, after a full hearing, the court has determined that the purposes of the proceeding have been fully accomplished and that the facility can be returned to the provider's management without further jeopardy to the residents of the facility, creditors, owners of the facility, and to the public. An order terminating the rehabilitation proceeding shall be based upon on a full report and accounting by the director of the conduct of the provider's officers during the rehabilitation and of the provider's current financial condition.
H. If at any time the director deems that further efforts to rehabilitate the provider would be useless, he the director may report to the court and apply for an order of liquidation and dissolution pursuant to title 10, chapter 14, article 3, if a corporation, or may apply for other appropriate relief for dissolving the provider and winding up its affairs. An order directing the liquidation or dissolution of the provider shall act as a revocation of the provider's permit issued pursuant to section 20‑1803.
I. In connection with the rehabilitation proceedings, the director may appoint one or more special deputy directors of the department of insurance and financial institutions to act for him the director and may employ such counsel, clerks or assistants as he the director deems necessary. The compensation of the special deputies, counsel, clerks or assistants and any expenses of taking possession of the provider's facility and of conducting the proceedings shall be set by the director, subject to approval of the court, and shall be paid out of the funds or assets of the provider.
Sec. 109. Section 20-1812, Arizona Revised Statutes, is amended to read:
20-1812. Disclosure statement; contents
At the time of or prior to before the execution of a life care contract and the transfer of any money or other property to a provider pursuant thereto, the provider shall deliver to the person with whom the life care contract is entered into a disclosure statement which that contains a copy of the provider's certified financial statements and feasibility study prepared according to the provisions of section 20‑1802 and any other information required by the director. The cover of the disclosure statement shall contain the following statement in bold‑faced print: "A permit for this life care facility has been issued by the Arizona department of insurance and financial institutions. This permit does not constitute approval, recommendation or endorsement of the life care facility by the department, nor does it evidence the accuracy or completeness of the information in this statement."
Sec. 110. Section 20-2202, Arizona Revised Statutes, is amended to read:
20-2202. Joint underwriting association; establishment
A. There is established in the department of insurance A joint underwriting association is established in the department of insurance and financial institutions consisting of insurers authorized to write and engaged in writing in this state on a direct basis liability insurance, including the liability portion of multiperil policies, but not including ocean marine insurance. Every such insurer shall be a member of the association and shall remain a member as a condition of its authority to continue to transact insurance in this state.
B. If after a hearing conducted pursuant to section 20‑2201, the director determines that a voluntary plan would fail to provide coverage, the association shall provide liability insurance coverages for a designated class or classes of risks on a primary basis in this state. The association shall not be required to provide coverage available through an assigned risk plan or coverages for pollution liability, hazardous waste liability or workers' compensation. The association may operate only on a finding by the director after a public hearing pursuant to section 20‑161 that liability insurance is substantially unavailable through private insurers for a particular line.
C. If the director determines, on application of any interested party and after a public hearing, that liability insurance for a particular line is no longer substantially unavailable through private insurers, the association shall cease its underwriting operations.
D. Nothing contained in This chapter prohibits does not prohibit an insurer from issuing or renewing a policy of liability insurance in this state. However, on a determination by the director, after a public hearing pursuant to section 20‑161, that substantial adverse selection has, or will likely, result, the director may issue an order to insurers that no original policies shall thereafter be issued or that renewal policies shall be issued only if the insurer will offer the insurance to a representative sample of rating classifications, or both.
Sec. 111. Repeal
Section 20-2305, Arizona Revised Statutes, is repealed.
Sec. 112. Section 20-2306, Arizona Revised Statutes, is amended to read:
20-2306. Use of uniform employee health status questionnaire
A. An accountable health plan shall use the uniform employee health status questionnaire prescribed pursuant to section 20‑2305 by the department for all small groups for which the accountable health plan requires employees and their covered dependents to complete health status questionnaires.
B. An accountable health plan may add to the questionnaire additional questions which that pertain to eligibility for coverage and for underwriting purposes and may ask the producer or the employees and dependents follow‑up questions about their responses to the uniform employee health status questionnaire.
Sec. 113. Section 20-2310, Arizona Revised Statutes, is amended to read:
20-2310. Discrimination prohibited; preexisting conditions; wellness programs
A. Except as provided in subsection B of this section, a health benefits plan may not deny, limit or condition the coverage or benefits based on a person's health status‑related factors or a lack of evidence of insurability.
B. A health benefits plan shall not exclude coverage for preexisting conditions, except that:
1. A health benefits plan may exclude coverage for preexisting conditions for a period of not more than twelve months or, in the case of a late enrollee, eighteen months. The exclusion of coverage does not apply to services that are furnished to newborns who were otherwise covered from the time of their birth or to persons who satisfy the portability requirements under section 20‑2308.
2. The accountable health plan shall reduce the period of any applicable preexisting condition exclusion by the aggregate of the periods of creditable coverage that apply to the individual.
C. A health benefits plan shall not include an affiliation period in a policy unless the affiliation period satisfies the requirements prescribed in 45 Code of Federal Regulations section 146.119(b).
D. On request of a health benefits plan, a person who provides coverage during a period of continuous coverage with respect to a covered individual shall promptly disclose the coverage provided to the covered individual, the period of the coverage and the benefits provided under the coverage.
E. The accountable health plan shall calculate creditable coverage according to the following rules:
1. The accountable health plan shall give an individual credit for each day the individual was covered by creditable coverage.
2. The accountable health plan shall not count a period of creditable coverage for an individual enrolled in a health benefits plan if after the period of coverage and before the enrollment date there were sixty‑three consecutive days during which the individual was not covered under any creditable coverage.
3. The accountable health plan shall give credit in the calculation of creditable coverage for any period that an individual is in a waiting period or an affiliation period for any health coverage.
4. The accountable health plan shall not count a period of creditable coverage with respect to enrollment of an individual if, after the most recent period of creditable coverage and before the enrollment date, sixty‑three consecutive days lapse during all of which the individual was not covered under any creditable coverage. The accountable health plan shall not include in the determination of the period of continuous coverage described in this section any period that an individual is in a waiting period for health insurance coverage offered by a health care insurer, is in a waiting period for benefits under a health benefits plan offered by an accountable health plan or is in an affiliation period.
5. In determining the extent to which an individual has satisfied any portion of any applicable preexisting condition period the accountable health plan shall count a period of creditable coverage without regard to the specific benefits covered during that period.
6. An accountable health plan shall not impose any preexisting condition exclusion in the case of an individual who is covered under creditable coverage thirty‑one days after the individual's date of birth.
7. An accountable health plan shall not impose any preexisting condition exclusion in the case of a child who is adopted or placed for adoption before age eighteen and who is covered under creditable coverage thirty‑one days after the adoption or placement for adoption.
F. An accountable health plan shall provide the certificate of creditable coverage described in subsection G of this section without charge for creditable coverage occurring after June 30, 1996 if the individual:
1. Ceases to be covered under a health benefits plan offered by an accountable health plan or otherwise becomes covered under a COBRA continuation provision. An individual who is covered by a health benefits plan that is offered by an accountable health plan, that is terminated or not renewed at the choice of the employer and where the replacement of the health benefits plan is without a break in coverage is not entitled to receive the certification prescribed in this paragraph but is instead entitled to receive the certifications prescribed in paragraphs 2 and 3 of this subsection.
2. Who was covered under a COBRA continuation provision ceases to be covered under the COBRA continuation provision.
3. Requests certification from the accountable health plan within twenty‑four months after the coverage under a health benefits plan offered by an accountable health plan ceases.
G. The certificate of creditable coverage provided by an accountable health plan is a written certification of:
1. The period of creditable coverage of the individual under the accountable health plan and any applicable coverage under a COBRA continuation provision.
2. Any applicable waiting period or affiliation period imposed on an individual for any coverage under the accountable health plan.
H. Any accountable health plan that issues health benefits plans in this state, as applicable, shall issue and accept a written certificate of creditable coverage of the individual that contains at least the following information:
1. The date that the certificate is issued.
2. The name of the individual or dependent for whom the certificate applies and any other information that is necessary to allow the issuer providing the coverage specified in the certificate to identify the individual, including the individual's identification number under the policy and the name of the policyholder if the certificate is for or includes a dependent.
3. The name, address and telephone number of the issuer providing the certificate.
4. The telephone number to call for further information regarding the certificate.
5. One of the following:
(a) A statement that the individual has at least eighteen months of creditable coverage. For the purposes of this subdivision, "eighteen months" means five hundred forty‑six days.
(b) Both the date that the individual first sought coverage, as evidenced by a substantially complete application, and the date that creditable coverage began.
6. The date creditable coverage ended, unless the certificate indicates that creditable coverage is continuing from the date of the certificate.
7. The consumer assistance telephone number for the department.
8. The following statement in at least fourteen point fourteen‑point type:
Important notice!
Keep this certificate with your important personal records to protect your rights under the health insurance portability and accountability act of 1996 ("HIPAA"). This certificate is proof of your prior health insurance coverage. You may need to show this certificate to have a guaranteed right to buy new health insurance ("Guaranteed issue"). This certificate may also help you avoid waiting periods or exclusions for preexisting conditions. Under HIPAA, these rights are guaranteed only for a very short time period. After your group coverage ends, you must apply for new coverage within 63 days to be protected by HIPAA. If you have questions, call the Arizona department of insurance and financial institutions.
I. An accountable health plan may provide any certification pursuant to subsection F, paragraph 1 of this section at the same time the accountable health plan sends the notice required by the applicable COBRA continuation provision.
J. An accountable health plan has satisfied the certification requirement under this section if the accountable health plan offering the health benefits plan provides the prescribed certificate in accordance with this section within thirty days after the event that triggered the issuance of the certification.
K. If an accountable health plan imposes a waiting period for coverage of preexisting conditions, within a reasonable period of time after receiving an individual's proof of creditable coverage and not later than the date by which the individual must select an insurance plan, the accountable health plan shall give the individual written disclosure of the accountable health plan's determination regarding any preexisting condition exclusion period that applies to that individual. The disclosure shall include all of the following information:
1. The period of creditable coverage allowed toward the waiting period for coverage of preexisting conditions.
2. The basis for the accountable health plan's determination and the source and substance of any information on which the accountable health plan has relied.
3. A statement of any right the individual may have to present additional evidence of creditable coverage and to appeal the accountable health plan's determination, including an explanation of any procedures for submission and appeal.
L. Periods of creditable coverage for an individual are established by presentation of the written certifications described in this section and section 20‑1379. In addition to written certification of the period of creditable coverage as described in this section, individuals may establish creditable coverage through the presentation of documents or other means. In order to make a determination that is based on the relevant facts and circumstances of the amount of creditable coverage that an individual has, an accountable health plan shall take into account all information that the plan obtains or that is presented to the plan on behalf of the individual.
M. The department may enforce and monitor the issuance and delivery of the notices and certificates by accountable health plans and insurers as required by this section, the health insurance portability and accountability act of 1996 (P.L. 104‑191; 110 Stat. 1936) and any federal regulations adopted to implement the health insurance portability and accountability act of 1996.
N. This section does not prohibit any health benefits plan from providing or offering to provide rewards or incentives under a wellness program that satisfies the requirements for an exception from the general prohibition against discrimination based on a health factor under the health insurance portability and accountability act of 1996 (P.L. 104-191; 110 stat. 1936), including any federal regulations that are adopted pursuant to that act.
Sec. 114. Section 20-2318, Arizona Revised Statutes, is amended to read:
20-2318. Mandatory coverage prohibited
Notwithstanding any law to the contrary, the basic health benefit plan is not subject to the requirements of section 20‑461, subsection A, paragraph 16 17 and subsection B, section 20‑826, subsections C, D, E, F, H, I, J and K, sections 20‑841, 20‑841.01 and 20‑841.02, section 20‑1051, paragraph 4 3, section 20‑1057, subsections B, C, I, J, K, L and M, section 20‑1402, subsection A, paragraphs 2, 4, 5, 6, 7 and 8, section 20‑1404, subsections E, F, G, H, I and J and sections 20‑1406, 20‑1406.01, 20‑1406.02 and 20‑1408.
Sec. 115. Section 20-2402, Arizona Revised Statutes, is amended to read:
20-2402. Risk retention groups chartered and licensed in this state; definitions
A. A risk retention group, pursuant to this title, shall be chartered and licensed to write only liability insurance pursuant to this chapter and, except as provided in this chapter, must comply with this title with respect to insurers that are chartered and licensed in this state and with section 20‑2403. Before it may offer insurance in any state, each risk retention group shall also submit for approval to the director of the department of insurance and financial institutions a plan of operation or a feasibility study and revisions of the plan or study if the group intends to offer any additional lines of liability insurance. The group shall not offer any additional kinds of liability insurance in this state or in any other state until a revision of the plan or study is approved by the director of the department of insurance and financial institutions.
B. Immediately on receipt of an application for a charter, this state shall provide summary information concerning the filing to the national association of insurance commissioners, including the name of the risk retention group, the identity of the initial members of the group, the identity of those individuals who organized the group or who will provide administrative services or otherwise influence or control the activities of the group, the amount and nature of initial capitalization, the coverages to be afforded and the states in which the group intends to operate.
C. A risk retention group that is licensed in this state shall comply with all of the following:
1. The board of directors of the risk retention group shall have a majority of independent board directors. If the risk retention group is a reciprocal risk retention group, the attorney‑in‑fact shall be required to adhere to the same standards regarding independence of operation and governance as imposed on the risk retention group's board of directors or subscribers' advisory committee, or both, under these standards, and, to the extent permissible under this state's laws, service providers of a reciprocal risk retention group shall contract with the risk retention group and not the attorney‑in‑fact.
2. A board director does not qualify as independent unless the board of directors affirmatively determines that the board director has no material relationship with the risk retention group. Each risk retention group shall disclose these determinations to its domestic regulator, at least annually. Any person that is a direct or indirect owner of or subscriber in the risk retention group or is an officer, board director or employee, or all three, of an owner and insured, as contemplated by 15 United States Code section 3901(a)(4)(E)(ii), is considered to be independent, unless some other position of that officer, board director or employee constitutes a material relationship.
3. The term of any material service provider contract with the risk retention group may not exceed five years. Any contract or its renewal shall require the approval of the majority of the risk retention group's independent board directors. The risk retention group's board of directors shall have the right to terminate any service provider, audit or actuarial contracts at any time for cause after providing adequate notice as defined in the contract. The service provider contract is deemed material if the amount to be paid for that contract is greater than or equal to five percent of the risk retention group's annual gross written premium or two percent of its surplus, whichever is greater. A service provider contract that is a material relationship may not be entered into unless the risk retention group has notified the director of the department of insurance and financial institutions in writing of its intention to enter into the transaction at least thirty days before and the director of the department of insurance and financial institutions has not disapproved the transaction within that period.
4. The board of directors of a risk retention group shall adopt a written policy in the plan of operation as approved by the board that requires the board of directors to do all of the following:
(a) Ensure that all owners or insureds, or both, of the risk retention group receive evidence of ownership interest.
(b) Develop a set of governance standards applicable to the risk retention group.
(c) Oversee the evaluation of the risk retention group's management, including the performance of the captive manager, managing general underwriter or other parties responsible for underwriting, determination of rates, collection of premium, adjusting or settling claims or the preparation of financial statements.
(d) Review and approve the amount to be paid for all material service providers.
(e) Review and approve, at least annually, all of the following:
(i) The risk retention group's goals and objectives relevant to the compensation of officers and service providers.
(ii) The officers' and service providers' performance in light of those goals and objectives.
(iii) The continued engagement of the officers and material service providers.
5. Each risk retention group shall have an audit committee composed of at least three independent board members. A nonindependent board member may participate in the activities of the audit committee, if invited by the members, but cannot be a member of that committee. The audit committee shall have a written charter that defines the committee's purpose, which, at a minimum, shall be to do all of the following:
(a) Assist in board oversight of the integrity of the financial statements, the compliance with legal and regulatory requirements and the qualifications, independence and performance of the independent auditor and actuary.
(b) Discuss the annual audited financial statements and quarterly financial statements with management.
(c) Discuss the annual audited financial statements with its independent auditor and, if advisable, discuss its quarterly financial statements with its independent auditor.
(d) Discuss policies with respect to risk assessment and risk management.
(e) Meet separately and periodically, either directly or through a designated representative of the committee, with management and independent auditors.
(f) Review with the independent auditor any audit problems or difficulties and management's response.
(g) Set clear hiring policies of the risk retention group as to the hiring of employees or former employees of the independent auditor.
(h) Require the external auditor to rotate the lead or coordinating audit partner having primary responsibility for the risk retention group's audit as well as the audit partner responsible for reviewing that audit, so that neither individual performs audit services for more than five consecutive fiscal years.
(i) Report regularly to the board of directors.
6. The director of the department of insurance and financial institutions may waive the requirement to establish an audit committee pursuant to paragraph 5 of this subsection if the risk retention group demonstrates to the director that doing so is impracticable and the risk retention group's board of directors is otherwise able to fulfill the requirements of the audit committee as set forth in this section.
7. The board of directors shall adopt and disclose governance standards by making the information available through electronic means, such as posting the information on the risk retention group's website, or other means, and providing that information to members and insureds on request. The information shall include all of the following:
(a) A process by which the board directors are elected by the owners or insureds, or both.
(b) Board director qualification standards.
(c) Board director responsibilities.
(d) Board director access to management and, as necessary and appropriate, independent advisers.
(e) Board director compensation.
(f) Board director orientation and continuing education.
(g) The policies and procedures that are followed for management succession.
(h) The policies and procedures that are followed for the annual performance evaluation of the board.
8. The board of directors shall adopt and disclose a code of business conduct and ethics for board directors, officers and employees and promptly disclose to the board of directors any waivers of the code for board directors or executive officers, including all of the following topics:
(a) Conflicts of interest.
(b) Matters covered under the corporate opportunity doctrine under the state of domicile.
(c) Confidentiality.
(d) Fair dealing.
(e) Protection and proper use of risk retention group assets.
(f) Compliance with all applicable laws, rules and regulations.
(g) Requiring the reporting of any illegal or unethical behavior that affects the operation of the risk retention group.
9. The captive manager, president or chief executive officer of the risk retention group shall promptly notify the domestic regulator, in writing, if either becomes aware of any material noncompliance with any of the risk retention group's governance standards.
D. For the purposes of this section:
1. "Board director" means a natural person designated in the articles of the risk retention group, or designated, elected or appointed by any other manner, name or title to act as a board director.
2. "Board of directors" or "board" means the governing body of the risk retention group elected by the shareholders or members to establish policy, elect or appoint officers and committees and make other governing decisions.
3. "Material relationship" means a person's relationship with the risk retention group, including any of the following:
(a) The receipt in any one twelve‑month period of compensation or payment of any other item of value by that person, a member of that person's immediate family or any business with which that person is affiliated from the risk retention group or a consultant or service provider to the risk retention group that is greater than or equal to five percent of the risk retention group's gross written premium for that twelve‑month period or two percent of its surplus, whichever is greater, as measured at the end of any fiscal quarter falling in a twelve‑month period. The person or immediate family member of that person is not independent until one year after the person's compensation from the risk retention group falls below the threshold.
(b) A relationship with an auditor in which a board director or an immediate family member of a board director who is affiliated with, or employed in, a professional capacity by a present or former internal or external auditor of the risk retention group is not independent until one year after the end of the affiliation, employment or auditing relationship.
(c) A relationship with a related entity in which a board director or immediate family member of a board director who is employed as an executive officer of another company where any of the risk retention group's present executives serve on that other company's board of directors is not independent until one year after the end of that service or the employment relationship.
4. "Service providers" includes captive managers, auditors, accountants, actuaries, investment advisers, attorneys and managing general underwriters or any other party responsible for underwriting, determination of rates, collection of premium, adjusting and settling claims or the preparation of financial statements. For the purposes of this paragraph, attorney does not include defense counsel retained by the risk retention group to defend claims, unless the amount of fees paid to those attorneys create creates a material relationship.
Sec. 116. Section 20-2501, Arizona Revised Statutes, is amended to read:
20-2501. Definitions; scope
A. In this chapter, unless the context otherwise requires:
1. "Adverse decision" means a utilization review determination by the utilization review agent that a requested service or claim for service is not a covered service or is not medically necessary under the plan if that determination results in a documented denial or nonpayment of the service or claim.
2. "Benefits based on the health status of the insured" means a contract of insurance to pay a fixed benefit amount, without regard to the specific services received, to a policyholder who meets certain eligibility criteria based on health status including:
(a) A disability income insurance policy that pays a fixed daily, weekly or monthly benefit amount to an insured who is deemed a person with to have a disability as defined by the policy terms.
(b) A hospital indemnity policy that pays a fixed daily benefit during hospital confinement.
(c) A disability insurance policy that pays a fixed daily, weekly or monthly benefit amount to an insured who is certified by a licensed health care professional as chronically ill as defined by the policy terms.
(d) A disability insurance policy that pays a fixed daily, weekly or monthly benefit amount to an insured who suffers from a prolonged physical illness, disability or cognitive disorder as defined by the policy terms.
3. "Claim" means a request for payment for a service already provided. Claim does not include:
(a) Claim adjustments for usual and customary charges for a service or coordination of benefits between health care insurers.
(b) A request for payment under a policy or contract that pays benefits based on the health status of the insured and that does not reimburse the cost of or provide covered services.
4. "Covered service" means a service that is included in a policy, evidence of coverage or similar document that specifies which services, insurance or other benefits are included or covered.
5. "Denial" means a direct or indirect determination regarding all or part of a request for any service or a direct determination regarding a claim that may trigger a request for review or reconsideration. Denial does not include:
(a) Enforcement of a health care insurer's deductibles, copayments or coinsurance requirements or adjustments for usual and customary charges, deductibles, copayments or coinsurance requirements for a service or coordination of benefits between health care insurers.
(b) The rejection of a request for payment under a policy or contract that pays benefits based on the health status of the insured and that does not reimburse the cost of or provide covered services.
6. "Department" means the department of insurance.
7. "Director" means the director of the department of insurance.
8. 6. "Health care insurer" means a disability insurer, group disability insurer, blanket disability insurer, health care services organization, hospital service corporation, prepaid dental plan organization, medical service corporation, dental service corporation or optometric service corporation or a hospital, medical, dental and optometric service corporation.
9. 7. "Indirect denial" means a failure to communicate authorization or nonauthorization to the member by the utilization review agent within ten business days after the utilization review agent receives the request for a covered service.
10. 8. "Provider" means the physician or other licensed practitioner identified to the utilization review agent as having primary responsibility for providing care, treatment and services rendered to a patient.
11. 9. "Service" means a diagnostic or therapeutic medical or health care service, benefit or treatment.
12. 10. "Utilization review" means a system for reviewing the appropriate and efficient allocation of inpatient hospital resources, inpatient medical services and outpatient surgery services that are being given or are proposed to be given to a patient, and of any medical, surgical and health care services or claims for services that may be covered by a health care insurer depending on determinable contingencies, including without limitation outpatient services, in‑office consultations with medical specialists, specialized diagnostic testing, mental health services, emergency care and inpatient and outpatient hospital services. Utilization review does not include elective requests for the clarification of coverage.
13. 11. "Utilization review agent" means a person or entity that performs utilization review. For purposes of article 2 of this chapter, utilization review agent has the same meaning prescribed in section 20‑2530. For purposes of this chapter, utilization review agent does not include:
(a) A governmental agency.
(b) An agent that acts on behalf of the governmental agency.
(c) An employee of a utilization review agent.
14. 12. "Utilization review plan" means a summary description of the utilization review guidelines, protocols, procedures and written standards and criteria of a utilization review agent.
B. For the purposes of this chapter, utilization review by an optometric service corporation applies only to nonsurgical medical and health care services.
Sec. 117. Section 20-2533, Arizona Revised Statutes, is amended to read:
20-2533. Denial; levels of review; disclosure; additional time after service by mail; review process
A. Any member who is denied a covered service or whose claim for a service is denied may pursue the applicable review process prescribed in this article. Except as provided in sections 20‑2534 and 20‑2535, health care insurers shall provide at least the following levels of review, as applicable:
1. An expedited medical review and expedited appeal pursuant to section 20‑2534.
2. An informal reconsideration pursuant to section 20‑2535.
3. A formal appeal process pursuant to section 20‑2536.
4. An external independent review pursuant to section 20‑2537.
B. A health care insurer may offer additional levels of review other than the levels prescribed in subsection A of this section as long as the additional levels of review do not increase the time period limitations prescribed by this article.
C. At the time coverage is initiated, each health care insurer that operates in this state and whose utilization review system includes the power to affect the direct or indirect denial of requested medical or health care services or claims for medical or health care services shall include a separate information packet that is approved by the director with the member's policy, evidence of coverage or similar document. At the time coverage is renewed, each health care insurer shall include a separate statement with the member's policy, evidence of coverage or similar document that informs the member that the member can obtain a replacement packet that explains the appeal process by contacting a specific department and telephone number. A health care insurer shall also provide a copy of the information packet to the member or the member's treating provider on request and to the member within five business days after the date the appeal is initiated pursuant to section 20‑2534, 20‑2535 or 20‑2536. The information packet provided by the health care insurer shall include all of the following information:
1. A detailed description and explanation of each level of review prescribed in subsection A of this section and notice of the member's right to proceed to the next level of review if the prior review is unsuccessful.
2. An explanation of the procedures that the member must follow, including the applicable time periods, for each level of review prescribed in subsection A of this section and an explanation of how the member may obtain the member's medical records pursuant to title 12, chapter 13, article 7.1.
3. The specific title and department of the person and the address, telephone number and telefacsimile fax number of that person whom the member must notify at each level of review prescribed in subsection A of this section in order to pursue that level of review.
4. The specific title and department of the person and the address, telephone number and telefacsimile FAX number of the person who will be responsible for processing that review.
5. A notice that if the member decides to pursue an appeal the member must provide the person who will be responsible for processing the appeal with any material justification or documentation for the appeal at the time that the member files the written appeal.
6. A description of the utilization review agent's and health care insurer's roles at each level of review prescribed by subsection A of this section and an outline of the director's role during the external independent review process, if not already described in response to paragraph 1 of this subsection.
7. A notice that if the member participates in the process of review pursuant to this article the member waives any privilege of confidentiality of the member's medical records regarding any person who examined or will examine the member's medical records in connection with that review process for the medical condition under review.
8. A statement that the member is not responsible for the costs of any external independent review.
9. Standardized forms that are prescribed by the department and that a member may use to file and pursue an appeal.
10. The name and telephone number for the department of insurance and financial institutions consumer assistance office with a statement that the department of insurance and financial institutions consumer assistance office can assist consumers with questions about the health care appeals process.
D. At the time of issuing a denial, the health care insurer shall notify the member of the right to appeal under this article. A health care insurer that issues an explanation of benefits document shall satisfy this obligation by prominently displaying in the document a statement about the right to appeal. A health care insurer that does not issue an explanation of benefits document shall satisfy this obligation through some other reasonable means to assure that the member is apprised of the right to appeal at the time of a denial. A reasonable means that includes giving the member's treating provider a form statement about the right to appeal shall require the treating provider to notify the member of the member's right to appeal.
E. Any written notice, acknowledgment, request, decision or other written document required to be mailed pursuant to this article is deemed received by the person to whom the document is properly addressed on the fifth business day after the request is mailed. For the purposes of this subsection, "properly addressed" means the last known address.
F. The director shall require any member who files a complaint with the department relating to an adverse decision to pursue the review process prescribed in this article. This subsection does not limit the director's authority pursuant to chapter 1, article 2 of this title.
G. If the member's complaint is an issue of medical necessity under the coverage document and not whether the claim or service is covered, the informal reconsideration shall be performed as prescribed by section 20‑2535 by a licensed health care professional. If the member's complaint is an issue of medical necessity under the coverage document and not whether the claim or service is covered, the expedited review or formal appeal shall be decided by a physician, provider or other health care professional as prescribed by section 20‑2534 or 20‑2536. Any external independent review shall be decided by a physician, provider or other health care professional as prescribed by section 20‑2537.
H. Any person given access to a member's medical records or other medical information in connection with proceedings pursuant to this article shall maintain the confidentiality of the records or information in accordance with title 12, chapter 13, article 7.1.
Sec. 118. Section 20-2541, Arizona Revised Statutes, is amended to read:
20-2541. Health care insurer fee
The director of the department of insurance may assess each health care insurer that is authorized to transact insurance:
1. A single fee of not more than two hundred dollars $200 per insurer.
2. Up to two hundred dollars $200 each year for the costs of performing the responsibilities relating to the procurement of independent review organizations as prescribed in sections 20‑2537 and 20‑2538 and for implementing and maintaining the external independent review process, including processing and paying claims through the health care appeals fund established by section 20‑2540. The department of insurance is authorized one full‑time equivalent position to perform these responsibilities.
Sec. 119. Section 20-2802, Arizona Revised Statutes, is amended to read:
20-2802. Scope of chapter
A. This chapter does not apply to:
1. A provider employed by or under contract with the enrollee's health care services plan.
2. A health care services plans plan administered under title 36.
3. A health care services plan which that only covers health care expenses incurred by an enrollee who is subsequently admitted to a licensed hospital as part of the treatment.
B. Nothing in This chapter is intended to does not create any private right or cause of action for or on behalf of any enrollee, provider or other person, whether a resident or nonresident of this state. This chapter provides solely an administrative remedy to the director of the department of insurance for any violation of this chapter or any related rule.
Sec. 120. Section 20-2901, Arizona Revised Statutes, is amended to read:
20-2901. Definitions
In this article, unless the context otherwise requires:
1. "Applicant" means a provider organization that submits an application to the contractor to provide continuing education courses.
2. "Approved continuing education course" means any course that has been approved by at least five other states or that is approved by a contractor or automatically approved pursuant to section 20‑2904.
3. "Approved provider" means an organization or individual that offers an approved continuing education course and that is authorized by the contractor to offer the course to a licensee for credit toward the licensee's continuing education requirements.
4. "Continuing education review committee" means the committee appointed by the director pursuant to section 20‑2905 to establish minimum standards that apply to approved providers and approved continuing education courses and minimum performance standards that apply to contractors.
5. 4. "Continuously licensed" means that a licensee's license has not terminated for any reason. For the purposes of this paragraph, a license that expires under section 20‑289, subsection E is not considered to have terminated if the late fee is timely paid and the license is renewed or the license is placed on inactive status pursuant to section 20‑289.01.
6. 5. "Contractor" means the person who has a contract with the department of insurance to approve continuing education providers and courses and to administer the continuing education program and who is paid through fees collected from approved providers when the approved providers apply for continuing education course approval.
7. 6. "Credit hour" means the value assigned to an hour of instruction in an approved continuing education course.
8. 7. "Ethics training" means continuing education course content regarding the ethical responsibilities insurance producers owe to insurers, applicants, policyholders, regulators, insurance professionals and the public.
9. 8. "License period" means the period between the date an Arizona insurance license is issued or last renewed and the expiration date of the Arizona insurance license.
10. 9. "Licensee" means an individual insurance producer licensed for major line insurance as defined in section 20‑281. Licensee does not include any business entity.
11. 10. "Nonresident licensee" means a licensee who is applying to renew a nonresident license in this state.
12. 11. "Provider organization" means a person that provides continuing education courses but that has not yet been accepted as an approved provider pursuant to section 20‑2904.
Sec. 121. Repeal
Section 20-2905, Arizona Revised Statutes, is repealed.
Sec. 122. Section 20-3251, Arizona Revised Statutes, is amended to read:
20-3251. Interstate insurance product regulation compact
The interstate insurance product regulation compact is enacted into law as follows:
Article I
Purpose
Under the terms and conditions of this compact, this state seeks to join with other states and establish the interstate insurance product regulation compact and thus become a member of the interstate insurance product regulation commission. The director is hereby designated to serve as the representative of this state to the commission. The purposes of the compact are, through means of joint and cooperative action among the compacting states:
1. To promote and protect the interest of consumers of individual and group annuity, life insurance, disability income and long-term care insurance products.
2. To develop uniform standards for insurance products covered under the compact.
3. To establish a central clearinghouse to receive and provide prompt review of insurance products covered under the compact and, in certain cases, related advertisements, submitted by insurers authorized to do business in one or more compacting states.
4. To give appropriate regulatory approval to those product filings and advertisements satisfying the applicable uniform standard.
5. To improve coordination of regulatory resources and expertise between state insurance departments regarding the setting of uniform standards and review of insurance products covered under the compact.
6. To create the interstate insurance product regulation commission.
7. To perform these and other related functions as may be consistent with the state regulation of the business of insurance.
Article II
Definitions
In this compact, unless the context otherwise requires:
1. "Advertisement" means any material designed to create public interest in a product or induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace or retain a policy, as more specifically defined in the rules and operating procedures of the commission.
2. "Bylaws" means those bylaws established by the commission for its governance or for directing or controlling the commission's actions or conduct.
3. "Commission" means the interstate insurance product regulation commission established by this compact.
4. "Commissioner" means the insurance director of insurance or the chief insurance regulatory official of a state including commissioner, superintendent, director or administrator.
5. "Compact" means the interstate insurance product regulation compact.
6. "Compacting state" means any state that has enacted the compact and that has not withdrawn or been terminated under article XIV of this compact.
7. "Domiciliary state" means the state in which an insurer is incorporated or organized or, in the case of an alien insurer, its state of entry.
8. 7. "Insurer" means any entity licensed by a state to issue contracts of insurance for any of the lines of insurance covered by the compact.
9. 8. "Member" means the person chosen by a compacting state as its representative to the commission or the person's designee.
10. 9. "Noncompacting state" means any state that is not at the time a compacting state.
11. 10. "Operating procedures" means procedures adopted by the commission implementing a rule, uniform standard or compact provision.
12. 11. "Product" means the form of a policy or contract, including any application, endorsement or related form that is attached to and made a part of the policy or contract, and any evidence of coverage or certificate, for an individual or group annuity, life insurance, disability income or long‑term care insurance product that an insurer is authorized to issue.
13. 12. "Rule" means a statement of general or particular applicability and future effect that is adopted by the commission, including a uniform standard developed pursuant to article VII of this compact, and that is designed to implement, interpret or prescribe law or policy or describes the organization, procedure or practice requirements of the commission, which shall have the force and effect of law in the compacting states.
14. 13. "State" means any state, district or territory of the United States.
15. 14. "Third‑party filer" means an entity that submits a product filing to the commission on behalf of an insurer.
16. 15. "Uniform standard" means a standard adopted by the commission for a product line pursuant to article VII of this compact and includes all of the product requirements in aggregate. Each uniform standard shall be construed, whether express or implied, to prohibit the use of any inconsistent, misleading or ambiguous provisions in a product and the form of the product made available to the public shall not be unfair, inequitable or against public policy as determined by the commission.
Article III
Commission Establishment and Venue
A. The compacting states hereby create and establish a joint public agency known as the interstate insurance product regulation commission. Under article IV of this compact, the commission has the power to develop uniform standards for product lines, receive and provide prompt review of products filed with the commission and give approval to those product filings satisfying applicable uniform standards. It is not intended for the commission to be the exclusive entity for receipt and review of insurance product filings. This section does not prohibit any insurer from filing its product in any state wherein the insurer is licensed to conduct the business of insurance. Any filing is subject to the laws of the state where filed.
B. The commission is a body corporate and politic, and an instrumentality of the compacting states.
C. The commission is solely responsible for its liabilities except as otherwise specifically provided in this compact.
D. Venue is proper and judicial proceedings by or against the commission shall be brought solely and exclusively in a court of competent jurisdiction where the principal office of the commission is located.
Article IV
Commission Powers
The commission has the following powers:
1. To adopt rules pursuant to article VII of this compact that shall have the force and effect of law and shall be binding in the compacting states to the extent and in the manner provided in the compact.
2. To exercise its rulemaking authority and establish reasonable uniform standards for products covered under the compact, and advertisement related thereto, which shall have the force and effect of law and shall be binding in the compacting states, but only for those products filed with the commission. A compacting state shall have the right to opt out of the uniform standard pursuant to article VII of this compact, to the extent and in the manner provided in this compact. Any uniform standard established by the commission for long‑term care insurance products may provide the same or greater protections for consumers as, but shall not provide less than, those protections set forth in the national association of insurance commissioners' long-term care insurance model act and long-term care insurance model regulation, respectively, adopted as of 2001. The commission shall consider whether any subsequent amendments to the long‑term care insurance model act or long-term care insurance model regulation adopted by the national association of insurance commissioners require amending of the uniform standards established by the commission for long-term care insurance products.
3. To receive and review in an expeditious manner products filed with the commission, and rate filings for disability income and long-term care insurance products, and give approval of those products and rate filings that satisfy the applicable uniform standard, where such approval shall have the force and effect of law and be binding on the compacting states to the extent and in the manner provided in the compact.
4. To receive and review in an expeditious manner advertisement relating to long‑term care insurance products for which uniform standards have been adopted by the commission, and give approval to all advertisement that satisfies the applicable uniform standard. For any product covered under this compact, other than long‑term care insurance products, the commission shall have the authority to require an insurer to submit all or any part of its advertisement with respect to that product for review or approval before use if the commission determines that the nature of the product is such that an advertisement of the product could have the capacity or tendency to mislead the public. The actions of the commission as provided in this section shall have the force and effect of law and shall be binding in the compacting states to the extent and in the manner provided in the compact.
5. To exercise its rulemaking authority and designate products and advertisement that may be subject to a self‑certification process without the need for prior approval by the commission.
6. To adopt operating procedures pursuant to article VII of this compact that shall be binding in the compacting states to the extent and in the manner provided in the compact.
7. To bring and prosecute legal proceedings or actions in its name as the commission. The standing of any state insurance department to sue or be sued under applicable law shall not be affected.
8. To issue subpoenas requiring the attendance and testimony of witnesses and the production of evidence.
9. To establish and maintain offices.
10. To purchase and maintain insurance and bonds.
11. To borrow, accept or contract for services of personnel, including employees of a compacting state.
12. To hire employees, professionals or specialists, and elect or appoint officers, and to fix their compensation, define their duties and give them appropriate authority to carry out the purposes of the compact, and determine their qualifications and to establish the commission's personnel policies and programs relating to, among other things, conflicts of interest, rates of compensation and qualifications of personnel.
13. To accept any and all appropriate donations and grants of money, equipment, supplies, materials and services, and to receive, use and dispose of the same. The commission shall strive to avoid any appearance of impropriety.
14. To lease, purchase, accept appropriate gifts or donations of, or otherwise to own, hold, improve or use, any property, real, personal or mixed. The commission shall strive to avoid any appearance of impropriety.
15. To sell, convey, mortgage, pledge, lease, exchange, abandon or otherwise dispose of any property, real, personal or mixed.
16. To remit filing fees to compacting states as may be set forth in the bylaws, rules or operating procedures.
17. To enforce compliance by compacting states with rules, uniform standards, operating procedures and bylaws.
18. To provide for dispute resolution among compacting states.
19. To advise compacting states on issues relating to insurers domiciled or doing business in noncompacting jurisdictions, consistent with the purposes of the compact.
20. To provide advice and training to those personnel in state insurance departments responsible for product review, and to be a resource for state insurance departments.
21. To establish a budget and make expenditures.
22. To borrow money.
23. To appoint committees, including advisory committees comprising members, state insurance regulators, state legislators or their representatives, insurance industry and consumer representatives and other interested persons as may be designated in the bylaws.
24. To provide and receive information from, and to cooperate with, law enforcement agencies.
25. To adopt and use a corporate seal.
26. To perform other functions as may be necessary or appropriate to achieve the purposes of the compact consistent with the state regulation of the business of insurance.
Article V
Commission Organization
A. Each compacting state shall have and be limited to one member. Each member shall be qualified to serve in that capacity pursuant to applicable law of the compacting state. Any member may be removed or suspended from office as provided by the law of the state from which the member shall be appointed. Any vacancy occurring in the commission shall be filled in accordance with the laws of the compacting state wherein the vacancy exists. This section does not affect the manner in which a compacting state determines the election or appointment and qualification of its own commissioner.
B. Each member shall be entitled to one vote and shall have an opportunity to participate in the governance of the commission in accordance with the bylaws. Notwithstanding any provision in this compact to the contrary, no action of the commission with respect to the adoption of a uniform standard shall be effective unless two-thirds of the members vote in favor of the uniform standard.
C. The commission, by a majority of the members, shall prescribe bylaws to govern its conduct as may be necessary or appropriate to carry out the purposes, and exercise the powers, of the compact, including:
1. Establishing the fiscal year of the commission.
2. Providing reasonable procedures for appointing and electing members, as well as holding meetings, of the management committee.
3. Providing reasonable standards and procedures for:
(a) The establishment and meetings of other committees.
(b) Governing any general or specific delegation of any authority or function of the commission.
4. Providing reasonable procedures for calling and conducting meetings of the commission that consist of a majority of commission members, ensuring reasonable advance notice of each such meeting and providing for the right of citizens to attend each such meeting with enumerated exceptions designed to protect the public's interest, the privacy of individuals and insurers' proprietary information, including trade secrets. The commission may meet in camera only after a majority of the entire membership votes to close a meeting. As soon as practicable, the commission must make public a copy of the vote to close the meeting revealing the vote of each member with no proxy votes allowed and the votes taken during the meeting.
5. Establishing the titles, duties, authority and reasonable procedures for the election of the officers of the commission.
6. Providing reasonable standards and procedures for the establishment of the personnel policies and programs of the commission. Notwithstanding any civil service or other similar laws of any compacting state, the bylaws shall exclusively govern the personnel policies and programs of the commission.
7. Adopting a code of ethics to address permissible and prohibited activities of commission members and employees.
8. Providing a mechanism for winding up the operations of the commission and the equitable disposition of any surplus funds that may exist after the termination of the compact and after the payment or reserving of all of its debts and obligations.
D. The commission shall publish its bylaws in a convenient form and file a copy of the bylaws and any amendment to the bylaws with the appropriate agency or officer in each of the compacting states.
E. A management committee comprising no more than fourteen members shall be established as follows:
1. One member from each of the six compacting states with the largest premium volume for individual and group annuities, life, disability income, and long-term care insurance products, determined from the records of the national association of insurance commissioners for the prior year.
2. Four members from those compacting states with at least two per cent percent of the market based on the premium volume described in paragraph 1 of this subsection, other than the six compacting states with the largest premium volume, selected on a rotating basis as provided in the bylaws.
3. Four members from those compacting states with less than two per cent percent of the market, based on the premium volume described in paragraph 1 of this subsection, with one selected from each of the four zone regions of the national association of insurance commissioners as provided in the bylaws.
F. The management committee shall have such authority and duties as may be set forth in the bylaws, including:
1. Managing the affairs of the commission in a manner consistent with the bylaws and purposes of the commission.
2. Establishing and overseeing an organizational structure within, and appropriate procedures for, the commission to provide for the creation of uniform standards and other rules, the receipt and review of product filings, administrative and technical support functions, the review of decisions regarding the disapproval of a product filing and the review of elections made by a compacting state to opt out of a uniform standard. However, a uniform standard shall not be submitted to the compacting states for adoption unless approved by two-thirds of the members of the management committee.
3. Overseeing the offices of the commission.
4. Planning, implementing and coordinating communications and activities with other state, federal and local government organizations in order to advance the goals of the commission.
G. The commission shall elect annually officers from the management committee, with each having such authority and duties, as may be specified in the bylaws.
H. The management committee, subject to the approval of the commission, may appoint or retain an executive director for such period, on such terms and conditions and for such compensation as the commission may deem appropriate. The executive director shall serve as secretary to the commission, but shall not be a member of the commission. The executive director shall hire and supervise other staff as may be authorized by the commission.
I. A legislative committee comprising state legislators or their designees shall be established to monitor the operations of, and make recommendations to, the commission, including the management committee. However, the manner of selection and term of any legislative committee member shall be as set forth in the bylaws. Before the adoption by the commission of any uniform standard, revision to the bylaws, annual budget or other significant matter as may be provided in the bylaws, the management committee shall consult with and report to the legislative committee.
J. The commission shall establish two advisory committees, one of which shall comprise consumer representatives independent of the insurance industry, and the other comprising insurance industry representatives.
K. The commission may establish additional advisory committees as its bylaws may provide for the carrying out of its functions.
L. The commission shall maintain its corporate books and records in accordance with the bylaws.
M. The members, officers, executive director, employees and representatives of the commission shall be immune from suit and liability, either personally or in their official capacity, for any claim for damage to or loss of property or personal injury or other civil liability caused by or arising out of any actual or alleged act, error or omission that occurred, or that the person against whom the claim is made had a reasonable basis for believing occurred within the scope of commission employment, duties or responsibilities. This subsection does not protect any such person from suit or liability for any damage, loss, injury or liability caused by the intentional or wilful and wanton misconduct of that person.
N. The commission shall defend any member, officer, executive director, employee or representative of the commission in any civil action seeking to impose liability arising out of any actual or alleged act, error or omission that occurred within the scope of commission employment, duties or responsibilities, or that the person against whom the claim is made had a reasonable basis for believing occurred within the scope of commission employment, duties or responsibilities. This subsection does not prohibit that person from retaining the person's own counsel. Also, the actual or alleged act, error or omission may not have resulted from that person's intentional or wilful and wanton misconduct.
O. The commission shall indemnify and hold harmless any member, officer, executive director, employee or representative of the commission for the amount of any settlement or judgment obtained against that person arising out of any actual or alleged act, error or omission that occurred within the scope of commission employment, duties or responsibilities, or that such person had a reasonable basis for believing occurred within the scope of commission employment, duties or responsibilities. However, the actual or alleged act, error or omission may not have resulted from the intentional or wilful and wanton misconduct of that person.
Article VI
Commission Meeting and Acts
A. The commission shall meet and take such actions as are consistent with the provisions of this compact and the bylaws.
B. Each member of the commission shall have the right and power to cast a vote to which that compacting state is entitled and to participate in the business and affairs of the commission. A member shall vote in person or by such other means as provided in the bylaws. The bylaws may provide for members' participation in meetings by telephone or other means of communication.
C. The commission shall meet at least once during each calendar year. Additional meetings shall be held as set forth in the bylaws.
Article VII
Rules and Operating Procedures, Rulemaking Functions
and Opting Out of Uniform Standards
A. The commission shall adopt reasonable rules, including uniform standards, and operating procedures in order to effectively and efficiently achieve the purposes of this compact. If the commission exercises its rulemaking authority in a manner that is beyond the scope of the purposes of this compact, the action by the commission shall be invalid and have no force and effect.
B. Rules and operating procedures shall be made pursuant to a rulemaking process that conforms to the model state administrative procedure act of 1981 as amended, as may be appropriate to the operations of the commission. Before the commission adopts a uniform standard, the commission shall give written notice to the relevant state legislative committees in each compacting state responsible for insurance issues of its intention to adopt the uniform standard. The commission in adopting a uniform standard shall consider fully all submitted materials and issue a concise explanation of its decision.
C. A uniform standard shall become effective ninety days after its adoption by the commission or such later date as the commission may determine. A compacting state may opt out of a uniform standard as provided in this article. "Opt out" means any action by a compacting state to decline to adopt or participate in an adopted uniform standard. All other rules and operating procedures, and amendments thereto, shall become effective as of the date specified in each rule, operating procedure or amendment.
D. A compacting state may opt out of a uniform standard, either by legislation or rule adopted by the insurance department under the compacting state's administrative procedure act. If a compacting state elects to opt out of a uniform standard by rule, it must:
1. Give written notice to the commission no later than ten business days after the uniform standard is adopted, or at the time the state becomes a compacting state.
2. Find that the uniform standard does not provide reasonable protections to the citizens of the state, given the conditions in the state.
E. The commissioner shall make specific findings of fact and conclusions of law, based on a preponderance of the evidence, detailing the conditions in the state that warrant a departure from the uniform standard and determining that the uniform standard would not reasonably protect the citizens of the state. The commissioner must consider and balance the following factors and find that the conditions in the state and needs of the citizens of the state outweigh both:
1. The intent of the legislature to participate in, and the benefits of, an interstate agreement to establish national uniform consumer protections for the products subject to this compact.
2. The presumption that a uniform standard adopted by the commission provides reasonable protections to consumers of the relevant product.
F. A compacting state, at the time of its enactment of the compact, may prospectively opt out of all uniform standards involving long‑term care insurance products by expressly providing for such opt out in the enacted compact, and such an opt out shall not be treated as a material variance in the offer or acceptance of any state to participate in the compact. Such an opt out shall be effective at the time of enactment of the compact by the compacting state and shall apply to all existing uniform standards involving long‑term care insurance products and those subsequently adopted. Pursuant to this subsection, this state opts out of all uniform standards involving long-term care insurance products.
G. If a compacting state elects to opt out of a uniform standard, the uniform standard shall remain applicable in the compacting state electing to opt out until the opt out legislation is enacted into law or the regulation opting out becomes effective. Once the opt out of a uniform standard by a compacting state becomes effective as provided under the laws of that state, the uniform standard shall have no further force and effect in that state unless and until the legislation or regulation implementing the opt out is repealed or otherwise becomes ineffective under the laws of that state. If a compacting state opts out of a uniform standard after the uniform standard has been made effective in that state, the opt out shall have the same prospective effect as provided under article XIV of this compact for withdrawals.
H. If a compacting state has formally initiated the process of opting out of a uniform standard by regulation, and while the regulatory opt out is pending, the compacting state may petition the commission, at least fifteen days before the effective date of the uniform standard, to stay the effectiveness of the uniform standard in that state. The commission may grant a stay if it determines the regulatory opt out is being pursued in a reasonable manner and there is a likelihood of success. If a stay is granted or extended by the commission, the stay or extension thereof may postpone the effective date by up to ninety days, unless affirmatively extended by the commission. However, a stay may not be permitted to remain in effect for more than one year unless the compacting state can show extraordinary circumstances that warrant a continuance of the stay, including, the existence of a legal challenge that prevents the compacting state from opting out. A stay may be terminated by the commission on notice that the rulemaking process has been terminated.
I. Not later than thirty days after a rule or operating procedure is adopted, any person may file a petition for judicial review of the rule or operating procedure. However, the filing of such a petition shall not stay or otherwise prevent the rule or operating procedure from becoming effective unless the court finds that the petitioner has a substantial likelihood of success. The court shall give deference to the actions of the commission consistent with applicable law and shall not find the rule or operating procedure to be unlawful if the rule or operating procedure represents a reasonable exercise of the commission's authority.
Article VIII
Commission Records and Enforcement
A. The commission shall adopt rules establishing conditions and procedures for public inspection and copying of its information and official records, except information and records involving the privacy of individuals and insurers' trade secrets. The commission may adopt additional rules under which it may make available to federal and state agencies, including law enforcement agencies, records and information otherwise exempt from disclosure, and may enter into agreements with such agencies to receive or exchange information or records subject to nondisclosure and confidentiality provisions.
B. Except as to privileged records, data and information, the laws of any compacting state pertaining to confidentiality or nondisclosure shall not relieve any compacting state commissioner of the duty to disclose any relevant records, data or information to the commission. Disclosure to the commission does not waive or otherwise affect any confidentiality requirement. Except as otherwise expressly provided in this compact, the commission shall not be subject to the compacting state's laws pertaining to confidentiality and nondisclosure with respect to records, data and information in its possession. Confidential information of the commission shall remain confidential after the information is provided to any commissioner.
C. The commission shall monitor compacting states for compliance with duly adopted bylaws, rules, including uniform standards, and operating procedures. The commission shall notify any noncomplying compacting state in writing of its noncompliance with commission bylaws, rules or operating procedures. If a noncomplying compacting state fails to remedy its noncompliance within the time specified in the notice of noncompliance, the compacting state shall be deemed to be in default as set forth in article XIV of this compact.
D. The commissioner of any state in which an insurer is authorized to do business, or is conducting the business of insurance, shall continue to exercise the commissioner's authority to oversee the market regulation of the activities of the insurer in accordance with the provisions of the state's law. The commissioner's enforcement of compliance with the compact is governed by the following provisions:
1. With respect to the commissioner's market regulation of a product or advertisement that is approved or certified to the commission, the content of the product or advertisement shall not constitute a violation of the provisions, standards or requirements of the compact except on a final order of the commission, issued at the request of a commissioner after prior notice to the insurer and an opportunity for hearing before the commission.
2. Before a commissioner may bring an action for violation of any provision, standard or requirement of the compact relating to the content of an advertisement not approved or certified to the commission, the commission, or an authorized commission officer or employee, must authorize the action. Authorization under this paragraph does not require notice to the insurer, opportunity for hearing or disclosure of requests for authorization or records of the commission's action on such requests.
Article IX
Dispute Resolution
On the request of a member, the commission shall attempt to resolve any disputes or other issues that are subject to this compact and that may arise between two or more compacting states, or between compacting states and noncompacting states, and the commission shall adopt an operating procedure providing for resolution of such disputes.
Article X
Product Filing and Approval
A. Insurers and third‑party filers seeking to have a product approved by the commission shall file the product with, and pay applicable filing fees to, the commission. This compact does not restrict or otherwise prevent an insurer from filing its product with the insurance department in any state wherein the insurer is licensed to conduct the business of insurance, and such filing shall be subject to the laws of the states where filed.
B. The commission shall establish appropriate filing and review processes and procedures pursuant to commission rules and operating procedures. The commission shall adopt rules to establish conditions and procedures under which the commission will provide public access to product filing information. In establishing such rules, the commission shall consider the interests of the public in having access to such information, as well as protection of personal medical and financial information and trade secrets, that may be contained in a product filing or supporting information.
C. Any product approved by the commission may be sold or otherwise issued in those compacting states for which the insurer is legally authorized to do business.
Article XI
Review of Commission Decisions Regarding Filings
A. Not later than thirty days after the commission has given notice of a disapproved product or advertisement filed with the commission, the insurer or third‑party filer whose filing was disapproved may appeal the determination to a review panel appointed by the commission. The commission shall adopt rules to establish procedures for appointing the review panels and provide for notice and hearing. An allegation that the commission, in disapproving a product or advertisement filed with the commission, acted arbitrarily, capriciously or in a manner that is an abuse of discretion or otherwise not in accordance with the law, is subject to judicial review in accordance with article III, subsection D of this compact.
B. The commission shall have authority to monitor, review and reconsider products and advertisement subsequent to their filing or approval on a finding that the product does not meet the relevant uniform standard. Where appropriate, the commission may withdraw or modify its approval after proper notice and hearing, subject to the appeal process in subsection A of this article.
Article XII
Finance
A. The commission shall pay or provide for the payment of the reasonable expenses of its establishment and organization. To fund the cost of its initial operations, the commission may accept contributions and other forms of funding from the national association of insurance commissioners, compacting states and other sources. Contributions and other forms of funding from other sources shall be of such a nature that the independence of the commission concerning the performance of its duties shall not be compromised.
B. The commission shall collect a filing fee from each insurer and third‑party filer filing a product with the commission to cover the cost of the operations and activities of the commission and its staff in a total amount sufficient to cover the commission's annual budget.
C. The commission's budget for a fiscal year shall not be approved until it has been subject to notice and comment as set forth in article VII of this compact.
D. The commission shall be exempt from all taxation in and by the compacting states.
E. The commission shall not pledge the credit of any compacting state, except by and with the appropriate legal authority of that compacting state.
F. The commission shall keep complete and accurate accounts of all its internal receipts, including grants and donations, and disbursements of all funds under its control. The internal financial accounts of the commission shall be subject to the accounting procedures established under its bylaws. The financial accounts and reports including the system of internal controls and procedures of the commission shall be audited annually by an independent certified public accountant. On the determination of the commission, but no less frequently than every three years, the review of the independent auditor shall include a management and performance audit of the commission. The commission shall make an annual report to the governor and legislature of the compacting states, which shall include a report of the independent audit. The commission's internal accounts shall not be confidential and such materials may be shared with the commissioner of any compacting state on request. Any work papers related to any internal or independent audit and any information regarding the privacy of individuals and insurers' proprietary information, including trade secrets, shall remain confidential.
G. A compacting state does not have any claim to or ownership of any property held by or vested in the commission or to any commission funds held under this compact.
Article XIII
Compacting States, Effective Date and Amendment
A. Any state is eligible to become a compacting state.
B. The compact shall become effective and binding on legislative enactment of the compact into law by two compacting states. The commission shall become effective for purposes of adopting uniform standards for, reviewing and giving approval or disapproval of products filed with the commission that satisfy applicable uniform standards only after twenty‑six states are compacting states or, alternatively, by states representing greater than forty per cent percent of the premium volume for life insurance, annuity, disability income and long-term care insurance products, based on records of the national association of insurance commissioners for the prior year. Thereafter, it shall become effective and binding as to any other compacting state on enactment of the compact into law by that state.
C. Amendments to the compact may be proposed by the commission for enactment by the compacting states. An amendment does not become effective and binding on the commission and the compacting states unless and until all compacting states enact the amendment into law.
Article XIV
Withdrawal, Default and Termination
A. Once effective, the compact shall continue in force and remain binding on each and every compacting state. A compacting state may withdraw from the compact by enacting a statute specifically repealing the statute that enacted the compact into law.
B. The effective date of withdrawal is the effective date of the repealing statute. The withdrawal shall not apply to any product filings approved or self-certified, or any advertisement of such products, on the date the repealing statute becomes effective, except by mutual agreement of the commission and the withdrawing state unless the approval is rescinded by the withdrawing state as provided in subsection E of this article.
C. The commissioner of the withdrawing state shall immediately notify the management committee in writing on the introduction of legislation repealing the compact in the withdrawing state.
D. The commission shall notify the other compacting states of the introduction of such legislation within ten days after its receipt of notice thereof.
E. The withdrawing state is responsible for all obligations, duties and liabilities incurred through the effective date of withdrawal, including any obligations, the performance of which extend beyond the effective date of withdrawal, except to the extent those obligations may have been released or relinquished by mutual agreement of the commission and the withdrawing state. The commission's approval of products and advertisement before the effective date of withdrawal shall continue to be effective and be given full force and effect in the withdrawing state, unless formally rescinded by the withdrawing state in the same manner as provided by the laws of the withdrawing state for the prospective disapproval of products or advertisement previously approved under state law.
F. Reinstatement following withdrawal of any compacting state shall occur on the effective date of the withdrawing state reenacting the compact.
G. If the commission determines that any compacting state has at any time defaulted in the performance of any of its obligations or responsibilities under the compact, the bylaws or adopted rules or operating procedures, after notice and hearing as set forth in the bylaws, all rights, privileges and benefits conferred by the compact on the defaulting state shall be suspended from the effective date of default as fixed by the commission. The grounds for default include failure of a compacting state to perform its obligations or responsibilities and any other grounds designated in commission rules. The commission shall immediately notify the defaulting state in writing of the defaulting state's suspension pending a cure of the default. The commission shall stipulate the conditions and the time period within which the defaulting state must cure its default. If the defaulting state fails to cure the default within the time period specified by the commission, the defaulting state shall be terminated from the compact and all rights, privileges and benefits conferred by the compact shall be terminated from the effective date of termination.
H. Product approvals by the commission or product self‑certifications, or any advertisement in connection with such product, that are in force on the effective date of termination shall remain in force in the defaulting state in the same manner as if the defaulting state had withdrawn voluntarily under this article.
I. Reinstatement following termination of any compacting state requires a reenactment of the compact.
J. The compact dissolves effective on the date of the withdrawal or default of the compacting state that reduces membership in the compact to one compacting state. On the dissolution of the compact, the compact becomes null and void and shall be of no further force or effect, and the business and affairs of the commission shall be wound up and any surplus funds shall be distributed in accordance with the bylaws.
Article XV
Binding Effect of Compact and Other Laws
A. The compact does not prevent the enforcement of any other law of a compacting state, except as provided in subsection B of this article.
B. For any product approved or certified to the commission, the rules, uniform standards and any other requirements of the commission shall constitute the exclusive provisions applicable to the content, approval and certification of such products. For advertisement that is subject to the commission's authority, any rule, uniform standard or other requirement of the commission that governs the content of the advertisement shall constitute the exclusive provision that a commissioner may apply to the content of the advertisement. No action taken by the commission shall abrogate or restrict any of the following:
1. The access of any person to state courts.
2. Remedies available under state law related to breach of contract, tort or other laws not specifically directed to the content of the product.
3. State law relating to the construction of insurance contracts.
4. The authority of the attorney general of the state, including maintaining any actions or proceedings, as authorized by law.
C. All insurance products filed with individual states shall be subject to the laws of those states.
D. All lawful actions of the commission, including all rules and operating procedures adopted by the commission, are binding on the compacting states.
E. All agreements between the commission and the compacting states are binding in accordance with their terms.
F. On the request of a party to a conflict over the meaning or interpretation of commission actions, and on a majority vote of the compacting states, the commission may issue advisory opinions regarding the meaning or interpretation in dispute.
G. If any provision of the compact exceeds the constitutional limits imposed on the legislature of any compacting state, the obligations, duties, powers or jurisdiction sought to be conferred by that provision on the commission shall be ineffective as to that compacting state, and those obligations, duties, powers or jurisdiction shall remain in the compacting state and shall be exercised by the agency thereof to which those obligations, duties, powers or jurisdiction are delegated by law in effect at the time the compact becomes effective.
Article XVI
Severability and Construction
A. If any provision of this compact or its application to any person or circumstance is held invalid, the remainder of the compact or the application of the provision to other persons or circumstances is not affected.
B. This compact shall be liberally construed to effectuate its purposes.
Sec. 123. Section 20-3302, Arizona Revised Statutes, is amended to read:
20-3302. Insurance compliance audit privilege; requirements
A. Except as provided in subsections E and F of this section, an insurance compliance audit document is privileged information and is not discoverable or admissible as evidence in any legal action in any civil or administrative proceeding other than a regulatory or legal action brought as part of the director's duties. This privilege is a matter of substantive law of this state and is not merely a procedural matter governing civil proceedings in the courts of this state. The following provisions apply to the privilege:
1. If any company, person or entity performs or directs the performance of an insurance compliance audit, an officer, employee or agent involved with the insurance compliance audit or any consultant who is hired for the purpose of performing the insurance compliance audit may not be examined in any civil or administrative proceeding as to the insurance compliance audit or any insurance compliance audit document.
2. In connection with examinations conducted under this title, an insurer may submit an insurance compliance audit document to the director or the director's designee as a confidential document without waiving the privilege set forth under this subsection to which the insurer would otherwise be entitled. Any insurance compliance audit document furnished to the director may not be provided by the director to any other person or entity and shall be accorded the same privilege provided under this subsection.
3. If an insurer submits an insurance compliance audit document to the director, the document remains confidential and privileged and:
(a) Is subject to all applicable statutory or common law privileges, including the insurance compliance audit privilege, the work product doctrine, the attorney‑client privilege or the subsequent remedial measures exclusion.
(b) Is not subject to any further disclosure or production.
(c) Is not subject to title 39, chapter 1, article 2, not subject to subpoena and not subject to discovery or admissible in a private administrative proceeding or in a private civil action, other than in an administrative proceeding conducted by the director.
4. Disclosure of an insurance compliance audit document to a governmental agency, whether voluntary or pursuant to compulsion of law, does not constitute a waiver of the privilege set forth under this subsection with respect to any other person or governmental agency.
5. The director may obtain insurance compliance audit documents at any time. The director may use the insurance compliance audit documents in the furtherance of any regulatory or legal action brought as part of the director's duties. The insurer shall comply with any compliance dates set by the director with respect to the insurance compliance audit. Notwithstanding any other law, the director shall provide an insurer with copies of all documents that the director believes support a violation of this title or that justify any regulatory or other action against the insurer. A disclosure pursuant to this paragraph is not a waiver of any applicable privilege or claim of confidentiality in the disclosed documents.
6. In order to facilitate identification, audit documents produced as a result of an insurance compliance audit shall be labeled "compliance report: privileged document".
7. A person who conducts or participates in the preparation of an insurance compliance audit and who has observed physical events may testify regarding those events, but may not be compelled to testify or produce documents related to any privileged part of the insurance compliance audit or any insurance compliance audit document.
8. The insurance compliance audit does not prevent the discovery of a document or other evidence, otherwise discoverable, that is maintained by an insurer and that was not developed for the insurance compliance audit pursuant to this article.
B. The privilege described in this article does not apply to:
1. A document, communication, data or report or other information required by the department or other regulatory agency to be collected, developed, maintained or reported under applicable law.
2. Information obtained by observation, sampling or monitoring by the department or other regulatory agency.
3. Information obtained from a source not involved in the preparation of the insurance compliance audit report.
4. Documents, communications, data, spreadsheets, reports, memoranda, drawings, photographs, exhibits, computer records, maps, charts, graphs, recordings and surveys kept or prepared in the ordinary course of business.
C. If an insurance compliance audit document is obtained, reviewed or used in a criminal proceeding, the privilege described in this article is not waived or eliminated for any other purpose.
D. This article does not provide civil or criminal immunity to an organization or affect any other privilege that may be available by law.
E. The privilege set forth under subsection A of this section does not apply under the following circumstances:
1. To the extent that it is expressly waived by the insurer that prepared or caused to be prepared the insurance compliance audit document.
2. If, after an in camera review, a court of record in a civil or administrative proceeding other than in a regulatory or legal action brought as part of the director's duties determines one of the following:
(a) The privilege is asserted for a fraudulent purpose.
(b) The document is not subject to the privilege.
(c) The privileged document shows evidence of noncompliance with applicable state or federal laws, rules, regulations or orders of the department and the insurer, person or entity fails to undertake corrective action or eliminate the noncompliance within the compliance date set by the director.
F. Within sixty days after an insurer is served a written request by certified mail for disclosure of an insurance compliance audit document, the insurer may file with the appropriate court a petition requesting a hearing on whether the insurance compliance audit document or portions of the document are privileged under this section or subject to disclosure. The court shall conduct an in camera review of the insurance compliance audit document and shall determine whether all or a portion of the insurance compliance audit document is privileged or subject to disclosure. The insurer's failure to file a petition for a hearing does not waive the privilege in connection with any other request for disclosure of the insurance compliance audit document. If an insurer files a petition for an in camera hearing pursuant to this subsection, the following apply:
1. The petition shall include all of the information set forth in paragraph 3 of this subsection.
2. After conducting an in camera review, the court may require disclosure of all or a portion of the insurance compliance audit document if the court determines, based on its in camera review, that any one of the conditions set forth in subsection E, paragraph 2 of this section applies. On making this determination, the court may only compel the disclosure of those portions of an insurance compliance audit document that are relevant to issues in dispute in the underlying proceeding. Any compelled disclosure will not be considered to be a public document or be deemed to be a waiver of the privilege for any other civil or administrative proceeding. An insurer unsuccessfully opposing disclosure may apply to the court for an appropriate order protecting the document from further disclosure.
3. At the time of filing a request for a hearing, the insurer shall provide all of the following information:
(a) The date of the insurance compliance audit document.
(b) The identity of the entity conducting the insurance compliance audit.
(c) The general nature of the activities covered by the insurance compliance audit.
(d) An identification of the portions of the insurance compliance audit document for which the privilege is being asserted.
G. An insurer asserting the insurance compliance privilege set forth under subsection A of this section has the burden of demonstrating the applicability of the privilege. Once an insurer has established the applicability of the privilege, the party seeking disclosure has the burden of proving the inapplicability of the privilege.
H. At any time, the parties to a civil or administrative proceeding other than a regulatory or legal action brought as a part of the director's duties may stipulate to entry of an order directing that specific information contained in an insurance compliance audit document is or is not subject to the privilege provided under subsection A of this section. The stipulation may be limited to the instant proceeding and, absent specific language to the contrary, is not applicable to any other proceeding.
I. This section or the release of any insurance compliance audit document under this section does not limit, waive or abrogate the scope or nature of any statutory or common law privilege including the work product doctrine, the attorney‑client privilege or the subsequent remedial measures exclusion.
J. This article does not limit the director's authority under sections 20‑156, 20‑157, 20‑157.01, 20‑160 and 20‑466.
Sec. 124. Section 20-3459, Arizona Revised Statutes, is amended to read:
20-3459. Civil immunity; enforcement; civil penalty
A. A health insurer that complies in good faith with the requirements of this chapter is immune from civil liability for the purposes of reviewing and approving a credentialing application.
B. The director of insurance shall enforce this chapter. A health insurer that fails to comply with this chapter or with any rules adopted pursuant to this chapter is subject to the civil penalties prescribed in section 20‑456.
C. On receipt of multiple complaints of violations of this chapter by a health insurer from applicants or participating providers, the director of insurance shall conduct an examination of the health insurer pursuant to section 20‑156, 20‑831 or 20‑1058, as applicable to the specific insurer.
Sec. 125. Section 23-722.04, Arizona Revised Statutes, is amended to read:
23-722.04. Unemployment insurance information; disclosure; violation; classification
A. The department or the office of economic opportunity may disclose unemployment insurance information to the following entities:
1. Any federal, state or local governmental agency in the investigation of fraud relating to public programs or the misuse of public monies.
2. Divisions of the department, including the employment and rehabilitation services administrations, for program and research purposes.
3. The workforce Arizona council for program performance, regional planning and other program and research purposes.
4. The department of education to evaluate adult education program performance and for other primary and adult education program and research purposes.
5. The Arizona board of regents, universities under the jurisdiction of the Arizona board of regents and community college districts to evaluate program performance and for other program and research purposes.
6. The United States department of labor, or its agents, or the United States census bureau, or its agents, as required by law or in connection with the requirements imposed as a result of receiving federal funding.
7. Department contractors or subcontractors, or their agents, for the sole purpose of providing for the processing, storage and transmission of information. This disclosure must be consistent with this section.
8. The industrial commission of Arizona, department of insurance and financial institutions or attorney general for use by those agencies, or their agents or contractors, in the prevention, investigation and prosecution of workers' compensation fraud.
B. On the request of one of the entities specified in subsection A of this section to the department or the office of economic opportunity, the department or the office of economic opportunity shall disclose unemployment insurance information to the entity pursuant to guidelines established by the workforce data task force established by section 41‑5404 and pursuant to a written data sharing agreement with the requesting entity in a form determined by the workforce data task force pursuant to the laws of this state and applicable federal regulations. The department or the office of economic opportunity may disclose the unemployment insurance information only after the requesting entity has demonstrated that the information will be kept confidential, except for those purposes for which the information was provided to the requesting entity, and that the requesting entity has security safeguards in place to prevent the unauthorized disclosure of the information.
C. Except as otherwise allowed by law or as otherwise authorized by agreement between the department of economic security and the United States department of labor, the department of economic security or the office of economic opportunity may not use federal unemployment insurance grant monies to pay for any costs incurred in processing and handling requests for disclosure of unemployment insurance information. The department of economic security and the office of economic opportunity, in consultation with the workforce data task force, shall establish a rate structure that complies with 20 Code of Federal Regulations section 603.8 for costs incurred in processing requests for disclosure of unemployment insurance information.
D. The requesting entity may not make public any unemployment insurance information that identifies an individual or the individual's employer. Any unauthorized disclosure, including security breaches, shall be reported to the department and the office of economic opportunity immediately. Any person who knowingly discloses confidential unemployment insurance information in violation of this section without prior written authorization from the department or the office of economic opportunity or authorization as otherwise provided by law is guilty of a class 3 misdemeanor.
E. The office of economic opportunity may use unemployment insurance information to perform economic analyses, for the development of labor market information and a state workforce evaluation data system and for other program and research purposes.
F. This section does not prohibit disclosure that is required or allowed by federal law.
Sec. 126. Section 23-901, Arizona Revised Statutes, is amended to read:
23-901. Definitions
In this chapter, unless the context otherwise requires:
1. "Award" means the finding or decision of an administrative law judge or the commission as to the amount of compensation or benefit due an injured employee or the dependents of a deceased employee.
2. "Client" means an individual, association, company, firm, partnership, corporation or any other legally recognized entity that is subject to this chapter and that enters into a professional employer agreement with a professional employer organization.
3. "Co‑employee" means every person employed by an injured employee's employer.
4. "Commission" means the industrial commission of Arizona.
5. "Compensation" means the compensation and benefits provided by this chapter.
6. "Employee", "workman", "worker" and "operative" means:
(a) Every person in the service of this state or a county, city, town, municipal corporation or school district, including regular members of lawfully constituted police and fire departments of cities and towns, whether by election, appointment or contract of hire.
(b) Every person in the service of any employer subject to this chapter, including aliens and minors legally or illegally permitted allowed to work for hire, but not including a person whose employment is both:
(i) Casual.
(ii) Not in the usual course of the trade, business or occupation of the employer.
(c) Lessees of mining property and the lessees' employees and contractors engaged in the performance of work that is a part of the business conducted by the lessor and over which the lessor retains supervision or control are within the meaning of this paragraph employees of the lessor, and are deemed to be drawing wages as are usually paid employees for similar work. The lessor may deduct from the proceeds of ores mined by the lessees the premium required by this chapter to be paid for such employees.
(d) Regular members of volunteer fire departments organized pursuant to title 48, chapter 5, article 1, regular firefighters of any volunteer fire department, including private fire protection service organizations, organized pursuant to title 10, chapters 24 through 40, volunteer firefighters serving as members of a fire department of any incorporated city or town or an unincorporated area without pay or without full pay and on a part‑time basis, and voluntary policemen and volunteer firefighters serving in any incorporated city, town or unincorporated area without pay or without full pay and on a part‑time basis, are deemed to be employees, but for the purposes of this chapter, the basis for computing wages for premium payments and compensation benefits for regular members of volunteer fire departments organized pursuant to title 48, chapter 5, article 1, or organized pursuant to title 10, chapters 24 through 40, regular members of any private fire protection service organization, volunteer firefighters and volunteer policemen of these departments or organizations shall be the salary equal to the beginning salary of the same rank or grade in the full‑time service with the city, town, volunteer fire department or private fire protection service organization, provided if there is no full‑time equivalent then the salary equivalent shall be as determined by resolution of the governing body of the city, town or volunteer fire department or corporation.
(e) Members of the department of public safety reserve, organized pursuant to section 41‑1715, are deemed to be employees. For the purposes of this chapter, the basis for computing wages for premium payments and compensation benefits for a member of the department of public safety reserve who is a peace officer shall be the salary received by officers of the department of public safety for the officers' first month of regular duty as an officer. For members of the department of public safety reserve who are not peace officers, the basis for computing premiums and compensation benefits is four hundred dollars $400 a month.
(f) Any person placed in on‑the‑job evaluation or in on‑the‑job training under the department of economic security's temporary assistance for needy families program or vocational rehabilitation program shall be deemed to be an employee of the department for the purpose of coverage under the state workers' compensation laws only. The basis for computing premium payments and compensation benefits shall be two hundred dollars $200 per month. Any person receiving vocational rehabilitation services under the department of economic security's vocational rehabilitation program whose major evaluation or training activity is academic, whether as an enrolled attending student or by correspondence, or who is confined to a hospital or penal institution, shall not be deemed to be an employee of the department for any purpose.
(g) Regular members of a volunteer sheriff's reserve, which may be established by resolution of the county board of supervisors, to assist the sheriff in the performance of the sheriff's official duties. A roster of the current members shall monthly be certified to the clerk of the board of supervisors by the sheriff and shall not exceed the maximum number authorized by the board of supervisors. Certified members of an authorized volunteer sheriff's reserve shall be deemed to be employees of the county for the purpose of coverage under the Arizona workers' compensation laws and occupational disease disability laws and shall be entitled to receive the benefits of these laws for any compensable injuries or disabling conditions that arise out of and occur in the course of the performance of duties authorized and directed by the sheriff. Compensation benefits and premium payments shall be based on the salary received by a regular full‑time deputy sheriff of the county involved for the first month of regular patrol duty as an officer for each certified member of a volunteer sheriff's reserve. This subdivision does not provide compensation coverage for any member of a sheriff's posse who is not a certified member of an authorized volunteer sheriff's reserve except as a participant in a search and rescue mission or a search and rescue training mission.
(h) A working member of a partnership may be deemed to be an employee entitled to the benefits provided by this chapter on written acceptance, by endorsement, at the discretion of the insurance carrier for the partnership of an application for coverage by the working partner. The basis for computing premium payments and compensation benefits for the working partner shall be an assumed average monthly wage of not less than six hundred dollars $600 nor more than the maximum wage provided in section 23‑1041 and is subject to the discretionary approval of the insurance carrier. Any compensation for permanent partial or permanent total disability payable to the partner is computed on the lesser of the assumed monthly wage agreed to by the insurance carrier on the acceptance of the application for coverage or the actual average monthly wage received by the partner at the time of injury.
(i) The sole proprietor of a business subject to this chapter may be deemed to be an employee entitled to the benefits provided by this chapter on written acceptance, by endorsement, at the discretion of the insurance carrier of an application for coverage by the sole proprietor. The basis for computing premium payments and compensation benefits for the sole proprietor is an assumed average monthly wage of not less than six hundred dollars $600 nor more than the maximum wage provided by section 23‑1041 and is subject to the discretionary approval of the insurance carrier. Any compensation for permanent partial or permanent total disability payable to the sole proprietor shall be computed on the lesser of the assumed monthly wage agreed to by the insurance carrier on the acceptance of the application for coverage or the actual average monthly wage received by the sole proprietor at the time of injury.
(j) A member of the Arizona national guard, Arizona state guard or unorganized militia shall be deemed a state employee and entitled to coverage under the Arizona workers' compensation law at all times while the member is receiving the payment of the member's military salary from this state under competent military orders or on order of the governor. Compensation benefits shall be based on the monthly military pay rate to which the member is entitled at the time of injury, but not less than a salary of four hundred dollars $400 per month, nor more than the maximum provided by the workers' compensation law. Arizona compensation benefits shall not inure to a member compensable under federal law.
(k) Certified ambulance drivers and attendants who serve without pay or without full pay on a part‑time basis are deemed to be employees and entitled to the benefits provided by this chapter and the basis for computing wages for premium payments and compensation benefits for certified ambulance personnel shall be four hundred dollars $400 per month.
(l) Volunteer workers of a licensed health care institution may be deemed to be employees and entitled to the benefits provided by this chapter on written acceptance by the insurance carrier of an application by the health care institution for coverage of such volunteers. The basis for computing wages for premium payments and compensation benefits for volunteers shall be four hundred dollars $400 per month.
(m) Personnel who participate in a search or rescue operation or a search or rescue training operation that carries a mission identifier assigned by the division of emergency management as provided in section 35‑192.01 and who serve without compensation as volunteer state employees. The basis for computation of wages for premium purposes and compensation benefits is the total volunteer man‑hours recorded by the division of emergency management in a given quarter multiplied by the amount determined by the appropriate risk management formula.
(n) Personnel who participate in emergency management training, exercises or drills that are duly enrolled or registered with the division of emergency management or any political subdivision as provided in section 26‑314, subsection C and who serve without compensation as volunteer state employees. The basis for computation of wages for premium purposes and compensation benefits is the total volunteer man‑hours recorded by the division of emergency management or political subdivision during a given training session, exercise or drill multiplied by the amount determined by the appropriate risk management formula.
(o) Regular members of the Arizona game and fish department reserve, organized pursuant to section 17‑214. The basis for computing wages for premium payments and compensation benefits for a member of the reserve is the salary received by game rangers and wildlife managers of the Arizona game and fish department for the game rangers' and wildlife managers' first month of regular duty.
(p) Every person employed pursuant to a professional employer agreement.
(q) A working member of a limited liability company who owns less than fifty percent of the membership interest in the limited liability company.
(r) A working member of a limited liability company who owns fifty percent or more of the membership interest in the limited liability company may be deemed to be an employee entitled to the benefits provided by this chapter on the written acceptance, by endorsement, of an application for coverage by the working member at the discretion of the insurance carrier for the limited liability company. The basis for computing wages for premium payments and compensation benefits for the working member is an assumed average monthly wage of six hundred dollars $600 or more but not more than the maximum wage provided in section 23‑1041 and is subject to the discretionary approval of the insurance carrier. Any compensation for permanent partial or permanent total disability payable to the working member is computed on the lesser of the assumed monthly wage agreed to by the insurance carrier on the acceptance of the application for coverage or the actual average monthly wage received by the working member at the time of injury.
(s) A working shareholder of a corporation who owns less than fifty percent of the beneficial interest in the corporation.
(t) A working shareholder of a corporation who owns fifty percent or more of the beneficial interest in the corporation may be deemed to be an employee entitled to the benefits provided by this chapter on the written acceptance, by endorsement, of an application for coverage by the working shareholder at the discretion of the insurance carrier for the corporation. The basis for computing wages for premium payments and compensation benefits for the working shareholder is an assumed average monthly wage of six hundred dollars $600 or more but not more than the maximum wage provided in section 23‑1041 and is subject to the discretionary approval of the insurance carrier. Any compensation for permanent partial or permanent total disability payable to the working shareholder is computed on the lesser of the assumed monthly wage agreed to by the insurance carrier on the acceptance of the application for coverage or the actual average monthly wage received by the working shareholder at the time of injury.
7. "General order" means an order applied generally throughout this state to all persons under jurisdiction of the commission.
8. "Heart‑related or perivascular injury, illness or death" means myocardial infarction, coronary thrombosis or any other similar sudden, violent or acute process involving the heart or perivascular system, or any death resulting therefrom, and any weakness, disease or other condition of the heart or perivascular system, or any death resulting therefrom.
9. "Insurance carrier" means every insurance carrier duly authorized by the director of the department of insurance and financial institutions to write workers' compensation or occupational disease compensation insurance in this state.
10. "Interested party" means the employer, the employee, or if the employee is deceased, the employee's estate, the surviving spouse or dependents, the commission, the insurance carrier or their representative.
11. "Mental injury, illness or condition" means any mental, emotional, psychotic or neurotic injury, illness or condition.
12. "Order" means and includes any rule, direction, requirement, standard, determination or decision other than an award or a directive by the commission or an administrative law judge relative to any entitlement to compensation benefits, or to the amount of compensation benefits, and any procedural ruling relative to the processing or adjudicating of a compensation matter.
13. "Personal injury by accident arising out of and in the course of employment" means any of the following:
(a) Personal injury by accident arising out of and in the course of employment.
(b) An injury caused by the wilful act of a third person directed against an employee because of the employee's employment, but does not include a disease unless resulting from the injury.
(c) An occupational disease that is due to causes and conditions characteristic of and peculiar to a particular trade, occupation, process or employment, and not the ordinary diseases to which the general public is exposed, and subject to section 23‑901.01 or, for heart‑related, perivascular or pulmonary cases, section 23‑1105.
14. "Professional employer agreement" means a written contract between a client and a professional employer organization:
(a) In which the professional employer organization expressly agrees to co‑employ all or a majority of the employees providing services for the client. In determining whether the professional employer organization employs all or a majority of the employees of a client, any person employed pursuant to the terms of the professional employer agreement after the initial placement of client employees on the payroll of the professional employer organization shall be included.
(b) That is intended to be ongoing rather than temporary in nature.
(c) In which employer responsibilities for worksite employees, including hiring, firing and disciplining, are expressly allocated between the professional employer organization and the client in the agreement.
15. "Professional employer organization" means any person engaged in the business of providing professional employer services. Professional employer organization does not include a temporary help firm or an employment agency.
16. "Professional employer services" means the service of entering into co‑employment relationships under this chapter to which all or a majority of the employees providing services to a client or to a division or work unit of a client are covered employees.
17. "Special order" means an order other than a general order.
18. "Weakness, disease or other condition of the heart or perivascular system" means arteriosclerotic heart disease, cerebral vascular disease, peripheral vascular disease, cardiovascular disease, angina pectoris, congestive heart trouble, coronary insufficiency, ischemia and all other similar weaknesses, diseases and conditions, and also previous episodes or instances of myocardial infarction, coronary thrombosis or any similar sudden, violent or acute process involving the heart or perivascular system.
19. "Workers' compensation" means workmen's compensation as used in article XVIII, section 8, Constitution of Arizona.
Sec. 127. Section 23-904, Arizona Revised Statutes, is amended to read:
23-904. Arizona worker injuries in other state; injury to foreign worker in this state; evidence of insurance; judicial notice of other state's laws
A. If a worker who has been hired or is regularly employed in this state receives a personal injury by accident arising out of and in the course of the worker's employment, the worker is entitled to compensation according to the laws of this state even if the injury was received outside this state.
B. If a worker who is employed in this state and is subject to this chapter temporarily leaves this state incidental to that employment and receives an injury arising out of and in the course of employment, the worker, or beneficiaries of the worker if the injury results in death, is entitled to the benefits of this chapter as though the worker were injured in this state.
C. A worker from another state and the employer of the worker in that other state are exempt from this chapter while that worker is temporarily in this state doing work for an employer if all of the following are true:
1. The employer has furnished workers' compensation insurance coverage under the workers' compensation insurance or similar laws of a state other than Arizona so as to cover that worker's employment while in this state.
2. The extraterritorial provisions of this chapter are recognized in that other state.
3. Employers and workers who are covered in this state are likewise exempted exempt from the application of the workers' compensation insurance act or similar laws of the other state.
4. The benefits under the workers' compensation insurance act or similar laws of the other state, or other remedies under a similar act or laws, are the exclusive remedy against the employer for any injury, whether resulting in death or not, received by the worker while temporarily working for that employer in this state.
D. A certificate from a duly authorized officer of the commission, the department of insurance and financial institutions or a similar department of another state certifying that the employer in the other state is insured in that state is prima facie evidence that the employer carries that workers' compensation insurance.
E. If in any appeal or other litigation the construction of the laws of another state is required, the courts shall take judicial notice of the laws of the other state.
F. For the purposes of this section, a worker is deemed to be temporarily in a state doing work for an employer if, during the three hundred sixty-five days immediately preceding either the worker's date of injury or, in the case of an occupational disease or cumulative trauma claim, the worker's last date of injurious exposure, the worker performs fewer than ninety continuous days of required services in the state under the direction and control of the employer.
G. If a worker has a claim under the workers' compensation laws of another state, territory, province or foreign nation for the same injury or occupational disease as the claim filed in this state, the total amount of compensation paid or awarded under the other state's workers' compensation laws shall be credited against the compensation due under the workers' compensation laws of this state. The worker is entitled to the full amount of compensation due under the laws of this state. If compensation under the laws of this state is more than the compensation under the laws of the other state, or compensation paid the worker under the laws of the other state is recovered from the worker, the insurer shall pay any unpaid compensation to the worker up to the amount required by the claim under the laws of this state.
H. Claims made after the effective date of this section September 13, 2013 are subject to this section regardless of the date of injury.
Sec. 128. Section 23-930, Arizona Revised Statutes, is amended to read:
23-930. Unfair claim processing practices; bad faith; civil penalties
A. The commission has exclusive jurisdiction as prescribed in this section over complaints involving alleged unfair claim processing practices or bad faith by an employer, self‑insured employer, insurance carrier or claims processing representative relating to any aspect of this chapter. The commission shall investigate allegations of unfair claim processing or bad faith either on receiving a complaint or on its own motion.
B. If the commission finds that unfair claim processing or bad faith has occurred in the handling of a particular claim, it shall award the claimant, in addition to any benefits it finds are due and owing, a benefit penalty of twenty‑five per cent percent of the benefit amount ordered to be paid or five hundred dollars $500, whichever is more.
C. If the commission finds that an employer, self‑insured employer, insurance carrier or claim processing representative has a history or pattern of repeated unfair claim processing practices or bad faith, it may impose a civil penalty of up to one thousand dollars $1,000 for each violation found. The civil penalty shall be deposited, pursuant to sections 35‑146 and 35‑147, in the state general fund.
D. Any party aggrieved by an order of the commission under this section may request a hearing pursuant to section 23‑947. The hearing and decision shall be conducted pursuant to the provisions of section 23‑941.
E. The commission shall adopt by rule a definition of unfair claim processing practices and bad faith. In adopting a rule under this subsection, the commission shall consider, among other factors, recognized and approved claim processing practices within the insurance industry, the commission's own experience in processing workers' compensation claims and the workers' compensation and insurance laws of this state.
F. This section shall not be construed as limiting does not limit or interfering interfere with the authority of the department of insurance and financial institutions as provided by law to regulate any insurance carriers, including the jurisdiction of the department of insurance and financial institutions over unfair claim settlement practices as provided in section 20‑461.
Sec. 129. Section 23-950, Arizona Revised Statutes, is amended to read:
23-950. Priority of actions
Actions and proceedings under this chapter and actions or proceedings to which the commission, the insurance department, of insurance and financial institutions or the state is a party in which any question arises under this chapter or concerning an award of the commission, or an order of the commission or insurance the department of insurance and financial institutions shall be advanced for trial or hearing over civil actions, except election contests and actions affecting the corporation commission.
Sec. 130. Section 23-961, Arizona Revised Statutes, is amended to read:
23-961. Methods of securing compensation by employers; deficit premium; civil penalty
A. Employers shall secure workers' compensation to their employees in one of the following ways:
1. By insuring and keeping insured the payment of such compensation with an insurance carrier authorized by the director of the department of insurance and financial institutions to write workers' compensation insurance in this state.
2. By furnishing to the commission satisfactory proof of financial ability to pay the compensation directly or through a workers' compensation pool approved by the commission in the amount and manner and when due as provided in this chapter. The requirements of this paragraph may be satisfied by furnishing to the commission satisfactory proof that the employer is a member of a workers' compensation pool approved by the commission pursuant to section 23‑961.01. The commission may require a deposit or any other security from the employer for the payment of compensation liabilities in an amount fixed by the commission, but not less than one hundred thousand $100,000 dollars for workers' compensation liabilities. If the employer does not fully comply with the provisions of this chapter relating to the payment of compensation, the commission may revoke the authority of the employer to pay compensation directly.
B. An employer may not secure compensation to comply with this chapter by any mechanism other than as provided in this section. No insurance, combination or other program may be marketed, offered or sold as workers' compensation that does not comply with this section. An employer violates this chapter if the employer purchases or secures its obligations under this chapter through a substitute for workers' compensation that does not comply with this section.
C. Insurance carriers that transact the business of workers' compensation insurance in this state are subject to the rules of the director of the department of insurance and financial institutions.
D. On application of an insurance carrier, the director of the department of insurance and financial institutions may order the release to the insurance carrier of all or part of the cash or securities that the insurance carrier deposited before the effective date of this amendment to this section July 1, 2015 with the state treasurer pursuant to this section. In determining whether to order the release of all or part of the deposit, the director of the department of insurance and financial institutions shall consider all of the following:
1. The financial condition of the insurance carrier.
2. The insurance carrier's liabilities for workers' compensation loss and loss expenses in this state.
3. Whether the insurance carrier is subject to a finding of hazardous condition, an order of supervision, a delinquency proceeding or any other regulatory action in this state, the insurance carrier's state of domicile or any other state in which the insurance carrier transacted the business of insurance.
4. Any other factors the director of the department of insurance and financial institutions determines are relevant to the application for release of the deposit.
E. Except in the event of nonpayment of premiums, each insurance carrier shall carry a risk to the conclusion of the policy period unless the policy is cancelled by the employer or unless one or both of the parties to a professional employer agreement terminate the agreement. The policy period shall be agreed upon on by the insurance carrier and the employer.
F. At least thirty days' notice shall be given by the insurance carrier to the employer and to the commission of any cancellation or nonrenewal of a policy if the cancellation or nonrenewal is at the election of the insurance carrier. The insurance carrier shall promptly notify the commission of any cancellation by the employer or failure of the employer to renew the policy. The failure to give notice of nonrenewal if the nonrenewal is at the election of the insurance carrier shall not extend coverage beyond the policy period. An insurance carrier shall notify the commission on a form prescribed by the commission that it has insured an employer for workers' compensation promptly after undertaking to insure the employer.
G. Every insurance carrier on or before March 1 of each year shall pay to the state treasurer for the credit of the administrative fund, in lieu of all other taxes on workers' compensation insurance, a tax of not more than three per cent percent on all premiums collected or contracted for during the year ending December 31 next preceding, less the deductions from such total direct premiums for applicable cancellations, returned premiums and all policy dividends or refunds paid or credited to policyholders within this state and not reapplied as premiums for new, additional or extended insurance. Every self‑insured employer, including workers' compensation pools, on or before March 31 of each year shall pay a tax of not more than three per cent percent of the premiums that would have been paid by the employer if the employer had been fully insured by an insurance carrier authorized to transact workers' compensation insurance in this state during the preceding calendar year. The commission shall adopt rules that shall specify the premium plans and methods to be used for the calculation of rates and premiums and that shall be the basis for the taxes assessed to self‑insured employers. The tax shall be not less than two hundred fifty dollars $250 per annum and shall be computed and collected by the commission and paid to the state treasurer for the credit of the administrative fund at a rate not exceeding three per cent percent to be fixed annually by the industrial commission of Arizona. The rate shall be no more than is necessary to cover the actual expenses of the industrial commission of Arizona in carrying out its powers and duties under this title. Any quarterly payments of tax pursuant to subsection I of this section shall be deducted from the tax payable pursuant to this subsection.
H. An insurance carrier may reduce the amount of premiums paid by an employer by up to five per cent percent if all of the following apply:
1. The insured employer complies with the drug testing policy requirements prescribed in section 23‑493.04.
2. The insured employer conducts drug testing of prospective employees.
3. The insured employer conducts drug testing of an employee after the employee has been injured.
4. The insured employer allows the employer's insurance carrier to have access to the drug testing results under paragraphs 2 and 3 of this subsection.
I. Any insurer that, pursuant to this section, paid or is required to pay a tax of two thousand dollars $2,000 or more for the preceding calendar year shall file a quarterly report, in a form prescribed by the commission, accompanied by a payment in an amount equal to the tax due at the rates prescribed in subsection G of this section for premiums determined pursuant to subsection G of this section or an amount equal to twenty‑five per cent percent of the tax paid or required to be paid pursuant to subsection G of this section for the preceding calendar year. The quarterly payments shall be due and payable on or before the last day of the month following the close of the quarter and shall be made to the state treasurer.
J. If an overpayment of taxes results from the method prescribed in subsection I of this section the industrial commission of Arizona may refund the overpayment without interest.
K. An insurer who fails to pay the tax prescribed by subsection G or I of this section or the amount prescribed by section 23‑1065, subsection A is subject to a civil penalty equal to the greater of twenty‑five dollars $25 or five per cent percent of the tax or amount due plus interest at the rate of one per cent percent per month from the date the tax or amount was due.
L. An insurance carrier authorized to write workers' compensation insurance may not assess an employer premiums for services provided by a contractor alleged to be an employee under section 23‑902, subsection B or C, unless the carrier has done both of the following:
1. Prepared written audit or field investigation findings establishing that all applicable factors for determining employment status under section 23‑902 have been met.
2. Provided a copy of such findings to the employer in advance of assessing a premium.
M. Notwithstanding section 23‑901, paragraph 6, subdivision (i), a sole proprietor may waive the sole proprietor's rights to workers' compensation coverage and benefits if both the sole proprietor and the insurance carrier of the employer subject to this chapter for which the sole proprietor performs services sign and date a waiver that is substantially in the following form:
I am a sole proprietor, and I am doing business as (name of sole proprietor) . I am performing work as an independent contractor for (name of employer) . I am not the employee of (name of employer) for workers' compensation purposes, and, therefore, I am not entitled to workers' compensation benefits from (name of employer) . I understand that if I have any employees working for me, I must maintain workers' compensation insurance on them.
_________________________ _________________________
Sole proprietor Date
_________________________ _________________________
Insurance carrier Date
Sec. 131. Section 23-1091, Arizona Revised Statutes, is amended to read:
23-1091. Assigned risk plan
A. An insurer may decline to issue a workers' compensation or occupational disease policy to an employer. An employer who is refused coverage by two or more insurers shall be placed in the assigned risk plan established by this section.
B. There shall be only one workers' compensation assigned risk plan in this state. The director of the department of insurance and financial institutions shall contract with a qualified party to be the assigned risk plan administrator.
C. The administrator may charge all insurers transacting workers' compensation insurance in this state a reasonable fee to administer the assigned risk plan. Each insurer shall pay a share of the fee based on the insurer's share of the preceding calendar year's total net direct workers' compensation and occupational disease compensation insurance premiums written in this state.
D. The assigned risk plan administrator shall develop a plan of operation and, on approval by the director of the department of insurance and financial institutions, shall issue a directive for the equitable apportioning of assigned risks among all the insurers. At any time, the director of the department of insurance and financial institutions may require the assigned risk plan administrator to amend the plan of operation. The plan shall include at least the following:
1. A method for the administrator to select one or more insurers transacting workers' compensation insurance in this state to act as servicing carriers. An administrator that is an insurer may act as its own servicing carrier. The administrator shall monitor the performance of the servicing carriers and shall measure performance against the administrator's established standards. A servicing carrier shall:
(a) Provide coverage for the risks placed in the assigned risk plan.
(b) Pay claims.
(c) Provide safety management services.
(d) Perform other activities that are related to the preliminary and subsequent effectuation of the contract and that arise out of the contract, including paying commissions to any licensed property and casualty agent or broker in this state.
2. A method for apportioning the workers' compensation assigned risks among all insurers.
E. Unless the director decides to use another method, the rates used to determine the premiums of risks in the assigned risk plan are the rates annually filed with the director of the department of insurance and financial institutions by the designated rating organization pursuant to section 20‑357, subsection B, unless the director requires the use of rates from another rating organization, plus a uniform percentage increase that applies to all classifications, that is determined by the designated rating organization or, if the director directs, another rating organization and that is subject to approval by the director. The expected loss rates, ballast factors and other factors for use with the uniform experience rating plan as described in title 20, chapter 2, article 4 and filed with the director also apply to experience rated risks in the assigned risk plan.
F. Rating classifications used in the assigned risk plan shall conform to the uniform classification plan. Subclassifications and rating rule deviations shall not be used in the assigned risk plan.
G. All insurers participating in workers' compensation or occupational disease compensation insurance shall participate in the assigned risk plan.
H. Distribution of assignments among insurers shall be made in proportion to each insurer's share of the preceding calendar year's total net direct workers' compensation and occupational disease compensation insurance premium written in this state, as far as practicable.
I. An insurer that refuses to participate in the assigned risk plan shall not be authorized to write workers' compensation coverage in this state. If an insurer refuses to participate in the assigned risk plan after being authorized to write workers' compensation coverage in this state, the insurer's authorization shall be revoked. If an insurer withdraws from or is terminated from writing workers' compensation coverage in this state, the insurer remains responsible for all injuries sustained during the period of coverage stated in the policies of that insurer.
Sec. 132. Section 25-529, Arizona Revised Statutes, is amended to read:
25-529. Title IV-D cases; alternative medical insurance coverage
The director of the department of economic security may disseminate information provided by the department of insurance and financial institutions regarding individual medical insurance plans and may enter into agreements with a consortium of other states to offer medical insurance coverage to children in title IV‑D cases.
Sec. 133. Section 28-667, Arizona Revised Statutes, is amended to read:
28-667. Written accident report; definition
A. A law enforcement officer or public employee who, in the regular course of duty, investigates a motor vehicle accident resulting in bodily injury, death or damage to the property of any person in excess of $2,000 or the issuance of a citation shall complete a written report of the accident as follows:
1. Either at the time of and at the scene of the accident or after the accident by interviewing participants or witnesses.
2. Within twenty‑four hours after completing the investigation.
B. Every law enforcement officer or public employee who, in the regular course of duty, investigates a motor vehicle accident that results in damage to the property of any person in an amount of $2,000 or less, but that does not result in the issuance of a citation or bodily injury or death, shall complete a portion of the written report of the accident. The portion of the written report shall:
1. Be completed either at the time of and at the scene of the accident or after the accident by interviewing participants or witnesses.
2. Be completed within twenty‑four hours after completing the investigation.
3. Include the following minimum information:
(a) The time, day, month and year of the accident.
(b) Information adequate to identify the location of the accident.
(c) Identifying information for all involved parties and witnesses, including name, age, sex, address, telephone number, vehicle ownership and registration and proof of insurance.
(d) A narrative description of the facts of the accident, a simple diagram of the scene of the accident and the investigating officer's name, agency and identification number.
C. The agency employing the officer or public employee:
1. Shall not allow a person to examine the accident report or any related investigation report or a reproduction of the accident report or a related investigation report if the request is for a commercial solicitation purpose.
2. May require a person requesting the accident or related investigative report to state under penalty of perjury that the report is not examined or copied for a commercial solicitation purpose.
3. May retain the original report.
4. Shall maintain an electronic copy of the original report if the agency elects not to retain the original report pursuant to paragraph 3 of this subsection.
5. Shall immediately forward a copy of the report to the department of transportation for its use.
6. Except as otherwise provided by law, on request shall provide a copy of the unredacted report to the following:
(a) A person who is involved in the accident or the owner of a vehicle involved in the accident or a representative of the person or owner.
(b) Any insurer licensed pursuant to title 20 if the report is related to an investigation into fraudulent claims, or any insurer that writes automobile liability or motor vehicle liability policies and that is both of the following:
(i) Under the jurisdiction of the department of insurance and financial institutions or a self‑insured entity or its agents, employees or contractors in connection with claims investigation activities, antifraud activities, rating or underwriting.
(ii) An insurer of a person or vehicle involved in the accident.
(c) An attorney licensed to practice law or to a licensed private investigator representing a person involved in the accident in connection with any civil, administrative or arbitration proceeding in any court or government agency or before any self‑regulatory body, including the service of process, investigation in anticipation of litigation and the execution or enforcement of judgments and orders, or pursuant to a court order.
(d) An insurance support organization as defined in section 20‑2102 that provides services in connection with claims investigation activities, antifraud activities, rating or underwriting.
D. If a request is made pursuant to subsection C, paragraph 6, subdivision (a) or (c) of this section and the accident report indicates that a criminal complaint has been issued, before the report is released the personal identifying information regarding any victim shall be redacted from the accident report pursuant to section 13‑4434.
E. A law enforcement agency may deny a request for a copy of an unredacted accident report if the agency determines that release of the report would be harmful to a criminal investigation.
F. The department may place notes, date stamps, identifying numbers, marks or other information on the copies as needed, if they do not alter the original information reported by the investigating officer or public employee.
G. Any law restricting the distribution of personal identifying information by a business entity described in subsection C, paragraph 6, subdivisions (b) and (d) of this section applies to personal identifying information contained in an accident report. If a person who receives information under this section is not otherwise subject to distribution restrictions for information contained in accident reports, the person shall not release the report or any information contained in the report except to those persons designated in subsection C, paragraph 6 of this section.
H. For the purposes of this section, "commercial solicitation purpose" means a request for an accident report if there is neither:
1. A relationship between the person or the principal of the person requesting the accident report and any party involved in the accident.
2. A reason for the person to request the report other than for the purposes of soliciting a business or commercial relationship.
Sec. 134. Section 28-2166, Arizona Revised Statutes, is amended to read:
28-2166. Registration of vehicle rented without a driver; liability insurance; joint liability; violation; classification; definition
A. The department of transportation shall not allow an owner who is engaged in the business of renting or who intends to rent a motor vehicle in this state without a driver to register or to rent the motor vehicle until either:
1. The owner has procured public liability insurance with an insurance company approved by the department of insurance and financial institutions.
2. The owner has furnished to the department of transportation satisfactory proof of the owner's ability to respond in damages in the amount of fifteen thousand dollars $15,000 if one motor vehicle is registered and ten thousand dollars $10,000 for each additional motor vehicle. Proof of the ability to respond in damages in the amount of one hundred thousand dollars $100,000 is sufficient for any number of motor vehicles.
B. The policy of insurance required by subsection A of this section shall:
1. Insure the renter against:
(a) Liability arising from the renter's negligence in the operation of the rented motor vehicle in an amount of at least fifteen thousand dollars $15,000 for any one person injured or killed and thirty thousand dollars $30,000 for any number more than one person injured or killed in any one accident.
(b) Liability of the renter for property damage in the amount of at least ten thousand dollars $10,000 for any one accident.
2. Cover the liability of the renter to a passenger in the rented motor vehicle unless the owner gives the renter a written notice that the policy does not cover the liability.
C. Subject to the provisions of subsection D of this section, the public liability insurance or the obligation of a self‑insured owner pursuant to this section is primary coverage to any other available liability insurance coverage that is available and applicable for any damages and injury caused by a renter unless one of the following apply applies:
1. It is disclosed in the rental agreement to the renter the following:
"The owner does not extend any of its motor vehicle financial responsibility or provide public liability insurance coverage to the renter, authorized drivers or any other driver."
This disclosure shall be by one of the following methods:
(a) In at least ten point ten-point bold type in the rental or lease agreement and affirmatively acknowledged by the renter.
(b) In the terms of the master agreement maintained with the renter.
(c) At the time a reservation is made by a renter online, the disclosure is made in a conspicuous manner.
2. The renter purchased public liability insurance from the owner that provides coverage that complies with subsection B of this section to renters and authorized drivers of rental motor vehicles for liability that arises from the operation of the rental motor vehicle. Any liability insurance purchased from the owner pursuant to this subsection shall apply and be exhausted prior to any other applicable and available liability insurance coverage.
D. The owner regulated by this section:
1. Shall respond to the third party third-party claim, provide financial responsibility as prescribed in subsection B of this section and provide a defense for all claims for damages or liability arising out of the ownership, maintenance or use of a motor vehicle if there is an accident, there are damages or injuries that are caused by the renter and one of the following applies:
(a) The renter does not have any other liability coverage which that is available and applicable to the loss.
(b) The owner has not fully and accurately provided to the claimant the contact information regarding the renter, including the name, the address, the applicable insurance company and the policy number or the insurance company's claim number, within twenty days after the owner is notified of the claim.
2. After the owner has assumed defense of the claim under this subsection, cannot tender the claim to the excess insurer without the written agreement from the excess insurer and the excess insurer is not responsible for any costs incurred by the owner before the tender is accepted.
3. Has no obligation to provide a defense after the owner has paid its coverage limits, if the renter does not have any other liability coverage that is available and applicable to the loss.
4. In any situation in which damages or injuries are caused by a person who is operating a motor vehicle and who is not authorized by the written rental agreement to do so, has a right of subrogation against the person who rented the motor vehicle for damages that are caused to the owner and that arose out of the unauthorized operation of the owner's motor vehicle.
5. Except as provided in paragraph 4 of this subsection, has no other right of subrogation against the person who rented the motor vehicle.
E. In a situation where the owner does not provide primary coverage, the public liability insurance or the obligation of the self‑insured owner pursuant to this section shall provide excess coverage up to the limits prescribed in subsection B of this section.
F. The department of transportation shall cancel the registration of a motor vehicle rented without a driver if the owner has failed to comply with this section.
G. The owner of a motor vehicle who rents it to another without a driver, other than as a bona fide transaction involving the sale of the motor vehicle, without having procured the required public liability insurance or without qualifying as a self‑insurer pursuant to section 28‑4007 with at least the minimum limits prescribed in subsection A of this section is jointly and severally liable with the renter for damage caused by the negligence of the renter operating the motor vehicle.
H. The owner of a motor vehicle who rents a motor vehicle without a driver, other than as a bona fide transaction involving the sale of the motor vehicle, without first complying with this section is guilty of a class 2 misdemeanor.
I. As used in this section, an owner who is engaged in the business of renting or who intends to rent a motor vehicle without a driver does not include a person who operates a golf course that rents golf carts that are intended to be used primarily for playing a round of golf and that are only incidentally operated or moved on a highway.
J. As used in For the purposes of this section, "renter" includes any person operating a motor vehicle with permission of the person who has rented it.
Sec. 135. Section 28-4007, Arizona Revised Statutes, is amended to read:
28-4007. Self‑insurers
A. Except as provided in subsection E of this section, a person in whose name more than ten motor vehicles are registered or who is required to comply with the financial responsibility requirements prescribed in article 2 of this chapter may qualify as a self‑insurer or partial self‑insurer by obtaining a certificate of self‑insurance or partial self‑insurance issued by the director as provided in this section.
B. After determining that the person is financially able and will continue to be able to pay judgments obtained against the person, the director may issue a certificate of self‑insurance or partial self‑insurance.
C. On not less than five days' notice and after a hearing, the director may cancel a certificate of self‑insurance or a certificate of partial self‑insurance on reasonable grounds. For the purposes of this subsection, "reasonable grounds" includes any of the following circumstances:
1. Failure to pay a judgment within thirty days after the judgment becomes final.
2. Determination by the director that the person has not complied with the financial responsibility requirements of this chapter.
3. Determination by the director that the person knowingly submitted false information that is required by this chapter to this state, a political subdivision of this state, a court or a law enforcement agency.
4. Determination by the director that the person knowingly failed to respond within thirty days to a claim for damages for liability arising out of the ownership, maintenance or use of a motor vehicle.
5. Determination by the director that the person does not meet the bond requirements prescribed in section 28‑4011.
D. A person who is required to comply with the financial responsibility requirements prescribed in article 2 of this chapter may file an application with the department for partial self‑insurance to cover any portion of the financial responsibility requirements.
E. A person may also qualify as a self‑insurer if the person is insured by a captive insurer that is domiciled and authorized by the department of insurance and financial institutions to transact business in this state and that provides coverage in an amount of at least that required by section 28‑4033.
F. A person applying for self‑insurance or partial self‑insurance pursuant to this section shall comply with both of the following at the time of application:
1. The person shall submit evidence in a form prescribed by the director that the person is financially able and will continue to be able to pay the entire amount of self‑insurance or partial self‑insurance allowed by the director for judgments obtained against the person for liability arising out of the ownership, maintenance or use of a motor vehicle.
2. If applicable, the person shall submit evidence in a form prescribed by the director that the person has a valid insurance policy that meets the requirements prescribed in section 28‑4033 and that is issued by an insurer that holds a valid certificate of authority or that is permitted allowed to transact surplus lines insurance in this state.
G. The director may adopt rules to implement this section, including rules requiring additional evidence that the person meets the financial responsibility requirements of this chapter and rules providing for the periodic submission of evidence demonstrating that the person meets the standards required by the department to qualify as a self‑insurer, a captive insurer or partial self‑insurer.
H. The director of the department of transportation, in consultation with the director of the department of insurance and financial institutions, may establish procedures that allow a person to apply for and file a certificate of either partial self‑insurance or self‑insurance.
I. The director of the department of transportation, in consultation with the director of the department of insurance and financial institutions, shall establish procedures to exchange information regarding changes in the self‑insurance status of persons who are subject to this section.
Sec. 136. Section 28-4008, Arizona Revised Statutes, is amended to read:
28-4008. Assigned risk plans
A. After consultation with insurance companies authorized to issue motor vehicle liability policies in this state, the director of the department of insurance and financial institutions shall approve a reasonable plan for the equitable apportionment among the companies of applicants for policies and for motor vehicle liability policies who are in good faith entitled to but are unable to procure the policies through ordinary methods.
B. After a plan has been approved, all insurance companies authorized to issue motor vehicle liability policies in this state shall subscribe to and participate in the plan.
C. An applicant for a policy under this section, a person insured under an assigned risk plan and an insurance company affected may appeal to the director of the department of insurance and financial institutions from any ruling or decision of the manager or committee designated to operate the plan. Within ten days after notice of an order or act of the director of the department of insurance and financial institutions, a person aggrieved under this section by the order or act may file a petition in the superior court in the county in which the director of the department of insurance and financial institutions is domiciled against the director of the department of insurance and financial institutions for a review of the order or act. The court shall summarily hear the petition and may make any appropriate order or decree.
Sec. 137. Section 28-4038, Arizona Revised Statutes, is amended to read:
28-4038. Transportation network services; financial responsibility requirements; survey
A. For a transportation network company that requires a transportation network company driver to accept rides that are booked and paid for exclusively through the transportation network company's digital network or software application and during the time in which the transportation network company driver is logged in to the transportation network company's digital network or software application to be a driver, but is not in the act of providing transportation network services, the following insurance coverage shall be maintained:
1. Before March 1, 2016, the transportation network company driver shall maintain a motor vehicle liability insurance policy that meets at least the requirements of section 28‑4009. A transportation network company shall provide motor vehicle liability insurance coverage in the amount of twenty‑five thousand dollars because of bodily injury to or death of one person in any one accident, subject to the limit for one person, fifty thousand dollars because of bodily injury to or death of two or more persons in any one accident and twenty thousand dollars because of injury to or destruction of property of others in any one accident in the event a transportation network company driver's policy excludes coverage according to the policy's terms.
2. From and after February 29, 2016, the transportation network company driver or the transportation network company, or both, shall provide primary motor vehicle liability insurance coverage in the amount of twenty‑five thousand dollars $25,000 because of bodily injury to or death of one person in any one accident, subject to the limit for one person, fifty thousand dollars $50,000 because of bodily injury to or death of two or more persons in any one accident and twenty thousand dollars $20,000 because of injury to or destruction of property of others in any one accident. Coverage shall be maintained through any of the following:
(a) 1. A private passenger motor vehicle policy maintained by the transportation network company driver that expressly provides liability coverage while the driver is logged in to the transportation network company's digital network or software application to be a driver.
(b) 2. A motor vehicle liability policy maintained by the transportation network company.
(c) 3. A commercial motor vehicle liability policy.
B. For a transportation network company that requires a transportation network company driver to accept rides that are booked and paid for exclusively through the transportation network company's digital network or software application and during the time in which the transportation network company driver is providing transportation network services, the transportation network company driver or the transportation network company, or both, shall maintain the following insurance coverages:
1. Primary commercial motor vehicle liability insurance that covers the transportation network company driver's provision of transportation network services in a minimum amount of two hundred fifty thousand dollars $250,000 per incident.
2. Commercial uninsured motorist coverage in a minimum amount of two hundred fifty thousand dollars $250,000 per incident.
C. From and after February 29, 2016, Unless an insurance policy expressly provides coverage or contains an amendment or endorsement that expressly provides coverage, the transportation network company driver's insurance policy and the motor vehicle owner's personal motor vehicle insurance policy shall not be required to provide coverage for the transportation network company vehicle, the transportation network company driver, the motor vehicle owner or any third party while a transportation network company driver is logged in to a transportation network company's digital network or software application to be a driver or is providing transportation network services.
D. Notwithstanding subsection C of this section, an insurer may offer, for the period during which a transportation network company driver is logged in to a transportation network company's digital network or software application to be a driver or is providing transportation network services, one of the following:
1. A motor vehicle liability insurance policy expressly providing such coverage.
2. An amendment or endorsement to an existing motor vehicle liability insurance policy specifically providing such coverage.
E. An insurance policy required by this section is deemed to satisfy the financial responsibility requirements for a motor vehicle insurance policy under this title.
F. A transportation network company driver shall carry proof of insurance in the transportation network company vehicle at all times while logged in to a transportation network company's digital network or software application to be a driver or is providing transportation network services. If an accident occurs involving a transportation network company vehicle, the transportation network company driver shall provide proof of insurance to the parties involved in the accident at the time of the accident. The transportation network company driver shall also notify the transportation network company of the accident.
G. In a claims coverage investigation, transportation network companies and any insurer providing coverage as prescribed in this section shall fully cooperate in the exchange of information, including the precise times that a transportation network company driver logged on and off of the transportation network company's digital network or software application in the twenty-four-hour period immediately preceding the accident, and shall disclose to each other a clear description of the coverage, exclusions and limits provided under any insurance policy each party issued or maintained.
H. From and after February 29, 2016, This section and section 28‑4009 do not create an obligation for an insurer that issues coverage to which section 20‑1631 applies to offer, provide or issue a motor vehicle liability insurance policy or an endorsement or amendment that includes coverage for any liability arising while a transportation network company driver is logged in to the transportation network company's digital network or software application to be a driver or is providing transportation network services.
I. An insurance policy required by this section may be placed with an insurer authorized to transact insurance in this state pursuant to title 20, chapter 2, article 1 or a surplus lines insurer pursuant to title 20, chapter 2, article 5.
J. The department of insurance and financial institutions, as part of its annual survey of insurance companies, may request information from any property and casualty insurer authorized to write private passenger motor vehicle coverage in this state, including information regarding:
1. Whether the insurer offers for purchase a policy or an endorsement or amendment that covers transportation network company drivers while the driver is logged in to a transportation network company's digital network or software application to be a driver or is providing transportation network services.
2. The number of those policies, endorsements or amendments that have been purchased during the reporting period.
3. The number of those policies, endorsements or amendments that have been canceled during the reporting period.
Sec. 138. Section 28-4133, Arizona Revised Statutes, is amended to read:
28-4133. Insurance identification cards; documentary evidence; exception
A. An authorized insurer shall issue at least two motor vehicle insurance identification cards for a motor vehicle or automobile liability policy that meets the requirements of section 28‑4009 or section 28‑4033, subsection A, paragraph 2, subdivision (c).
B. The card shall include the number that the department assigns to the insurer and shall state that:
1. A person is required to possess evidence of financial responsibility within the motor vehicle.
2. The card or an image of the card that is displayed on a wireless communication device meets the requirement prescribed in paragraph 1 of this subsection.
3. The card or an image of the card that is displayed on a wireless communication device is satisfactory evidence if the person is asked by the department of transportation to verify financial responsibility on the motor vehicle.
C. All documentary evidence issued by an insurer or an authorized agent of the insurer shall indicate:
1. The name of the insurer as listed with the department of insurance and financial institutions.
2. For the purpose of verifying insurance coverage, the mailing address and telephone number of the insurer or an authorized agent of the insurer.
3. In order to accurately verify insurance coverage, other information as required by the department of transportation.
4. If a binder is issued by an authorized agent of an insurer, the name, address and telephone number of the agent.
D. This section does not apply to a commercial vehicle policy that provides automatic coverage for additional or newly acquired vehicles until the policy's expiration date.
Sec. 139. Section 28-6923, Arizona Revised Statutes, is amended to read:
28-6923. Bid requirements; procedure; bond
A. All items of construction or reconstruction of department facilities involving an expenditure of one hundred eighty-nine thousand dollars $189,000 or more shall be called for by advertising in a newspaper of general circulation published in this state for either:
1. Two consecutive publications if it is a weekly newspaper.
2. Two publications at least six but not more than ten days apart if it is a daily newspaper.
B. In fiscal year 2008‑2009 and each fiscal year thereafter, the amount provided in subsection A of this section shall be adjusted by the annual percentage change in the GDP price deflator as defined in section 41‑563.
C. The advertisement shall state specifically the character of the work to be done and where a person may obtain copies of the plans, specifications and complete information as to the proposed work.
D. The bidding information provided shall state specifically the character of the work to be performed and the kind, quantity and quality of materials or supplies to be furnished. The plans and specifications:
1. Shall be sufficiently complete, definite and explicit to permit allow informed, free, open and competitive bidding on a common basis.
2. May require performance on the basis of either means and methods specifications or end result specifications.
3. If end result specifications are used, shall provide an objective or standard to be achieved with the successful bidder expected to exercise the bidder's skill and ingenuity in achieving that objective or standard of performance by selecting the means and manner of performance and by assuming a corresponding responsibility for that selection.
E. If contractor insurance is required for construction or reconstruction pursuant to this section, the insurance shall be placed with an insurer authorized to transact insurance in this state pursuant to title 20, chapter 2, article 1 or a surplus lines insurer approved and identified by the director of the department of insurance and financial institutions pursuant to title 20, chapter 2, article 5.
F. A bid shall be accompanied by a certified check, cashier's check or surety bond for ten per cent percent of the amount of the bid included in the proposal as a guarantee that the contractor will enter into a contract to perform the proposal pursuant to the plans and specifications.
G. The certified check, cashier's check or surety bond shall be returned to the contractors whose proposals are not accepted and to the successful contractor on the execution of a satisfactory bond and contract as provided in this article.
H. The surety bond provided pursuant to subsection F of this section shall be executed and furnished as required by title 34, chapter 2, and the conditions and provisions of the surety bid bond regarding the surety's obligations shall follow the form required under section 34‑201, subsection A, paragraph 3.
I. If a bid that is satisfactory to the board is received, it shall let a contract to the lowest responsible bidder, on the contractor giving performance and payment bonds that follow the form and include the provisions required by title 34, chapter 2, article 2.
J. If the bids received for construction or reconstruction are not satisfactory to the board, a second call shall be made. If they are again rejected by the board, it may authorize the state engineer to construct or reconstruct the item as it deems most advantageous.
K. In determining the lowest responsible bidder under this section, the department and the board may consider the time of completion proposed by the bidder if the department and the board determine that this procedure will serve the public interest by providing a substantial fiscal benefit or that the use of the traditional awarding of contracts is not practicable for meeting desired construction standards or delivery schedules and if the formula for considering the time of completion is specifically stated in the bidding information.
L. This section does not prohibit a change to a construction contract that either:
1. Does not alter the scope of the work under a contract and the cost of the change does not exceed ten per cent percent of the contract amount or fifty thousand dollars $50,000, whichever is greater.
2. Does alter the scope of the work if the cost of the change does not exceed ten per cent percent of the contract amount or fifty thousand dollars $50,000, whichever is greater, and the changed work is within twenty per cent percent of the total project length.
M. If a project is funded completely with private monies, the private entity is not required to comply with subsections A through L of this section if the private entity complies with all of the following:
1. Before advertising for bids, submits to the department a bond that is issued by a surety insurer authorized to do business in this state and that is in an amount equal to one hundred twenty‑five per cent percent of the anticipated construction cost of the project, including construction management and contractor costs.
2. Solicits sealed bids from at least four contractors who are prequalified by the department to perform a contract of the anticipated dollar amount of the construction.
3. Awards the contract to the best bidder taking into account price and other criteria as provided in the bid documents.
4. Obtains bonds from the selected contractor that provide the same coverage as performance and payment bonds issued under title 34, chapter 2, article 2.
5. Uses department construction standards.
6. Pays all costs of department reviews of the contract and inspections of the project.
N. For the purposes of this section, a project is funded completely with private monies if all of the following apply:
1. The contractor is paid entirely with monies from private entities.
2. The private entities hire a competent construction manager and contractor who do not have an affiliation with each other.
3. The private entities either pay all costs of design or reimburse the department for all costs of design.
Sec. 140. Section 28-7369, Arizona Revised Statutes, is amended to read:
28-7369. Insurance requirements in procurements
If contractor insurance is required for services procured pursuant to this article, the insurance shall be placed with an insurer authorized to transact insurance in this state pursuant to title 20, chapter 2, article 1 or a surplus lines insurer approved and identified by the director of the department of insurance and financial institutions pursuant to title 20, chapter 2, article 5.
Sec. 141. Section 28-7704, Arizona Revised Statutes, is amended to read:
28-7704. Procurements
A. The department:
1. May procure services under this chapter using any of the following:
(a) Requests for project proposals in which the department describes a class of transportation facilities or a geographic area in which private entities are invited to submit proposals to develop transportation facilities.
(b) Solicitations using requests for qualifications, short‑listing of qualified proposers, requests for proposals, negotiations, best and final offers or other procurement procedures.
(c) Procurements seeking from the private sector development and finance plans most suitable for the project.
(d) Best value selection procurements based on price or financial proposals, or both, or other factors.
(e) Other procedures that the department determines may further the implementation of this chapter.
2. Shall procure services under this chapter using unsolicited proposals if the department determines that there is sufficient merit to pursue any unsolicited proposal and a reasonable opportunity for other entities to submit competing proposals for consideration and a possible contract award as appropriate.
B. For any procurement in which the department issues a request for qualifications, request for proposals or similar solicitation document, the request shall generally set forth the factors that will be evaluated and the manner in which responses will be evaluated. If contractor insurance is required for services procured pursuant to this section the insurance shall be placed with an insurer authorized to transact insurance in this state pursuant to title 20, chapter 2, article 1 or a surplus lines insurer approved and identified by the director of the department of insurance and financial institutions pursuant to title 20, chapter 2, article 5.
C. In evaluating proposals, the department may accord such relative weight to factors such as cost, financial commitment, innovative financing, technical, scientific, technological or socioeconomic merit and other factors as the department deems appropriate to obtain the best value for this state.
D. The department may pay a stipend to a proposer based on the department's estimate, in its sole discretion, of the value of the work product received, but only if the department has determined that the proposal submitted was responsive to the department's request for proposals and met all requirements established by the department for the project. In exchange for the stipend, the department may require the recipient to grant to the department the right to use any work product contained in the recipient's proposal, including technologies, techniques, methods, processes and information contained in the recipient's project design.
E. The department may charge and retain an administrative fee for the evaluation of an unsolicited project proposal.
F. The department may procure services, award agreements and administer revenues as authorized in this section notwithstanding any requirements of any other state or local statute, regulation or law relating to public bidding or other procurement procedures or other provisions otherwise applicable to public works, services or utilities.
G. The department may retain financial, legal and other consultants and experts inside or outside the public sector to assist in the evaluation, negotiation and development of eligible facilities under this chapter with a minimum of five years' experience working in that capacity with public‑private partnerships.
H. The department may spend monies that are reasonably necessary for the development of procurements, evaluation of concepts or proposals, negotiation of agreements and implementation of agreements for development or operation of eligible facilities under this chapter.
I. Before the department begins the process for procuring services as prescribed in subsection A of this section, the department shall hold at least one public hearing to receive comments on user charges, tolls, fares or similar charges.
Sec. 142. Section 29-609, Arizona Revised Statutes, is amended to read:
29-609. Purpose; insurance business
A. Except as provided in subsection B of this section, a limited liability company may be organized under this chapter and may conduct or promote business and other activities for any lawful purpose, except banking.
B. A limited liability company shall not be an insurer as defined in section 20‑104 unless as a title insurance agent as defined in section 20‑1562 or as a pure captive insurer as defined in section 20‑1098 who is expressly authorized by the director of the department of insurance and financial institutions pursuant to title 20. For the purposes of title insurance transactions or pure captive insurance business, the members of the limited liability company are individually responsible, equally and ratably, and not one for another, for all contracts, debts and engagements of the limited liability company, to the extent of the amount of each member's initial investment in the limited liability company.
Sec. 143. Section 29-3108, Arizona Revised Statutes, is amended to read:
29-3108. Nature, purpose and duration of limited liability company
A. A limited liability company is an entity distinct from its member or members.
B. Except as provided in subsections C and D of this section, a limited liability company may have any lawful purpose, regardless of whether the purpose is for profit.
C. A limited liability company may not engage in the business of banking.
D. A limited liability company may not be an insurer as defined in section 20‑104 unless as a title insurance agent as defined in section 20‑1562 or as a pure captive insurer as defined in section 20‑1098 that is expressly authorized by the director of the department of insurance and financial institutions pursuant to title 20. For the purposes of title insurance transactions or pure captive insurance business, the members of the company are individually responsible, equally and ratably, and not one for another, for all contracts, debts and engagements of the company, to the extent of the amount of each member's initial investment in the company.
E. A limited liability company has perpetual duration.
Sec. 144. Section 32-1004, Arizona Revised Statutes, is amended to read:
32-1004. Exemptions
A. The following persons are exempt from the provisions of this chapter when engaged in the regular course of their respective businesses but shall comply with the requirements of section 32‑1051, paragraphs 2 through 7 and section 32‑1055, subsection C and subsection D, paragraphs 1, 2, 3 and 5:
1. Attorneys‑at‑law.
2. A person regularly employed on a regular wage or salary in the capacity of credit person or a similar capacity, except as an independent contractor.
3. Banks, including trust departments of a bank, fiduciaries and financing and lending institutions.
4. Common carriers.
5. Title insurers, title insurance agents and abstract companies while doing an escrow business.
6. Licensed real estate brokers.
7. Employees of licensees under this chapter.
8. Substation payment offices employed by or serving as independent contractors or public utilities.
9. A person licensed pursuant to title 6, chapter 7.
10. A person licensed pursuant to title 6, chapter 9.
11. A person licensed pursuant to title 6, chapter 14, article 1.
12. A participant in a finance transaction in which a lender receives the right to collect commercial claims due the borrower by assignment, by purchase or by the taking of a security interest in those commercial claims.
13. An accounting, bookkeeping or billing service provider that complies with all of the following:
(a) Does not accept accounts that are contractually past due at the time of receipt.
(b) Does not initiate any contact with individual debtors except for the initial written notice of the amount owing and one written follow‑up notice.
(c) Does not give or send to any debtor a written communication that requests or demands payment.
(d) Does not receive or have access to monies paid by debtors or their insurers.
(e) All communications with the debtors are done in the name of the creditor.
14. A person collecting claims owed, due or asserted to be owed or due to a financial institution the deposits of which are insured by an agency of the federal government, or any affiliate of the financial institution, if the person is related by common ownership or affiliated by corporate control with the financial institution and collects the claims only for the financial institution or any affiliate of the financial institution.
15. A person who is licensed pursuant to title 20, chapter 2, article 3, 3.1, 3.2, 3.3 or 3.5 and who is authorized to collect premiums under an insurance policy financed by a premium finance agreement as defined in section 6‑1401.
16. A person that is licensed pursuant to title 20, chapter 2, article 9, that is authorized to act as an administrator for an insurer as defined in section 20‑485 and that collects charges pursuant to section 20‑485.09, subsection B.
B. For the purposes of subsection A, paragraph 12 of this section:
1. A transaction shall not be deemed a finance transaction if the primary purpose is to facilitate the collection of claims.
2. Commercial claim does not include an account arising from the purchase of a service or product intended for personal, family or household use.
C. For the purposes of subsection A, paragraph 13, subdivision (b) of this section, the initial written notice and follow‑up notice may contain only the following information:
1. The name, address and telephone and telefacsimile numbers of the creditor.
2. The amount due and an itemization of that amount.
3. The date payment is due.
4. The address or place where payment is to be made.
5. If the payment is past due, that payment is past due.
D. For a person who is exempt under subsection A, paragraph 14 of this section, the superintendent shall investigate complaints of residents of this state relating to any violations of section 32‑1051, paragraphs 2 through 7 or section 32‑1055, subsection C or subsection D, paragraph 1, 2, 3 or 5 and may examine the books, accounts, claims and files of a person that relate to the complaint. A person who is exempt and who violates the provisions of section 32‑1051, paragraphs 2 through 7 or section 32‑1055, subsection C or subsection D, paragraph 1, 2, 3 or 5 is subject to the provisions of sections 6‑132, 6‑136 and 6‑137.
Sec. 145. Section 32-1134, Arizona Revised Statutes, is amended to read:
32-1134. Powers and duties of registrar
A. The registrar shall:
1. Establish assessments and maintain the fund balance at a level sufficient to pay operating costs and anticipated claims using the cash basis of accounting.
2. Cause an examination of the fund to be made every three years by an independent certified public accountant.
3. File with the department of insurance and financial institutions an annual statement of the condition of the fund.
4. Employ accountants and attorneys from monies in the fund, but not to exceed ten thousand dollars $10,000 in any fiscal year, that are necessary for the performance of the duties prescribed in this section.
5. Employ or contract with individuals and procure equipment and operational support, to be paid from or purchased with monies in the fund, but not to exceed in any fiscal year fourteen percent of the total amount deposited in the fund in the prior fiscal year as may be necessary to monitor, process or oppose claims filed by claimants, which may result in collection from the recovery fund.
B. Notwithstanding section 32‑1135, the registrar may expend interest monies from the fund to increase public awareness of the fund. This expenditure may not exceed $50,000 in any fiscal year.
Sec. 146. Section 33-1003, Arizona Revised Statutes, is amended to read:
33-1003. Payment bond in lieu of lien right; bond purposes and conditions; recording
A. Every owner of land, including any person who has a legal or equitable interest therein in the land, who enters a contract requiring any person to perform labor or professional services or to furnish materials, machinery, fixtures or tools in the construction, alteration or repair of any building, or other structure or improvement on such land, may avoid the lien provisions of section 33‑981 pertaining to agents by requiring the person with whom he the owner contracts to furnish a payment bond. Upon On recordation of the payment bond together with a copy of such contract in the office of the county recorder, in the county in which the land is located, no lien shall thereafter be allowed or recorded by the person claiming a lien against the land on which the labor or professional services are performed or the materials, machinery, fixtures or tools furnished, as provided in this article, except by the person who contracts, in writing, directly with the owner.
B. A payment bond furnished pursuant to subsection A of this section shall be in the amount and form prescribed by title 34, chapter 2, article 2. The contract recorded with the bond shall contain a legal description of the land on which the work is being or is to be performed.
C. The bond provided for in this section shall be executed solely by one or more surety companies holding a certificate of authority to transact surety business in this state issued by the director of the department of insurance and financial institutions pursuant to title 20, chapter 2, article 1 and shall be accompanied by a power of attorney disclosing the authority of the person executing the same on behalf of the surety. Notwithstanding any other statute, the bond shall not be executed by an individual surety or sureties, even if the requirements of section 7‑101 are satisfied.
D. The county recorder of the county in which the bond and contract are recorded shall index the bond and contract under the index classification in which mechanics' and materialmen's liens are recorded.
Sec. 147. Section 33-1004, Arizona Revised Statutes, is amended to read:
33-1004. Discharge of mechanic's liens; bond; limitations of actions; discharge of surety; judgment
A. After perfection of a lien pursuant to this article, an owner, including any person who has a legal or equitable interest in the land which that is subject to the lien, a contractor, subcontractor, mortgagee or other lien creditor, may, either before or after the commencement of an action to foreclose such lien, may cause to be recorded in the office of the county recorder, in the county in which the land is located, a surety bond in the form described in subsection B of this section, together with a power of attorney disclosing the authority of the person executing the same on behalf of the surety. Upon On the recordation of such the bond, the property shall be discharged of such lien whether or not a copy of the bond is served upon on the claimant or he the claimant perfects his the claimant's rights against the bond.
B. A surety bond to discharge a lien perfected under this section shall be executed by the person seeking to discharge such lien, as principal, and by a surety company or companies holding a certificate of authority to transact surety business in this state, issued by the director of the department of insurance and financial institutions pursuant to title 20, chapter 2, article 1. The bond shall be for the sole protection of the claimant who perfected such lien. Notwithstanding any other statute, the surety bond shall not be executed by an individual surety or sureties, even if the requirements of section 7‑101 are satisfied. The bond shall be in an amount equal to one hundred fifty per cent percent of the demand set forth in and secured by the notice and claim of lien and shall be conditioned for the payment of the judgment which that would have been rendered against the property for the enforcement of the lien. The legal description of the property and the docket and page of the lien sought to be discharged shall be set forth in the bond.
C. The principal on such bond, upon recordation thereof on recording the bond with the county recorder, shall cause a copy of the bond to be served within a reasonable time upon on the lien claimant, and if a suit is then pending to foreclose the lien, the claimant, within ninety days after receipt thereof, shall cause proceedings to be instituted to add the surety and the principal as parties to the lien foreclosure suit. In addition, on recording and service of the surety bond, any monies withheld in response to a stop notice or bonded stop notice that is served by the lien claimant pursuant to article 9 of this chapter with respect to the same labor and material described in the notice and claim of lien shall be released promptly.
D. The bond shall be discharged and the principal and sureties released upon on any of the following:
1. The failure of the lien claimant to commence a suit within the time allowed pursuant to section 33‑998.
2. The failure of the lien claimant to name the principal and sureties as parties to the action seeking foreclosure of the lien if a copy of the bond has been served upon on the claimant. If the bond is served upon on the claimant within less than ninety days from after the date the claimant would be required to commence his the claimant's action pursuant to section 33‑998, the claimant shall have ninety days from after the date he the claimant receives a copy of such bond to add the principal and the sureties as parties to the lien foreclosure suit.
3. The dismissal of the foreclosure suit with prejudice as to the claimant or the entry of judgment in such suit against claimant.
E. In an action to foreclose a lien under this article, where a bond has been filed and served as provided herein, a judgment for the claimant on the bond shall be against the principal and his the principal's sureties for the reasonable value of the labor and material furnished and shall not be against the property. A judgment for the claimant on the bond, including any recovery for interest, expenses, costs and attorney fees awarded by the court, shall not exceed the penal sum of the bond. If the amount the claimant recovers exceeds the penal sum of the bond, the claimant shall also be entitled to judgment against the principal for the excess amount.
F. In the event If a copy of the bond is not served upon on the claimant as provided in subsection C of this section, the claimant shall have six months after the discovery of such the bond to commence an action thereon, except that no action may be commenced on such the bond after two years from the date it was recorded as provided in this section.
G. The county recorder of the county in which the bond and contract are recorded shall index the bond and contract under the index classification in which mechanics' and materialmen's liens are recorded.
Sec. 148. Section 33-1062, Arizona Revised Statutes, is amended to read:
33-1062. Release of stop notice or bonded stop notice; surety bond
A. An owner, a construction lender or any original contractor or subcontractor who disputes any stop notice or bonded stop notice may file with the person on whom notice was served a release bond. The release bond shall be executed in an amount equal to one hundred fifty per cent percent of the amount claimed in the notice, conditioned for the payment of any amount that does not exceed the penal obligation of the bond and that the claimant may recover on the claim. A copy of the release bond shall be served on the stop notice claimant in the same manner required for the delivery of a stop notice. On the filing and service of the release bond, the monies withheld in response to the stop notice or bonded stop notice shall be released promptly. A bond to release a stop notice or bonded stop notice under this section shall be executed by a surety company or companies holding a certificate of authority to transact surety business in this state, issued by the director of the department of insurance and financial institutions pursuant to title 20, chapter 2, article 1. The bond shall be for the sole protection of the claimant who perfected such notice.
B. If an owner, a construction lender or any original contractor or subcontractor causes to be recorded a surety bond to discharge a lien perfected by the stop notice claimant pursuant to section 33-1004 with respect to the same labor and material described in the stop notice or bonded stop notice, the surety bond shall also serve as a release bond pursuant to this section, and the monies withheld in response to the stop notice or bonded stop notice shall be released promptly on the recording and service of the surety bond on the stop notice claimant as prescribed in section 33‑1004.
C. In an action to enforce payment of a claim stated in a stop notice or bonded stop notice, where if a bond has been filed and served as provided in this section, a judgment for the claimant on the bond shall be against the person seeking to release such the stop notice or bonded stop notice as principal and the surety for the amount the claimant recovers on the stop notice or bonded stop notice claim, including any recovery for interest, expenses, costs and attorney fees awarded by the court, that does not exceed the penal sum of the bond. If the amount the claimant recovers on the stop notice or bonded stop notice claim exceeds the penal sum of the bond, the claimant shall also be entitled to judgment against the principal for the excess amount.
Sec. 149. Section 33-1076, Arizona Revised Statutes, is amended to read:
33-1076. Discharge of commercial real estate broker's liens; bond; limitations of actions; discharge of surety; judgment
A. After perfection of a lien pursuant to this article, an owner, including any person who has a legal or equitable interest in the land that is subject to the lien, a mortgagee or any other lien creditor may, either before or after the commencement of an action to foreclose the lien, may cause to be recorded in the office of the county recorder in the county in which the land is located a surety bond in the form described in subsection B of this section, together with a power of attorney disclosing the authority of the person executing the bond on behalf of the surety. On the recordation of the bond, the property shall be discharged of the lien whether or not a copy of the bond is served on the claimant or the claimant perfects the claimant's rights against the bond.
B. A surety bond to discharge a lien perfected under this article shall be executed by the person seeking to discharge the lien, as principal, and by a surety company or companies holding a certificate of authority to transact surety business in this state that is issued by the director of the department of insurance and financial institutions pursuant to title 20, chapter 2, article 1. The bond is for the sole protection of the claimant who perfected the lien. Notwithstanding any other statute, the surety bond shall not be executed by individual surety or sureties, even if the requirements of section 7‑101 are satisfied. The bond shall be in an amount equal to one and one‑half times the claim secured by the lien and shall be conditioned for the payment of the judgment that would have been rendered against the property for the enforcement of the lien. The legal description of the property and the docket and page of the lien sought to be discharged shall be set forth in the bond.
C. On recordation of the bond with the county recorder, the principal on the bond shall cause a copy of the bond to be served within a reasonable time on the lien claimant, and if a suit is then pending to foreclose the lien, the claimant, within ninety days after receipt of the bond, shall cause proceedings to be instituted to add the surety and the principal as parties to the lien foreclosure suit.
D. The bond shall be discharged and the principal and sureties shall be released on any of the following:
1. The failure of the lien claimant to commence a suit within the time allowed pursuant to section 33‑1074.
2. The failure of the lien claimant to name the principal and sureties as parties to the action seeking foreclosure of the lien if a copy of the bond has been served on the claimant. If the bond is served on the claimant fewer than ninety days after the date the claimant would be required to commence an action pursuant to section 33‑1074, the claimant has ninety days from after the date of receiving a copy of the bond to add the principal and the sureties as parties to the lien foreclosure suit.
3. The dismissal of the foreclosure suit with prejudice as to the claimant or the entry of judgment in a suit against the claimant.
E. In an action to foreclose a lien under this article, if a bond has been filed and served as prescribed by this section a judgment for the claimant on the bond shall be against the principal and the principal's sureties and shall not be against the property.
F. If a copy of the bond is not served on the claimant as provided in subsection C of this section, the claimant has six months after the discovery of the bond to commence an action on the bond, except that no action may be commenced on the bond after two years from the date it was recorded as provided in this section.
G. The county recorder of the county in which the bond and contract are recorded shall index the bond and contract under the index classification in which commercial real estate broker liens are recorded.
Sec. 150. Section 34-201, Arizona Revised Statutes, is amended to read:
34-201. Notice of intention to receive bids and enter contract; procedure; doing work without advertising for bids; county compliance
A. Except as provided in subsections B through G and L of this section, every agent, on acceptance and approval of the working drawings and specifications, shall publish a notice to contractors of intention to receive bids and contract for the proposed work. This notice shall be published by advertising in a newspaper of general circulation in the county in which the agent is located for two consecutive publications if it is a weekly newspaper or for two publications that are at least six but no not more than ten days apart if it is a daily newspaper. The notice shall state:
1. The nature of the work required, the type, purpose and location of the proposed building and where the plans, specifications and full information as to the proposed work may be obtained.
2. That contractors desiring to submit proposals may obtain copies of full or partial sets of plans and specifications for estimate on request or by appointment. The return of such the plans and specifications shall be guaranteed by a deposit of a designated amount which that shall be refunded on return of the plans and specifications in good order.
3. That every proposal shall be accompanied by a certified check, cashier's check or surety bond for ten per cent percent of the amount of the bid included in the proposal as a guarantee that the contractor will enter into a contract to perform the proposal in accordance with the plans and specifications. Notwithstanding any other statute, the surety bond shall be executed solely by a surety company or companies holding a certificate of authority to transact surety business in this state issued by the director of the department of insurance and financial institutions pursuant to title 20, chapter 2, article 1. The surety bond shall not be executed by an individual surety or sureties, even if the requirements of section 7‑101 are satisfied. The certified check, cashier's check or surety bond shall be returned to the contractors whose proposals are not accepted, and to the successful contractor on the execution of a satisfactory bond and contract as provided in this article. The conditions and provisions of the surety bid bond regarding the surety's obligations shall follow the following form:
Now, therefore, if the obligee accepts the proposal of the principal and the principal enters into a contract with the obligee in accordance with the terms of the proposal and gives the bonds and certificates of insurance as specified in the standard specifications with good and sufficient surety for the faithful performance of the contract and for the prompt payment of labor and materials furnished in the prosecution of the contract, or in the event of the failure of the principal to enter into the contract and give the bonds and certificates of insurance, if the principal pays to the obligee the difference not to exceed the penalty of the bond between the amount specified in the proposal and such larger amount for which the obligee may in good faith contract with another party to perform the work covered by the proposal then this obligation is void. Otherwise it remains in full force and effect provided, however, that this bond is executed pursuant to the provisions of section 34‑201, Arizona Revised Statutes, and all liabilities on this bond shall be determined in accordance with the provisions of the section to the extent as if it were copied at length herein.
4. That the right is reserved to reject any or all proposals or to withhold the award for any reason the agent determines.
B. If the agent believes that any construction, building addition or alteration contemplated at a public institution can be advantageously done by the inmates of the public institution and regularly employed help, the agent may cause the work to be done without advertising for bids.
C. Any building, structure, addition or alteration may be constructed either with or without the use of the agent's regularly employed personnel without advertising for bids, provided that the total cost of the work, excluding materials and equipment previously acquired by bid, does not exceed:
1. In fiscal year 1994‑1995, fourteen thousand dollars $14,000.
2. In fiscal year 1995‑1996 and each fiscal year thereafter, the amount provided in paragraph 1 of this subsection adjusted by the annual percentage change in the GDP price deflator as defined in section 41‑563.
D. Notwithstanding subsection C of this section, any street, road, bridge, water or sewer work, other than a water or sewer treatment plant or building, may be constructed either with or without the use of the agent's regularly employed personnel without advertising for bids, provided that the total cost of the work does not exceed:
1. In fiscal year 1994‑1995, one hundred fifty thousand dollars $150,000.
2. In fiscal year 1995‑1996 and each fiscal year thereafter, the amount provided in paragraph 1 of this subsection adjusted by the annual percentage change in the GDP price deflator as defined in section 41‑563.
E. For the purposes of subsection D of this section, the total cost of water or sewer work does not include services provided by volunteers or donations made for the water or sewer project.
F. Notwithstanding this section, an agent may:
1. Construct, reconstruct, install or repair a natural gas or electric utility and distribution system, owned or operated by such agent, with regularly employed personnel of the agent without advertising for bids, unless otherwise prohibited by charter or ordinance.
2. Construct recreational projects, including trails, playgrounds, ballparks and other similar facilities and excluding buildings, structures, building additions and alterations to buildings, structures and building additions, with volunteer workers or workers provided by a nonprofit organization without advertising for bids for labor and materials, provided that the total cost of the work does not exceed:
(a) In fiscal year 2001‑2002, one hundred fifty thousand dollars $150,000.
(b) In fiscal year 2002‑2003 and each fiscal year thereafter, the amount provided in subdivision (a) adjusted by the annual percentage change in the GDP price deflator as defined in section 41‑563.
G. A contribution by an agent for the financing of public infrastructure made pursuant to a development agreement is exempt from this section if such the contribution for any single development does not exceed:
1. In fiscal year 1994‑1995, one hundred thousand dollars $100,000.
2. In fiscal year 1995‑1996 and each fiscal year thereafter, the amount provided in paragraph 1 of this subsection adjusted by the annual percentage change in the GDP price deflator as defined in section 41‑563.
H. In addition to other state or local requirements relating to the publication of bids, each agent shall provide at least one set of all plans and specifications to any construction news reporting service that files an annual request with the agent. For the purposes of this subsection, "construction news reporting service" means a service that researches, gathers and disseminates news and reports either in print or electronically, on at least a weekly basis for building projects, construction bids, the purchasing of materials, supplies or services and other construction bidding or planned activity to the allied construction industry. The allied construction industry includes both general and specialty contractors, builders, material and service suppliers, architects and engineers, owners, developers and government agencies.
I. Any construction by a county under this section shall comply with the uniform accounting system prescribed for counties by the auditor general under section 41‑1279.21. Any construction by a city or town under this section shall comply with generally accepted accounting principles.
J. Any construction, building addition or alteration project that is financed by monies of this state or its political subdivisions shall not use endangered wood species unless an exemption is granted by the director of the department of administration. The director shall only grant an exemption if the use of endangered wood species is deemed necessary for historical restoration or to repair existing facilities and the use of any substitute material is not practical. Any lease‑purchase agreement entered into by this state or its political subdivisions for construction shall specify that no endangered wood species may be used in the construction unless an exemption is granted by the director. For the purposes of this subsection, "endangered wood species" includes those listed in appendix I of the convention on international trade in endangered species of wild flora and fauna.
K. All bonds given by a contractor and surety pursuant to this article, regardless of their actual form, will be deemed by law to be the form required and set forth in this article and no other.
L. Any building, structure, addition or alteration may be constructed without complying with this article if the construction, including construction of buildings or structures on public or private property, is required as a condition of development of private property and is authorized by section 9‑463.01 or 11-822. For the purposes of this subsection, building does not include police, fire, school, library or other public buildings.
M. Notwithstanding section 34‑221, any agent may enter into a guaranteed energy cost savings contract with a qualified provider for the purchase of energy cost savings measures without complying with this article and may procure a guaranteed energy cost savings contract through the competitive sealed proposal process prescribed in title 41, chapter 23 or any similar competitive proposal process adopted by the agent.
Sec. 151. Section 34-222, Arizona Revised Statutes, is amended to read:
34-222. Surety bond required; suit on bond; limitations
A. Except where specifically exempted by statute, before any contract is executed with any person for the construction, alteration, or repair of any public building, a public work or improvement of any county, city or town, or officer, board or commission thereof, and irrigation, power, electrical, drainage, flood protection and flood control districts, tax levying public improvement districts, and county or city improvement districts, the person shall furnish to the agent entering into such contract the following bonds which that shall become binding upon on the award of the contract to such person, who, for purposes of this article, means "contractor":
1. A performance bond in an amount equal to the full contract amount conditioned upon on the faithful performance of the contract in accordance with plans, specifications and conditions thereof. Such bond shall be solely for the protection of the public body awarding the contract.
2. A payment bond in an amount equal to the full contract amount solely for the protection of claimants supplying labor or materials to the contractor or his subcontractors in the prosecution of the work provided for in such contract.
B. Each such bond shall include a provision allowing the prevailing party in a suit on such bond to recover as a part of the judgment such reasonable attorneys' fees as may be fixed by a judge of the court.
C. Notwithstanding any other statute, each such bond shall be executed solely by a surety company or companies holding a certificate of authority to transact surety business in this state issued by the director of the department of insurance and financial institutions pursuant to title 20, chapter 2, article 1. The bonds shall not be executed by an individual surety or sureties, even if the requirements of section 7‑101 are satisfied. The bonds shall be payable to the public body concerned.
D. Such bonds shall be filed in the office of the department, board, commission, institution, agency or other contracting body awarding the contract.
E. It shall be illegal for the invitation for bids, or any person acting or purporting to act on behalf of the contracting body, to require that such bonds be furnished by a particular surety company, or through a particular agent or broker.
F. The conditions and provisions in the payment bond regarding the surety's obligations shall follow the following form:
Now, therefore, the condition of this obligation is such, that if the principal promptly pays all monies due to all persons supplying labor or materials to the principal or the principal's subcontractors in the prosecution of the work provided for in the contract, this obligation is void. Otherwise it remains in full force and effect.
Provided, however, that this bond is executed pursuant to the provisions of title 34, chapter 2, article 2, Arizona Revised Statutes, and all liabilities on this bond shall be determined in accordance with the provisions, conditions and limitations of title 34, chapter 2, article 2, Arizona Revised Statutes, to the same extent as if they were copied at length in this agreement.
The prevailing party in a suit on this bond shall recover as a part of the judgment reasonable attorney fees that may be fixed by a judge of the court.
G. The conditions and provisions in the performance bond regarding the surety's obligations shall follow the following form:
Now, therefore, the condition of this obligation is such, that if the principal faithfully performs and fulfills all of the undertakings, covenants, terms, conditions and agreements of the contract during the original term of the contract and any extension of the contract, with or without notice to the surety, and during the life of any guaranty required under the contract, and also performs and fulfills all of the undertakings, covenants, terms, conditions and agreements of all duly authorized modifications of the contract that may hereafter be made, notice of which modifications to the surety being hereby waived, the above obligation is void. Otherwise it remains in full force and effect.
Provided, however, that this bond is executed pursuant to the provisions of title 34, chapter 2, article 2, Arizona Revised Statutes, and all liabilities on this bond shall be determined in accordance with the provisions of title 34, chapter 2, article 2, Arizona Revised Statutes, to the extent as if it were copied at length in this agreement.
The prevailing party in a suit on this bond shall recover as part of the judgment reasonable attorney fees that may be fixed by a judge of the court.
H. If the prime contract or specifications require any persons supplying labor or materials in the prosecution of the work to furnish payment or performance bonds, these bonds shall be executed solely by a surety company or companies holding a certificate of authority to transact surety business in this state issued by the director of the department of insurance and financial institutions pursuant to title 20, chapter 2, article 1. Notwithstanding the provisions of any other statute, the bonds shall not be executed by an individual surety or sureties, even if the requirements of section 7‑101 are satisfied.
I. All bonds given by a contractor and surety, pursuant to the provisions of this article, regardless of their actual form, will be deemed by law to be the form required and set forth in this article and no other.
Sec. 152. Section 34-608, Arizona Revised Statutes, is amended to read:
34-608. Bid security for design‑build and job‑order‑contracting construction services
A. As a guarantee that the contractor will enter into a contract, bid security is required for all design‑build construction services and all job‑order‑contracting construction services awarded by an agent by competitive sealed proposals pursuant to section 34‑603, subsection F or 34‑604, subsection F if the agent estimates that the budget for construction, excluding the cost of any finance services, maintenance services, operations services, design services, preconstruction services or other related services, will be more than the amount prescribed in section 41‑2535, subsection D. Each proposal for design‑build construction services or job‑order‑contracting construction services shall be accompanied by a certified check, cashier's check or surety bond. The bid security amount for design‑build construction services shall be an amount equal to ten per cent percent of the agent's budget for construction, excluding any finance services, maintenance services, operations services, design services, preconstruction services or other related services, for the project as stated in the request for proposals. The bid security amount for job‑order‑contracting construction services shall be the amount determined by the agent and stated in the request for proposals and shall not be more than ten per cent percent of the agent's reasonably estimated budget for construction that the agent believes is likely to actually be done during the first year of the job‑order‑contracting contract, excluding any finance services, maintenance services, operations services, design services, preconstruction services or other related services that are included in the contract.
B. The agent shall return the certified check, cashier's check or surety bond to the contractors whose proposals are not accepted and to the successful contractor on the execution of satisfactory payment and performance bonds, insurance and the contract as provided in this chapter.
C. Notwithstanding any other statute, the surety bond shall be executed solely by a surety company or companies holding a certificate of authority to transact surety business in this state issued by the director of the department of insurance and financial institutions pursuant to title 20, chapter 2, article 1. The bond shall not be executed by an individual surety or sureties, even if the requirements of section 7‑101 are satisfied.
D. The conditions and provisions of the surety bond regarding the surety's obligations shall follow the following form:
Now, therefore, if the obligee accepts the proposal of the principal and the principal enters into a contract with the obligee in accordance with the terms of the proposal and gives the bonds and certificates of insurance as specified in the standard specifications with good and sufficient surety for the faithful performance of the contract and for the prompt payment of labor and materials furnished in the prosecution of the contract, or in the event of the failure of the principal to enter into the contract and give the bonds and certificates of insurance, if the principal pays to the obligee the difference not to exceed the penalty of the bond between the amount specified in the proposal and any larger amount for which the obligee may contract in good faith with another party to perform the work covered by the proposal, this obligation is void. Otherwise it remains in full force and effect. Provided, however, that this bond is executed pursuant to section 34-608, Arizona Revised Statutes, and all liabilities on this bond shall be determined in accordance with the provisions of the section to the extent as if it were copied at length in this agreement.
E. If the request for proposals requires security, noncompliance requires that the agent reject the proposal for noncompliance with the security requirement, unless the agent determines that the bid fails to comply in a nonsubstantial manner with the security requirements.
F. After the agent opens the proposals, the proposals are irrevocable for the period specified in the request for proposals, except as provided in section 34‑603, subsection F or section 34-604, subsection F. If a proposer is permitted allowed to withdraw its proposal before award, no action may be had against the proposer or the bid security.
G. All bonds given by a contractor and surety pursuant to this section, regardless of their actual form, are deemed by law to be the form required and set forth in this section.
Sec. 153. Section 34-610, Arizona Revised Statutes, is amended to read:
34-610. Construction‑manager‑at‑risk, design‑build and job‑order‑contracting construction services surety bond required; suit on bond; limitations
A. Except if specifically exempted by statute, before an agent executes any contract with any person or firm for construction‑manager‑at‑risk construction services, design‑build construction services or job‑order‑contracting construction services, the person or firm shall furnish to the agent entering into the contract the following bonds, except that the bonds shall be furnished only on and at the same time as execution of a contract or an amendment to a contract that commits the contractor to provide construction for a fixed price, a guaranteed maximum price or any other fixed amount within a designated time frame:
1. A performance bond in an amount equal to the full contract amount conditioned on the faithful performance of the contract in accordance with plans, specifications and conditions of the contract, except that:
(a) For job‑order‑contracting construction services, the performance bond shall cover the full amount of construction under the job‑order‑contracting construction services contract, shall not include any design services, preconstruction services, finance services, maintenance services, operations services or other related services included in the contract, may be a single bond for the full term of the contract, a separate bond for each year of a multiyear contract or a separate bond for each job order, as determined by the agent, and, if a single bond for the full term of the contract or a separate bond for each year of a multiyear contract, shall initially be based on the agent's reasonable estimate of the amount of construction that the agent believes is likely to actually be done during the full term of the contract or during the particular year of a multiyear contract, as applicable.
(b) For construction‑manager‑at‑risk construction services and design‑build construction services, the amount of the performance bond shall be the price of construction and shall not include the cost of any design services, preconstruction services, finance services, maintenance services, operations services or any other related services included in the contract. The performance bond shall be solely for the protection of the public body awarding the contract.
2. A payment bond in an amount equal to the full contract amount solely for the protection of claimants supplying labor or materials to the contractor or the contractor's subcontractors in the prosecution of the construction and not for the protection of persons providing any design services, preconstruction services, finance services, maintenance services, operations services or other related services provided for in the contract, except that:
(a) For job‑order‑contracting construction services, the payment bond shall cover the full amount of construction under the job‑order‑contracting construction services contract, shall not include any design services, preconstruction services, finance services, maintenance services, operations services or other related services included in the contract, may be a single bond for the full term of the contract, a separate bond for each year of a multiyear contract or a separate bond for each job order, as determined by the agent, and, if a single bond for the full term of the contract or a separate bond for each year of a multiyear contract, shall initially be based on the agent's reasonable estimate of the amount of construction that the agent believes is likely to actually be done during the full term of the contract or during the particular year of a multiyear contract, as applicable.
(b) For construction‑manager‑at‑risk construction services and design‑build construction services, the amount of the payment bond shall be the price of construction and shall not include the cost of any design services, preconstruction services, finance services, maintenance services, operations services or any other related services included in the contract.
B. Each bond shall include a provision allowing the prevailing party in a suit on the bond to recover as a part of the judgment any reasonable attorney fees as may be fixed by the court.
C. Notwithstanding any other statute, each bond shall be executed solely by a surety company or companies holding a certificate of authority to transact surety business in this state issued by the director of the department of insurance and financial institutions pursuant to title 20, chapter 2, article 1. The bonds shall not be executed by an individual surety or sureties, even if the requirements of section 7‑101 are satisfied. The bonds shall be payable to the public body concerned.
D. The bonds shall be filed in the office of the department, board, commission, institution, agency or other contracting body awarding the contract.
E. It is illegal for a request for qualifications or a request for proposals pursuant to section 34‑603 or 34-604, or any person acting or purporting to act on behalf of the contracting body, to require that bonds be furnished by a particular surety company, or through a particular agent or broker.
F. The conditions and provisions in the payment bond regarding the surety's obligations shall follow the following form:
Now, therefore, the condition of this obligation is that if the principal promptly pays all monies due to all persons supplying labor or materials to the principal or the principal's subcontractors in the prosecution of the construction provided for in the contract, this obligation is void. Otherwise it remains in full force and effect. Provided, however, that this bond is executed pursuant to title 34, chapter 6, Arizona Revised Statutes, and all liabilities on this bond shall be determined in accordance with the provisions, conditions and limitations of title 34, chapter 6, Arizona Revised Statutes, to the same extent as if they were copied at length in this agreement. The prevailing party in a suit on this bond shall recover as a part of the judgment reasonable attorney fees that may be fixed by the court.
G. The conditions and provisions in the performance bond regarding the surety's obligations shall follow the following form:
Now, therefore, the condition of this obligation is that if the principal faithfully performs and fulfills all of the undertakings, covenants, terms, conditions and agreements of the contract during the original term of the contract and any extension of the contract, with or without notice to the surety, and during the life of any guaranty required under the contract, and also performs and fulfills all of the undertakings, covenants, terms, conditions and agreements of all duly authorized modifications of the contract that may hereafter be made, notice of which modifications to the surety being hereby waived, the above obligation is void. Otherwise it remains in full force and effect. Provided, however, that this bond is executed pursuant to title 34, chapter 6, Arizona Revised Statutes, and all liabilities on this bond shall be determined in accordance with title 34, chapter 6, Arizona Revised Statutes, to the extent as if it were copied at length in this agreement. The prevailing party in a suit on this bond shall recover as part of the judgment reasonable attorney fees that may be fixed by the court. The performance under this bond is limited to the construction to be performed under the contract and does not include any design services, preconstruction services, finance services, maintenance services, operations services or any other related services included in the contract.
H. If the prime contract or specifications require any persons supplying labor or materials in the prosecution of the work to furnish payment or performance bonds, these bonds shall be executed solely by a surety company or companies holding a certificate of authority to transact surety business in this state issued by the director of the department of insurance and financial institutions pursuant to title 20, chapter 2, article 1. Notwithstanding any other statute, the bonds shall not be executed by an individual surety or sureties, even if the requirements of section 7‑101 are satisfied.
I. All bonds given by a contractor and surety pursuant to this section, regardless of their actual form, are deemed by law to be in the form required and set forth in this section.
Sec. 154. Section 35-457, Arizona Revised Statutes, is amended to read:
35-457. Sale of bonds; bids; forfeiture of deposit; definitions
A. Any or all of the bonds may be sold at public sale or through an online bidding process in a manner prescribed by the governing body or board that includes the following:
1. If sold by public sale before the sale of any bonds the governing body or board shall meet and enter on its record an order directing the sale of the bonds and the date and hour of the sale, and cause a copy of the order to be published at least once a week for two successive weeks in cities having a population of fifteen thousand or more persons, and once a week for four successive weeks in all other political subdivisions before the sale in one or more designated daily or weekly newspapers, together with a notice that sealed proposals will be received for purchase of the bonds on the date and hour named in the order.
2. If sold through an online bidding process, bids for the bonds that are entered into the system may be concealed until a specified time or disclosed in the online bidding process, may be subject to improvement in favor of the political subdivision before a specified time and may be for an entire issue of bonds or specified maturities according to the manner, terms and notice provisions ordered by the governing body.
B. If the bonds are sold by public sale or through an online bidding process, all proposals shall be received on the date and hour or in the manner stated in the order and the governing body or board shall award the bonds to the highest and most responsible bidder. The successful bidder shall provide a bid guarantee for not less than two percent of the total par value of the bonds within twenty‑four hours after the date and time the bid is awarded. The bid guarantee may be in the form of a certified check or a bond issued by a surety company licensed by the department of insurance and financial institutions to do business in this state. The governing body or board may reject any and all bids. If the successful bidder does not carry out the terms of the proposal to purchase the bonds, the bid guarantee shall be forfeited as stipulated and liquidated damages.
C. Notwithstanding any other provision of this section, bonds may be sold by negotiated sale on terms the governing body deems to be the best then available and may bear interest payable at such times as shall be determined by the governing body.
D. The bonds may be sold below, at or above par. If an issue of bonds is sold below par, the aggregate amount of discount plus interest to be paid on the bonds must not exceed the amount of interest that would be payable on the bonds over the maturity schedule prescribed by the governing body at the maximum rate set out in the resolution calling the election at which the bonds were voted. The amount of net premium associated with a bond issue may be used only for one or more of the following:
1. To pay costs incurred in issuing the bonds, subject to section 35‑452, subsection C.
2. As a deposit in a debt service fund and used only to pay interest on the bonds.
3. For any other purpose, if the political subdivision has voter authorization and available capacity under its debt limitations and the amount of net premium used for such purpose will reduce in an equal amount both:
(a) The available aggregate indebtedness capacity of the political subdivision under the statutes and constitution of this state.
(b) The principal amount authorized at the election for the political subdivision from which the issue of bonds is being sold.
E. Any net premium used as provided in subsection D, paragraph 3 of this section shall be amortized for all debt limitation purposes on a pro rata basis each year by multiplying the net premium used by a percentage equal to the percentage of the total principal amount of the bond issue that matures in that year.
F. For the purposes of this section:
1. "Net premium" means the difference between the par amount of the bond issue and the bond issue price determined pursuant to United States treasury regulations.
2. "Online bidding process" means a procurement process in which the governing body receives bids electronically over the internet in a real‑time, competitive bidding event.
Sec. 155. Section 35-762, Arizona Revised Statutes, is amended to read:
35-762. Reviewing entities; approval of developments; coordination; definitions
A. Any reviewing entity exercising its statutory duties in connection with a project may agree with any other reviewing entity to share information, coordinate review schedules or jointly conduct reviews.
B. A reviewing entity, in its discretion, may cooperate in the review of a project financing by adopting in whole or in part substantially similar review work performed on the project financing by another reviewing entity that is also charged with review of the project financing if the review work completed by the other entity meets the standards of the reviewing entity.
C. A reviewing entity that adopts in whole or in part review work performed on the project financing by another reviewing entity is deemed for all purposes to have complied with its review responsibilities as if the review work had been performed by the reviewing entity itself.
D. For the purposes of this section:
1. "Project" means a nursing home, rest home, skilled nursing facility, senior residential facility providing on-site medical and support services or life care facility owned and operated by a nonprofit organization that is exempt from taxation under section 501(c)(3) of the United States internal revenue code that is seeking debt financing pursuant to this chapter or a permit pursuant to title 20, chapter 8.
2. "Reviewing entity" means an industrial development authority formed pursuant to this chapter, a governing body approving the formation of an industrial development authority or the department of insurance and financial institutions.
Sec. 156. Section 36-2905, Arizona Revised Statutes, is amended to read:
36-2905. Removal of medicaid special exemption for payments to contractors; civil penalty
A. Notwithstanding any other law, beginning on October 1, 2003, each contractor shall pay to the director of the department of insurance and financial institutions a tax equal to two percent of the total capitation, including reinsurance, and any other reimbursement paid to the contractor by the administration for persons eligible pursuant to section 36‑2901, paragraph 6, subdivisions (a) and (g) and article 4 of this chapter. The tax shall be paid in four payments pursuant to subsection C of this section and deposited in the state general fund pursuant to sections 35‑146 and 35‑147.
B. The contractor shall not deduct any disallowance or penalty imposed by the administration pursuant to this chapter from the financial information submitted to the director of the department of insurance and financial institutions.
C. Each contractor shall file the estimated tax and documentation with the director of the department of insurance and financial institutions on a form prescribed by the director of the department of insurance and financial institutions to pay the estimated tax. A contractor shall make estimated tax payments to the director of the department of insurance and financial institutions for deposit in the state general fund pursuant to sections 35‑146 and 35‑147. The tax payments are due on or before September 15, December 15, March 15 and June 15 of each year. The amount of the payments shall be an estimate of the tax due for the quarter that ends in the month that payment is due.
D. On or before April 1, 2004 and annually on or before April 1 thereafter, the director of the department of insurance and financial institutions shall use data provided by the administration to reconcile the amount paid by each contractor pursuant to this section with the actual amount of title XIX and title XXI reimbursement made by the administration to the contractor in the preceding calendar year. If there is a discrepancy in the two amounts, the director of the department of insurance and financial institutions shall notify the contractor of the difference, provide a notice of right of appeal and bill the contractor for the unpaid amount of the premium tax or, if there is an overpayment, the director of the department of insurance and financial institutions shall either refund the amount of the overpayment to the contractor or issue a credit for the amount of the overpayment that the contractor can apply against future tax obligations prescribed by this section.
E. A contractor that fails to file an estimated payment or pay an unpaid premium tax as prescribed by this section is subject to a civil penalty equal to the greater of twenty‑five dollars $25 or five percent of the amount due and is subject to interest on the amount due at the rate of one percent per month from the date the amount was due.
F. From and after December 31, 2017, the director of the department of insurance and financial institutions may require that reports and payments under this section be submitted electronically. If the director requires electronic submission, the director shall include on the department of insurance's insurance and financial institution's official website a list of one or more acceptable methods by which a contractor must submit reports and payments.
Sec. 157. Section 36-2906.01, Arizona Revised Statutes, is amended to read:
36-2906.01. Qualified commercial carriers; administration; contracts
A. Entities, including insurers as defined in section 20‑104, hospital, medical, dental and optometric service corporations as defined in title 20, chapter 4, article 3 and health care services organizations as defined in section 20‑1051, are prohibited from contracting with the administration as a system contractor unless the entity establishes an affiliated corporation whose only authorized business is to provide services or coverage pursuant to a contract with the administration to persons defined as eligible in section 36‑2901, paragraph 6, subdivisions (a), (f) and (g).
B. If there is an insufficient number of, or an inadequate member capacity in, contracts awarded to contractors, the director may request that the director of the department of insurance and financial institutions grant a temporary exemption from the requirements of subsection A of this section for an entity regulated by the department of insurance and financial institutions, and otherwise qualified to be a system health plan, in order for that entity to enter into an arrangement with the administration to provide services to persons defined as eligible in section 36‑2901, paragraph 6, subdivisions (a), (f) and (g). On a written request from the administration, the director of the department of insurance and financial institutions may grant a one‑time onetime exemption to an entity, for a period not to exceed one year. During the temporary exemption, the entity must comply with all applicable provisions of both this article and the applicable chapter or article of title 20 under which the entity is licensed to operate.
C. With respect to entities that have been granted an exemption pursuant to subsection B of this section, the provisions of section 36‑2903, subsection M, relating to the direct operation of a provider, shall not apply. If the director determines that the operations of the entity would otherwise meet the circumstances specified in contract under which the administration could operate the entity directly or that the public health, safety or welfare require emergency action relative to the entity, the director shall notify the director of the department of insurance and financial institutions and may request that the department of insurance and financial institutions take appropriate actions.
Sec. 158. Section 36-2944.01, Arizona Revised Statutes, is amended to read:
36-2944.01. Removal of medicaid special exemption for payments to program contractors; civil penalty
A. Notwithstanding any other law, beginning on October 1, 2003, each program contractor shall pay to the director of the department of insurance and financial institutions a tax equal to two percent of the total capitation, including reinsurance, and any other reimbursement paid to the program contractor by the administration for persons eligible pursuant to section 36‑2931, paragraph 5. The tax shall be paid in four payments pursuant to subsection C of this section and deposited in the state general fund pursuant to sections 35‑146 and 35‑147.
B. The program contractor shall not deduct any disallowance or penalty imposed by the administration pursuant to this chapter from the financial information submitted to the director of the department of insurance and financial institutions.
C. Each program contractor shall file the estimated tax and documentation with the director of the department of insurance and financial institutions on a form prescribed by the director of the department of insurance and financial institutions. A program contractor shall make estimated tax payments to the director of the department of insurance and financial institutions for deposit in the state general fund pursuant to sections 35‑146 and 35‑147. The tax payments are due on or before September 15, December 15, March 15 and June 15 of each year. The amount of the payments shall be an estimate of the tax due for the quarter that ends in the month that payment is due.
D. On or before April 1, 2004 and annually on or before April 1 thereafter, the director of the department of insurance and financial institutions shall use data provided by the administration to reconcile the amount paid by each program contractor pursuant to this section with the actual amount of title XIX reimbursement made by the administration to the program contractor in the preceding calendar year. If there is a discrepancy in the two amounts, the director of the department of insurance and financial institutions shall notify the program contractor of the difference, provide a notice of right of appeal and bill the program contractor for the unpaid amount of the premium tax or, if there is an overpayment, the director of the department of insurance and financial institutions shall either refund the amount of the overpayment to the contractor or issue a credit for the amount of the overpayment that the program contractor can apply against future tax obligations prescribed by this section.
E. A contractor that fails to file an estimated payment or pay an unpaid premium tax as prescribed by this section is subject to a civil penalty equal to the greater of twenty‑five dollars $25 or five percent of the amount due and is subject to interest on the amount due at the rate of one percent per month from the date the amount was due.
F. From and after December 31, 2017, the director of the department of insurance and financial institutions may require that reports and payments under this section be submitted electronically. If the director requires electronic submission, the director shall include on the department of insurance's insurance and financial institution's official website a list of one or more acceptable methods by which a contractor must submit reports and payments.
Sec. 159. Section 36-2999.51, Arizona Revised Statutes, is amended to read:
36-2999.51. Definitions
In this article, unless the context otherwise requires:
1. "Continuing care retirement community" means an entity that provides nursing facility services and assisted living or independent living services on a contiguous campus that is either registered as a life care facility with the department of insurance and financial institutions or has assisted living and independent living beds in the aggregate that equal at least twice the number of nursing facility beds. For the purposes of this paragraph, "contiguous" means land that adjoins or touches the other property held by the same or a related organization and land divided by a public road.
2. "Fiscal year" means the period beginning on October 1 and ending on September 30.
3. "Medicare resident days" means resident days that are funded by the medicare program, a medicare advantage or special needs plan or the medicare hospice program.
4. "Net patient service revenue" means gross inpatient revenues from services that are provided to nursing facility patients minus reductions from gross inpatient revenue. For the purposes of this paragraph, inpatient revenues from services do not include nonpatient care revenues such as beauty and barber income, vending income, interest and contributions, revenues from the sale of meals and all outpatient revenues.
5. "Nursing facility" means a health care institution that provides inpatient beds or resident beds and nursing services to persons who need nursing services on a continuing basis but who do not require hospital care or direct daily care from a physician. Nursing facility does not include the Arizona veterans' homes.
6. "Reductions from gross inpatient revenue" includes bad debts, contractual adjustments, uncompensated care, administrative, courtesy and policy discounts, adjustments and other similar revenue deductions.
7. "Resident day" means a calendar day of care provided to a nursing facility resident, including the day of admission and excluding the day of discharge. Resident day includes a day on which a bed is held for a patient and for which the facility receives compensation for holding the bed.
8. "Upper payment limit" means the limitation established pursuant to 42 Code of Federal Regulations section 447.272 that disallows federal matching funds if a state medicaid agency pays certain classes of nursing facilities an aggregate amount for services that would exceed the amount that would be paid for the same services furnished by that class of nursing facilities under medicare payment principles.
Sec. 160. Section 38-871, Arizona Revised Statutes, as amended by Laws 2019, chapter 252, section 48, is amended to read:
38-871. Deferred compensation governing committee; members; powers and duties
A. The governing committee for deferred compensation plans is established that consists of the following seven members:
1. Three members who are appointed by the governor and who are either of the following:
(a) Individuals who have an account balance in a deferred compensation plan that is overseen by the governing committee. These individuals may be contributing or noncontributing participants in a deferred compensation plan and may be retired or nonretired.
(b) Members of the public who are not deferred compensation plan participants and who have at least ten years of relevant experience in either finance, investment management, pension plans or retirement plans.
2. The director of the department of administration or the director's designee.
3. The superintendent of the financial institutions division of the department of insurance and financial institutions or the superintendent's designee.
4. The director of the department of insurance and financial institutions or the director's designee.
5. The director of the Arizona state retirement system or the director's designee.
B. Governing committee members are subject to the conflict of interest provisions of chapter 3, article 8 of this title.
C. The governing committee may:
1. Investigate and approve deferred compensation plans that give state employees income tax benefits authorized by title 26, United States Code Annotated.
2. In carrying out the purposes of this article, enter into agreements with companies with demonstrable expertise in the areas encompassed by this article.
3. Adopt rules.
D. The governing committee shall:
1. Arrange for consolidated billing and efficient administrative services so that any plans approved operate without cost or contribution from this state except for the incidental expenses of statutorily required administrative duties and the administration of payroll salary deduction or reduction and remittance of the monies to the administrator, trustee or custodian of the plan or plans.
2. Meet quarterly or more frequently as the committee deems necessary.
3. Arrange for an annual financial audit of the plans.
4. Arrange for a performance review of the plans or participation in benchmarking surveys or studies at least every five years.
Sec. 161. Section 41-621, Arizona Revised Statutes, is amended to read:
41-621. Purchase of insurance; coverage; limitations; exclusions; definitions
A. The department of administration shall obtain insurance against loss, to the extent it is determined necessary and in the best interests of the this state as provided in subsection F of this section, on the following:
1. All state owned state-owned buildings, including those of the universities, excluding buildings of community colleges, whether financed in whole or in part by state monies or buildings in which the state has an insurable interest as determined by the department of administration.
2. Contents in any buildings owned, leased or rented, in whole or in part, by or to the this state, excluding buildings of community colleges, and reported to the department of administration.
3. The This state and its departments, agencies, boards and commissions and all officers, agents and employees thereof and such others as may be necessary to accomplish the functions or business of the state and its departments, agencies, boards and commissions against liability for acts or omissions of any nature while acting in authorized governmental or proprietary capacities and in the course and scope of employment or authorization except as prescribed by this chapter.
4. All personal property reported to the department of administration, including vehicles and aircraft owned by the state and its departments, agencies, boards and commissions and all non‑owned nonowned personal property which that is under the clear responsibility of this state because of written leases or other written agreements.
5. The This state and its departments, agencies, boards and commissions against casualty, use and occupancy and liability losses of every nature except as prescribed by this chapter.
6. Workers' compensation and employers' liability insurance.
7. Design and construction of buildings, roads, environmental remediations and other construction projects.
8. Other exposures to loss where insurance may be required to protect this state and its departments, agencies, boards and commissions and all officers, agents and employees acting in the course and scope of employment or authorization except as prescribed by this chapter.
B. To the extent it is determined necessary and in the best interests of the this state, the department of administration shall obtain insurance or provide for state self‑insurance against property damage caused by clients and liability coverage resulting from the direct or incidental care of clients participating in programs of the this state and its departments, agencies, boards or commissions relating to custodial care. The insurable programs shall include foster care, programs for the persons with developmental disabilities, an independent living program pursuant to section 8‑521 and respite‑sitter service programs. The department shall obtain insurance or provide for state self‑insurance pursuant to this subsection to protect the clients participating in these programs and individual providers of these program services on behalf of the this state and its departments, agencies, boards or commissions. The insurance provided under this subsection does not include medical or workers' compensation coverage for providers. The department may include in its annual budget request pursuant to section 41‑622, subsection D a charge for the insurance or self‑insurance provided in this subsection. To assist in carrying out the provisions of this subsection, the department shall establish a seven member seven-member advisory board in accordance with the following provisions:
1. The board shall consist of three members appointed by the director of the department of administration, at least one of whom shall be a foster parent, one member appointed by the director of the department of economic security, one member appointed by the director of the department of child safety, one member appointed by the director of the state department of corrections, and one member appointed by the administrative director of the courts.
2. The board shall elect a chairman from among its members.
3. The board shall hold at least two meetings a year or shall meet at the call of the chairman.
4. Board members shall serve for three year three-year terms.
5. Board members are not eligible to receive compensation but are eligible for reimbursement of expenses pursuant to title 38, chapter 4, article 2.
6. The board shall provide advice to the department regarding coverage and administration of the provisions of this subsection and shall assist the department in coordinating its activities pursuant to this subsection with state departments, agencies, boards and commissions.
C. The department of administration may obtain insurance against loss, to the extent it is determined necessary and in the best interests of the this state as provided in subsection F of this section for the professional liability of individual physicians and psychiatrists who provide services under a contract with the state department of corrections. Coverage is limited to acts and omissions committed inside a state department of corrections facility while in the performance of the contract and to individual physicians and psychiatrists who demonstrate to the satisfaction of the state department of corrections that they cannot otherwise obtain professional liability coverage for the services required by the contract. The director of the department of administration may impose on the state department of corrections a deductible for each loss that arises out of a professional liability claim pursuant to this subsection. Any changes in deductible amounts established by the director shall be subject to review by the joint legislative budget committee.
D. The department of administration may obtain property, liability, disability or workers' compensation insurance, self‑insure or develop risk retention pools to provide for payment of property loss or casualty claims or disability insurance claims against contractors of this state with the approval of the joint legislative budget committee. With respect to insurance, self‑insurance or risk retention pools for contractors licensed and contracted to do work for this state, the coverage afforded applies with respect to the conduct of the business entity of that contractor. The pool is available to all contractors regardless of the amount that the state contracted state-contracted work bears in relation to the amount of nonstate contracted work. The contractor shall be terminated from the pool if the contractor ceases to be a state contractor.
E. The department of administration may determine, in the best interests of the this state, that state self‑insurance is necessary or desirable and, if that decision is made, shall provide for state self‑insurance for losses arising out of state property, liability or workers' compensation claims prescribed by subsection A of this section. If the department of administration provides state self‑insurance, such coverage shall be excess over any other valid and collectible insurance. The director of the department of administration may impose on state departments, agencies, boards and commissions a deductible for each loss that arises out of a property, liability or workers' compensation loss pursuant to this subsection. Any changes in deductible amounts established by the director shall be subject to review by the joint legislative budget committee.
F. In carrying out the provisions of this chapter, the department of administration shall establish and provide the state with some or all of the necessary risk management services, or shall contract for risk management services pursuant to chapter 23 of this title, as the director of the department of administration deems necessary in the best interest of the state, and may, in addition to other specifications of such coverage as deemed necessary, may determine self‑insurance to be established. The provisions of Chapter 23 of this title shall does not apply to the department of administration's procurement of insurance to cover losses arising out of state property or liability claims prescribed in subsections A and D of this section or excess loss insurance for the state's workers' compensation liability for individual or aggregate claims, or both, in such amounts and at such primary retention levels as the department of administration deems in the best interest of the this state. In purchasing insurance to cover losses arising out of state property or liability claims prescribed by subsection A of this section, the department of administration is not subject to the provisions of title 20, chapter 2, article 5.
G. No A successful bidder for risk management services pursuant to this section shall be is not entitled to receive directly or indirectly any sales commission, contingent commission, excess profit commission, or other commissions, or anything of value, as payment for the risk management services except those amounts received directly from this state as payment for the risk management services.
H. The department of administration shall pay for purchased risk management services, premiums for insurance on state property and state liability and workers' compensation pursuant to the provisions of this chapter.
I. A state officer, agent or employee acting in good faith, without wanton disregard of his statutory duties and under the authority of an enactment that is subsequently declared to be unconstitutional, invalid or inapplicable, is not personally liable for an injury or damage caused thereby except to the extent that he the officer, agent or employee would have been personally liable had the enactment been constitutional, valid and applicable.
J. A state officer, agent or employee, except as otherwise provided by statute, is not personally liable for an injury or damage resulting from his an act or omission in a public official capacity where the act or omission was the result of the exercise of the discretion vested in him the officer, agent or employee and if the exercise of the discretion was done in good faith without wanton disregard of his statutory duties.
K. The This state and its departments, agencies, boards and commissions are immune from liability for losses arising out of a judgment for willful wilful and wanton conduct resulting in punitive or exemplary damages.
L. The following exclusions shall apply to subsections A, B and E of this section:
1. Losses against this state and its departments, agencies, boards and commissions that arise out of and are directly attributable to an act or omission determined by a court to be a felony by a person who is provided coverage pursuant to this article unless the state knew of the person's propensity for that action, except those acts arising out of the operation or use of a motor vehicle.
2. Losses arising out of contractual breaches.
M. If self‑insurance coverage is determined to exist, the attorney general, with funds provided by the department of administration, shall provide for the defense, either through his the attorney general's office or by appointment of outside legal counsel, of the this state and its departments, agencies, boards and commissions and all officers, agents and employees thereof and such others as are insured by the department of administration for or on account of their acts or omissions covered pursuant to this chapter. All state departments, agencies, boards and commissions, all officers, agents and employees thereof and such others as are insured by the department of administration shall cooperate fully with the attorney general and department of administration in the defense of claims arising pursuant to this chapter.
N. A claim for liability damages made pursuant to this chapter may be settled and payment made up to the amount of twenty‑five thousand dollars $25,000 or such higher limit as may be established by the joint legislative budget committee with the approval of the director of the department of administration. A claim over the amount of twenty‑five thousand dollars $25,000 up to fifty thousand dollars $50,000 or such higher limit as may be established by the joint legislative budget committee may be settled and payment made with the approval of the director of the department of administration and the attorney general. Any claim over the amount of fifty thousand dollars $50,000 or such higher limit as may be established by the joint legislative budget committee may be settled and payment made with the approval of the director of the department of administration, the attorney general and the joint legislative budget committee. If it is in the best interest of this state, the joint legislative budget committee may establish higher settlement limits. Any settlements involving amounts in excess of fifty thousand dollars $50,000 or such higher limit as may be established by the joint legislative budget committee shall be approved by the department of administration, the attorney general and the joint legislative budget committee pursuant to the authority granted. The settlement of liability claims shall be solely the authority of the department of administration, the attorney general and the joint legislative budget committee. No state department, agency, board or commission or any officer, agent or employee of this state may voluntarily make any payment, assume any obligation, incur any expense or maintain the individual right of consent for liability claims made pursuant to this chapter except as provided by this section.
O. Neither the authority provided by this section to insure, nor the exercise of such authority, shall:
1. Impose any liability on this state or the departments, agencies, boards and commissions or any officers, agents and employees of this state unless such liability otherwise exists.
2. Impair any defense this state or the departments, agencies, boards and commissions or any officers, agents and employees of this state otherwise may have.
P. The department of administration shall pay, on behalf of any state officer, agent or employee, any damages, excluding punitive damages, for which the officer, agent or employee becomes legally responsible if the acts or omissions resulting in liability were within the officer's, agent's or employee's course and scope of employment. The department of administration may pay for all damages however designated which that the officer, agent or employee becomes legally responsible for if the acts or omissions resulting in liability are determined by the director of the department of administration to be within the person's course and scope of employment.
Q. The department of administration shall adopt such rules as are deemed necessary to carry out, implement and limit the provisions of this chapter.
R. For the purposes of determining whether a state officer, agent or employee is entitled to coverage under this chapter, "within the course and scope of employment or authorization" means:
1. The acts or omissions that the state officer, agent or employee is employed or authorized to perform.
2. The acts or omissions of the state officer, agent or employee occur substantially within the authorized time and space limit.
3. The acts or omissions are activated at least in part by a purpose to serve this state or its departments, agencies, boards or commissions.
S. To the extent it is determined necessary and in the best interest of this state, the department of administration may obtain design and construction insurance or provide for self‑insurance against property damage caused by this state, its departments, agencies, boards and commissions and all officers and employees of this state in connection with the construction of public works projects. Workers' compensation liability insurance may be purchased to cover both general contractors and subcontractors doing work on a specific contracted work site worksite. The department may include in its annual budget request, pursuant to section 41‑622, subsection D, the cost of the insurance purchased or provided. In connection with the construction of public works projects, the department of administration may also use an owner‑controlled or wrap‑up insurance program if all of the following conditions are met:
1. The total cost of the project is over fifty million dollars $50,000,000.
2. The program maintains completed operations coverage for a term during which coverage is reasonably commercially available as determined by the director of the department of insurance and financial institutions, but in no event for less than three years.
3. Bid specifications clearly specify for all bidders the insurance coverage provided under the program and the minimum safety requirements that shall be met.
4. The program does not prohibit a contractor or subcontractor from purchasing any additional insurance coverage that a contractor believes is necessary for protection from any liability arising out of the contract. The cost of the additional insurance shall not be passed through to this state on a contract bid.
5. The program does not include surety insurance.
T. The state may purchase an owner‑controlled or wrap‑up policy that has a deductible or self‑insured retention as long as the deductible or self‑insured retention does not exceed one million dollars $1,000,000.
U. For the purposes of subsections S and T of this section:
1. "Owner‑controlled or wrap‑up insurance" means a series of insurance policies issued to cover this state and all of the contractors, subcontractors, architects and engineers on a specified contracted work site worksite for purposes of general liability, property damage and workers' compensation.
2. "Specific contracted work site worksite" means construction being performed at one site or a series of contiguous sites separated only by a street, roadway, waterway or railroad right‑of‑way, or along a continuous system for the provision of water and power.
V. Notwithstanding any other statute the department of administration may:
1. Limit the liability of a person who contracts to provide goods, software or other services to this state.
2. Allow the person to disclaim incidental or consequential damages.
3. Indemnify or hold harmless any party to the contract.
Sec. 162. Section 41-621.01, Arizona Revised Statutes, is amended to read:
41-621.01. Contractors or subcontractors; pooling of property, liability and workers' compensation coverage; exemptions; board of trustees; contract; termination; audit; insolvency
A. Pursuant to section 41‑621, subsection D and section 41‑622.01 two or more contractors or subcontractors licensed to do work for this state or any political subdivision of this state may with the approval of the department of administration enter into contracts or agreements pursuant to this section for the joint purchase of insurance, to pool retention of their risks for property and liability losses and to provide for the payment of the property loss or claim of liability made against any member of the pool on a cooperative or contract basis with one another or may jointly form a nonprofit corporation or enter into a trust agreement to carry out the provisions of this section in their behalf directly or by contract with a private party, if the department of administration has determined to sanction such a pool. Two or more contractors may also enter into contracts or agreements pursuant to this section to establish a workers' compensation pool to provide for the payment of workers' compensation claims pursuant to title 23, chapter 6 on a cooperative or contract basis with one another or may jointly form a nonprofit corporation or enter into a trust agreement to carry out the provisions of this section in their behalf directly or by contract with a private party. A workers' compensation pool established pursuant to this subsection may provide coverage for workers' compensation, employers' liability and occupational disease claims. A workers' compensation pool is subject to approval as a self‑insurer by the industrial commission of Arizona pursuant to section 23‑961, subsection A, paragraph 2 and is subject to title 23, chapter 6 and rules adopted pursuant to that chapter in addition to the requirements of this section. The industrial commission of Arizona, by rule, resolution or order, may adopt requirements for the administration of a workers' compensation pool under this subsection, including separation or commingling of funds, accounting, auditing, reporting, actuarial standards and procedures.
B. In addition to other authority granted pursuant to this title, two or more contractors or subcontractors licensed to do work for this state or any political subdivision of this state may enter into contracts or agreements for the joint purchase of life insurance, disability insurance, accident insurance or health benefits plan insurance, to pool retention of their risks of loss for life, disability, health or accident claims made against any contractor or subcontractor member of the pool or to jointly provide the health and medical services authorized in section 36‑2907. Contractors and subcontractors may establish pools for the purposes of this subsection by any of the following methods:
1. On a cooperative or contract basis.
2. By the formation of a nonprofit corporation.
3. By a contract or intergovernmental agreement with the Arizona health care cost containment system administration.
4. By the execution of a trust agreement directly by the contractors and subcontractors or by contracting with a third party.
C. Contractors or subcontractors of a political subdivision of this state that is a member of a risk retention pool authorized under title 11 may obtain life insurance, disability insurance, accident insurance or health benefits plan insurance coverage directly from that political subdivision if coverage is available and as authorized by section 11‑952.01, subsection C.
D. Section 10‑11301 does not apply to nonprofit corporations formed pursuant to this section.
E. Chapter 23 of this title does not apply to the procurement of insurance or to the procurement of the services provided for in subsection I, paragraph 8 of this section by any pool established pursuant to this section.
F. Title 43 does not apply to any pool established pursuant to this section. Any pool established pursuant to this section is exempt from taxation under title 43.
G. Each pool shall be operated by a board of trustees consisting of at least five members. The board of trustees of each group shall do all of the following:
1. Establish terms and conditions of coverage within the pool including exclusions of coverage.
2. Ensure that all claims are paid promptly.
3. Take all necessary precautions to safeguard the assets of the group.
4. Maintain minutes of its meetings.
5. Designate an administrator to carry out the policies established by the board of trustees and to provide day to day management of the group and delineate in the written minutes of its meetings the areas of authority it delegates to the administrator.
6. Notify the director of the department of insurance and financial institutions of the existence of the pool and file a copy of the agreement with the director and with the attorney general.
7. If the pool is a workers' compensation pool, file a copy of the agreement with the director of the industrial commission of Arizona.
H. The board of trustees shall not:
1. Extend credit to individual members for payment of a premium except pursuant to payment plans established by the board.
2. Borrow any monies from the group or in the name of the group except in the ordinary course of business.
I. A contract or agreement made pursuant to subsection A of this section shall contain the following:
1. A provision for a system or program of loss control.
2. A provision for termination of membership including either:
(a) Cancellation of individual members of the pool by the pool.
(b) Election by an individual member of the pool to terminate its participation.
3. A provision requiring the pool to pay all claims for which each member incurs liability during each member's period of membership.
4. A provision stating that each member is not relieved of its liability incurred during the member's period of membership except through the payment of losses by the pool or by the member.
5. A provision for the maintenance of claims reserves equal to known incurred losses and an estimate of incurred but not reported claims.
6. A provision for a final accounting and settlement of the obligations of or refunds to a terminating member to occur when all incurred claims are concluded, settled or paid.
7. A provision that the pool may establish offices where necessary in this state and employ necessary staff to carry out the purposes of the pool.
8. A provision that the pool may retain legal counsel, actuaries, auditors, engineers, private consultants and advisors.
9. A provision that the pool may make and alter bylaws and rules pertaining to the exercise of its purpose and powers.
10. A provision that the pool may purchase, lease or rent real and personal property it deems necessary.
11. A provision that the pool shall enter into a financial services agreement with banks and that it may issue checks in its own name.
J. A pool or a terminating member shall provide at least ninety days' written notice of the termination or cancellation. A workers' compensation pool shall notify the industrial commission of Arizona of the termination or cancellation of a member thirty days before the termination or cancellation of the member.
K. The pool shall be audited annually at the expense of the pool by a certified public accountant, with a copy of the report submitted to the governing body or chief executive officer of each member of the pool and to the director of the department of insurance and financial institutions. The board of trustees of the pool shall obtain an appropriate actuarial evaluation of the claim reserves of the pool including an estimate of the incurred but not reported claims. The department of insurance and financial institutions shall examine each contractor pool once every five years. The director of the department of insurance and financial institutions may examine a contractor pool sooner than five years from the preceding examination if the director has reason to believe that the pool is insolvent. The costs of any examination shall be paid by the pool subject to the examination.
L. If, as a result of the annual audit or an examination by the director of the department of insurance and financial institutions, it appears that the assets of the pool are insufficient to enable the pool to discharge its legal liabilities and other obligations, the director of the department of insurance and financial institutions shall notify the administrator and the board of trustees of the pool of the deficiency and provide the director's list of recommendations to abate the deficiency, including a recommendation not to add any new members until the deficiency is abated. If the pool fails to comply with the recommendations within sixty days after the date of the notice, the director shall notify the chief executive officer or the governing bodies, if any, of the members of the pool, the governor, the president of the senate and the speaker of the house of representatives that the pool has failed to comply with the recommendations of the director.
M. If a pool is determined to be insolvent or is otherwise found to be unable to discharge its legal liabilities and other obligations, each agreement or contract shall provide that the members of the pool shall be assessed on a pro rata basis as calculated by the amount of each member's annual contribution in order to satisfy the amount of deficiency. The assessment shall not exceed the amount of each member's annual contribution to the pool.
N. If a workers' compensation pool fails to comply with title 23, chapter 6 or rules adopted pursuant to that chapter, the director of the industrial commission of Arizona shall immediately notify the director of the department of administration and the director of the department of insurance and financial institutions.
Sec. 163. Section 41-1009, Arizona Revised Statutes, is amended to read:
41-1009. Inspections and audits; applicability; exceptions
A. An agency inspector, auditor or regulator who enters any premises of a regulated person for the purpose of conducting an inspection or audit shall, unless otherwise provided by law:
1. Present photo identification on entry of the premises.
2. On initiation of the inspection or audit, state the purpose of the inspection or audit and the legal authority for conducting the inspection or audit.
3. Disclose any applicable inspection or audit fees. Notwithstanding any other law, a regulated person being inspected or audited is responsible for only the direct and reasonable costs of the inspection or audit and is entitled to receive a detailed billing statement as described in paragraph 5, subdivision (e) of this subsection.
4. Afford an opportunity to have an authorized on‑site representative of the regulated person accompany the agency inspector, auditor or regulator on the premises, except during confidential interviews.
5. Provide notice of the right to have on request:
(a) Copies of any original documents taken by the agency during the inspection or audit if the agency is permitted allowed by law to take original documents.
(b) A split of any samples taken during the inspection if the split of any samples would not prohibit an analysis from being conducted or render an analysis inconclusive.
(c) Copies of any analysis performed on samples taken during the inspection.
(d) Copies of any documents to be relied on to determine compliance with licensure or regulatory requirements if the agency is otherwise permitted allowed by law to do so.
(e) A detailed billing statement that provides reasonable specificity of the inspection or audit fees imposed pursuant to paragraph 3 of this subsection and that cites the statute or rule that authorizes the fees being charged.
6. Inform each person whose conversation with the agency inspector, auditor or regulator during the inspection or audit is tape recorded that the conversation is being tape recorded.
7. Inform each person who is interviewed during the inspection or audit that:
(a) Statements made by the person may be included in the inspection or audit report.
(b) Participation in an interview is voluntary, unless the person is legally compelled to participate in the interview.
(c) The person is allowed at least twenty‑four hours to review and revise any written witness statement that is drafted by the agency inspector, auditor or regulator and on which the agency inspector, auditor or regulator requests the person's signature.
(d) The agency inspector, auditor or regulator may not prohibit the regulated person from having an attorney or any other experts in their field present during the interview to represent or advise the regulated person.
B. On initiation of an audit or an inspection of any premises of a regulated person, an agency inspector, auditor or regulator shall provide the following in writing:
1. The rights described in subsection A of this section and section 41‑1001.01, subsection C.
2. The name and telephone number of a contact person who is available to answer questions regarding the inspection or audit.
3. The due process rights relating to an appeal of a final decision of an agency based on the results of the inspection or audit, including the name and telephone number of a person to contact within the agency and any appropriate state government ombudsman.
4. A statement that the agency inspector, auditor or regulator may not take any adverse action, treat the regulated person less favorably or draw any inference as a result of the regulated person's decision to be represented by an attorney or advised by any other experts in their field.
5. A notice that if the information and documents provided to the agency inspector, auditor or regulator become a public record, the regulated person may redact trade secrets and proprietary and confidential information unless the information and documents are confidential pursuant to statute.
6. The time limit or statute of limitations applicable to the right of the agency inspector, auditor or regulator to file a compliance action against the regulated person arising from the inspection or audit, which applies to both new and amended compliance actions.
C. An agency inspector, auditor or regulator shall obtain the signature of the regulated person or on‑site representative of the regulated person on the writing prescribed in subsection B of this section and section 41‑1001.01, subsection C, if applicable, indicating that the regulated person or on‑site representative of the regulated person has read the writing prescribed in subsection B of this section and section 41‑1001.01, subsection C, if applicable, and is notified of the regulated person's or on‑site representative of the regulated person's inspection or audit and due process rights. The agency inspector, auditor or regulator may provide an electronic document of the writing prescribed in subsection B of this section and section 41‑1001.01, subsection C and, at the request of the regulated person or on‑site representative, obtain a receipt in the form of an electronic signature. The agency shall maintain a copy of this signature with the inspection or audit report and shall leave a copy with the regulated person or on‑site representative of the regulated person. If a regulated person or on‑site representative of the regulated person is not at the site or refuses to sign the writing prescribed in subsection B of this section and section 41‑1001.01, subsection C, if applicable, the agency inspector, auditor or regulator shall note that fact on the writing prescribed in subsection B of this section and section 41‑1001.01, subsection C, if applicable.
D. An agency that conducts an inspection shall give a copy of the inspection report to the regulated person or on‑site representative of the regulated person either:
1. At the time of the inspection.
2. Notwithstanding any other state law, within thirty working days after the inspection.
3. As otherwise required by federal law.
E. The inspection report shall contain deficiencies identified during an inspection. Unless otherwise provided by state or federal law, the agency shall provide the regulated person an opportunity to correct the deficiencies unless the agency documents in writing as part of the inspection report that the deficiencies are:
1. Committed intentionally.
2. Not correctable within a reasonable period of time as determined by the agency.
3. Evidence of a pattern of noncompliance.
4. A risk to any person, the public health, safety or welfare or the environment.
F. If the agency is unsure whether a regulated person meets the exemptions in subsection E of this section, the agency shall provide the regulated person with an opportunity to correct the deficiencies.
G. If the agency allows the regulated person an opportunity to correct the deficiencies pursuant to subsection E of this section, the regulated person shall notify the agency when the deficiencies have been corrected. Within thirty days after receipt of notification from the regulated person that the deficiencies have been corrected, the agency shall determine if the regulated person is in substantial compliance and notify the regulated person whether or not the regulated person is in substantial compliance. If the regulated person fails to correct the deficiencies or the agency determines the deficiencies have not been corrected within a reasonable period of time, the agency may take any enforcement action authorized by law for the deficiencies.
H. If the agency does not allow the regulated person an opportunity to correct deficiencies pursuant to subsection E of this section, on the request of the regulated person, the agency shall provide a detailed written explanation of the reason that an opportunity to correct was not allowed.
I. An agency decision pursuant to subsection E or G of this section is not an appealable agency action.
J. At least once every month after the commencement of the inspection, an agency shall provide a regulated person with an update on the status of any agency action resulting from an inspection of the regulated person. An agency is not required to provide an update after the regulated person is notified that no agency action will result from the agency inspection or after the completion of agency action resulting from the agency inspection.
K. For agencies with authority under title 49, if, as a result of an inspection or any other investigation, an agency alleges that a regulated person is not in compliance with licensure or other applicable regulatory requirements, the agency shall provide written notice of that allegation to the regulated person. The notice shall contain the following information:
1. A citation to the statute, regulation, license or permit condition on which the allegation of noncompliance is based, including the specific provisions in the statute, regulation, license or permit condition that are alleged to be violated.
2. Identification of any documents relied on as a basis for the allegation of noncompliance.
3. An explanation stated with reasonable specificity of the regulatory and factual basis for the allegation of noncompliance.
4. Instructions for obtaining a timely opportunity to discuss the alleged violation with the agency.
L. Subsection K of this section applies only to inspections necessary for the issuance of a license or to determine compliance with licensure or other regulatory requirements. Subsection K of this section does not apply to an action taken pursuant to section 11‑871, 11‑876, 11‑877, 49‑457.01, 49‑457.03 or 49‑474.01. Issuance of a notice under subsection K of this section is not a prerequisite to otherwise lawful agency actions seeking an injunction or issuing an order if the agency determines that the action is necessary on an expedited basis to abate an imminent and substantial endangerment to public health or the environment and documents the basis for that determination in the documents initiating the action.
M. This section does not authorize an inspection or any other act that is not otherwise authorized by law.
N. Except as otherwise provided in subsection L of this section, this section applies only to inspections necessary for the issuance of a license or to determine compliance with licensure or other regulatory requirements applicable to a licensee and audits pursuant to enforcement of title 23, chapters 2 and 4. This section does not apply:
1. To criminal investigations, investigations under tribal state gaming compacts and undercover investigations that are generally or specifically authorized by law.
2. If the agency inspector, auditor or regulator has reasonable suspicion to believe that the regulated person may be engaged in criminal activity.
3. To the Arizona peace officer standards and training board established by section 41‑1821.
4. To certificates of convenience and necessity that are issued by the corporation commission pursuant to title 40, chapter 2.
O. If an agency inspector, auditor or regulator gathers evidence in violation of this section, the violation may be a basis to exclude the evidence in a civil or administrative proceeding.
P. Failure of an agency, board or commission employee to comply with this section:
1. May subject the employee to disciplinary action or dismissal.
2. Shall be considered by the judge and administrative law judge as grounds for reduction of any fine or civil penalty.
Q. An agency may make rules to implement subsection A, paragraph 5 of this section.
R. Nothing in this section shall be used to exclude evidence in a criminal proceeding.
S. Subsection A, paragraph 7, subdivision (c) and subsection E of this section do not apply to the department of health services for the purposes of title 36, chapters 4 and 7.1.
T. Subsection B, paragraph 5 and subsection E of this section do not apply to the corporation commission for the purposes of title 44, chapters 12 and 13.
Sec. 164. Section 41-1525, Arizona Revised Statutes, is amended to read:
41-1525. Arizona quality jobs incentives; tax credits for new employment; qualifications; definitions
A. The owner of a business that is located in this state before July 2025 is eligible for income tax credits under section 43‑1074 or 43‑1161 or an insurance premium tax credit under section 20‑224.03 for net increases in full-time employees residing in this state and hired in qualified employment positions in this state.
B. To qualify under this section, and subject to preapproval by the authority, the business must meet at least one of the following requirements for each location of the business before it claims a first year tax credit for the location:
1. Invest at least five million dollars $5,000,000 of capital investment and create at least twenty‑five net new qualified employment positions that pay compensation at least equal to one hundred percent of the county median wage as computed annually by the authority in an urban location.
2. Invest at least two million five hundred thousand dollars $2,500,000 of capital investment and create at least twenty‑five net new qualified employment positions that pay compensation at least equal to one hundred twenty‑five percent of the county median wage as computed annually by the authority in an urban location.
3. Invest at least one million dollars $1,000,000 of capital investment and create at least twenty‑five net new qualified employment positions that pay compensation at least equal to one hundred fifty percent of the county median wage as computed annually by the authority in an urban location.
4. Invest at least five hundred thousand dollars $500,000 of capital investment and create at least twenty‑five net new qualified employment positions that pay compensation at least equal to two hundred percent of the county median wage as computed annually by the authority in an urban location.
5. Invest at least one million dollars $1,000,000 of capital investment and create at least five net new qualified employment positions that pay compensation at least equal to one hundred percent of the county median wage as computed annually by the authority in a rural location.
6. Invest at least five hundred thousand dollars $500,000 of capital investment and create at least five net new qualified employment positions that pay compensation at least equal to one hundred twenty‑five percent of the county median wage as computed annually by the authority in a rural location.
7. Invest at least one hundred thousand dollars $100,000 of capital investment and create at least five net new qualified employment positions that pay compensation at least equal to one hundred fifty percent of the county median wage as computed annually by the authority in a rural location.
C. The capital investment and the new qualified employment positions requirements of subsection B of this section must be accomplished within twelve months after the start of the required capital investment. No Credit may not be claimed until both requirements are met. A business that meets the requirements of subsection B of this section for a location is eligible to claim first year credits for three years beginning with the taxable year in which those requirements are completed. Employees hired at the location before the beginning of the taxable year but during the twelve-month period allowed in this subsection are considered to be new employees for the taxable year in which all of those requirements are completed. The employees that are considered to be new employees for the taxable year under this subsection shall not be included in the average number of full-time employees during the immediately preceding taxable year until the taxable year in which all of the requirements of subsection B of this section are completed. An employee working at a temporary worksite in this state while the designated location is under construction is considered to be working at the designated location if all of the following occur:
1. The employee is hired after the start of the required investment at the designated location.
2. The employee is hired to work at the designated location after it is completed.
3. The payroll for the employees destined for the designated location is segregated from other employees.
4. The employee is moved to the designated location within thirty days after its completion.
D. No Not more than ten thousand new jobs for all employers qualify for first year credits each year.
E. To claim a tax credit, the business must:
1. Obtain preapproval from the authority at a time, on a form and in a manner prescribed by the authority. Preapproval shall cover all first year credits intended to be claimed for the designated location and all second and third year credits associated with those first year credits.
2. Certify to the department of revenue or the department of insurance and financial institutions, as applicable, on or before the due date of the tax return, including any extensions for the year for which the credit is claimed, in a form prescribed by the department, including electronic media, information that the department may require, including the ownership interests of co‑owners of the business if the business is a partnership, limited liability company or an S corporation, and the following information for each employee in the designated location:
(a) The date of initial employment.
(b) The number of hours worked during the year.
(c) Whether the position was full‑time.
(d) The employee's annual compensation.
(e) The total cost of health insurance for the employee and the cost paid by the employer.
(f) Other information required by the department.
3. Report and certify to the authority the following information, and provide supporting documentation, on a form and in a manner approved by the authority, and as specified in subsection F of this section, for each year in which the taxpayer earned and claimed or used credits or is carrying forward amounts from previously earned and claimed credits:
(a) The business name and mailing address and any other contact information requested by the authority.
(b) The physical address of the business location or locations and the number of employees qualified for the credit at each location.
(c) The average hourly wage and the total amount of compensation paid to employees qualified for the credit and for all employees.
(d) The total number of qualified employment positions and the amount of income tax or premium tax credits qualified for in the taxable year.
(e) The estimated amount of tax credits to be used in the taxable year to offset tax liability.
(f) The estimated amount of tax credits to be available for carryforward in the taxable year and the year in which the credits expire.
(g) The number of jobs and the amount of credits earned and claimed on the prior year's tax return.
(h) The amount of credits used to offset tax liabilities on the prior year's tax return.
(i) The amount of credits available for carryforward as reported on the prior year's tax return and the year the credits expire.
(j) Capital investment made during the taxable year and the preceding taxable year.
(k) Other information necessary for the management and reporting of the incentives under this section.
4. For any year in which the taxpayer is claiming first year credits, report and certify the following additional information and provide supporting documentation to the authority on a form and in a manner approved by the authority, and as specified in subsection F of this section:
(a) That the net increase in the number of qualified employment positions for which credit is sought is the least of:
(i) The total number of filled qualified employment positions created at the designated location or locations during the taxable year.
(ii) The difference between the average number of full‑time employees in this state in the current taxable year and the average number of full‑time employees in this state during the immediately preceding taxable year.
(b) That all employees filling a qualified employment position were employed for at least ninety days during the first taxable year. Employees hired in the last ninety days of the taxable year are excluded for that taxable year and are considered to be new employees in the following taxable year.
(c) That none of the employees filling qualified employment positions were employed by the taxpayer during the twelve months before the current date of hire except for those relocating to this state.
(d) That all employees for whom second and third year credits are claimed are in qualified employment positions for which first year credits were allowed and claimed by the taxpayer on the original first and second year tax returns.
(e) That all employees for whom credits are taken performed their job duties primarily at the designated locations of the business.
F. To qualify for first year credits, the report and certification prescribed by subsection E, paragraphs 3 and 4 of this section must be filed with the authority by the earlier of six months after the end of the taxable year in which the qualified employment positions were created or by the date the tax return is filed for the taxable year in which the qualified employment positions were created. To qualify for second year credits, the report and certification prescribed by subsection E, paragraph 3 of this section must be filed with the authority by the earlier of six months after the end of the taxable year or the date the tax return is filed for the taxable year in which the second year credits are allowable. To qualify for third year credits, the report and certification prescribed by subsection E, paragraph 3 of this section must be filed with the authority by the earlier of six months after the end of the taxable year or the date the tax return is filed for the taxable year in which the third year credits are allowable.
G. Any information submitted to the authority under subsection E, paragraph 3, subdivisions (e) through (j) of this section is exempt from title 39, chapter 1, article 2 and considered to be confidential and is not subject to disclosure except:
1. To the extent that the person or organization that provided the information consents to the disclosure.
2. To the department of revenue for use in tax administration.
H. Documents filed with the authority, the department of insurance and financial institutions and the department of revenue under subsection E of this section shall contain either a sworn statement or certification, signed by an officer of the company under penalty of perjury, that the information contained is true and correct according to the best belief and knowledge of the person submitting the information after a reasonable investigation of the facts. If the document contains information that is materially false, the taxpayer is ineligible for the tax credits described under subsection A of this section and is subject to recovery of the amount of tax credits allowed in preceding taxable years based on the false information, plus penalties and interest.
I. The authority may make site visits to a taxpayer's facilities if it is necessary to further document or clarify reported information. The taxpayer must freely provide the access.
J. The authority by rule shall prescribe preapproval requirements and additional reporting requirements for taxpayers who claim tax credits pursuant to this section.
K. On or before September 30 of each year, the authority shall transmit a report to the governor, the president of the senate, the speaker of the house of representatives and the chairpersons of the senate finance committee and the house of representatives ways and means committee and provide a copy of the report to the secretary of state. The report shall include the following information:
1. The business names, locations, number of employees and amount of compensation paid to employees qualifying for income tax credits as reported to the authority.
2. The amount of capital investment, made during the preceding fiscal year and cumulatively.
3. The total amount of income tax credits allowed for the preceding taxable year and the number of qualified employment positions for which credits were claimed pursuant to sections 43‑1074 and 43‑1161.
L. For the purposes of this section:
1. "Capital investment" means an expenditure to acquire, lease or improve property that is used in operating a business, including:
(a) Land, buildings, machinery and fixtures.
(b) For taxable years beginning from and after June 30, 2011, equipment.
2. "Designated location" means the location at which the required capital investment is made under subsection B of this section.
3. "Location" means a single parcel or contiguous parcels of owned or leased land in this state, the structures and personal property contained on the land or any part of the structures occupied by the owner. Parcels that are separated only by a public thoroughfare or right-of-way are considered to be contiguous but a single contiguous parcel that is located in both an urban location and a rural location is considered to be a contiguous urban location.
4. "Qualified employment position" means employment that meets the following requirements:
(a) The position consists of at least one thousand seven hundred fifty hours per year of full‑time permanent employment.
(b) The job duties are performed primarily at the location or locations of the business in this state.
(c) The employment provides health insurance coverage for the employee for which the employer pays at least sixty‑five percent of the premium or membership cost. If the business is self-insured, the employer pays at least sixty‑five percent of a predetermined fixed cost per employee for an insurance program that is payable whether or not the employee has filed claims.
(d) The employer pays compensation at least equal to the wage threshold as described in subsection B of this section.
5. "Rural location" means a location that is within the boundaries of tribal lands or a city or town with a population of less than fifty thousand persons or a county with a population of less than eight hundred thousand persons.
6. "Urban location" means a location that is within the exterior boundaries of a city or town that has a population of fifty thousand persons or more and that is located in a county that has a population of eight hundred thousand persons or more.
Sec. 165. Section 41-2574, Arizona Revised Statutes, is amended to read:
41-2574. Contract performance and payment bonds
A. The following bonds or security is required and is binding on the parties to the contract if the value of a construction award exceeds the amount established by section 41‑2535:
1. A performance bond that is executed and furnished as required under title 34, chapter 2, article 2 or chapter 6, as applicable, in an amount equal to one hundred per cent percent of the price specified in the contract conditioned on the faithful performance of the contract in accordance with the plans, specifications and conditions of the contract, except that:
(a) For job‑order‑contracting construction services, the performance bond shall cover the full amount of construction under the job‑order‑contracting construction services contract, shall not include any design services, preconstruction services, finance services, maintenance services, operations services or other related services included in the contract, may be a single bond for the full term of the contract, a separate bond for each year of a multiyear contract or a separate bond for each job order, as determined by the purchasing agency, and, if a single bond for the full term of the contract or a separate bond for each year of a multiyear contract, shall initially be based on the purchasing agency's reasonable estimate of the amount of construction that the purchasing agency believes is likely to actually be done during the full term of the contract or during the particular year of a multiyear contract, as applicable.
(b) For construction‑manager‑at‑risk construction services and design‑build construction services, the amount of the performance bond shall be the price of construction and shall not include the cost of any design services, preconstruction services, finance services, maintenance services, operations services and other related services included in the contract. This bond is solely for the protection of this state. The conditions and provisions of the performance bond regarding the surety's obligations shall follow the form required under section 34‑222, subsection G or section 34‑610, subsection G, as applicable.
2. A payment bond that is executed and furnished as required by title 34, chapter 2, article 2 or chapter 6, as applicable, in an amount equal to one hundred per cent percent of the price specified in the contract for the protection of all persons supplying labor or material to the contractor or its subcontractors for the performance of the construction provided for in the contract, except that:
(a) For job‑order‑contracting construction services, the payment bond shall cover the full amount of construction under the job‑order‑contracting construction services contract, shall not include any design services, preconstruction services, finance services, maintenance services, operations services or other related services included in the contract, may be a single bond for the full term of the contract, a separate bond for each year of a multiyear contract or a separate bond for each job order, as determined by the purchasing agency, and, if a single bond for the full term of the contract or a separate bond for each year of a multiyear contract, shall initially be based on the purchasing agency's reasonable estimate of the amount of construction that the purchasing agency believes is likely to actually be done during the full term of the contract or during the particular year of a multiyear contract, as applicable.
(b) For construction‑manager‑at‑risk construction services and design‑build construction services, the amount of the payment bond shall be the price of construction and shall not include the cost of any design services, preconstruction services, finance services, maintenance services, operations services or other related services included in the contract. The conditions and provisions of the payment bond regarding the surety's obligations shall follow the form required under section 34‑222, subsection F or section 34‑610, subsection F, as applicable.
B. For design‑bid‑build construction, the bonds prescribed in subsection A of this section shall be provided on and at the same time as execution of the construction contract. For construction‑manager‑at‑risk, design‑build and job‑order‑contracting construction services, the bonds prescribed in subsection A of this section shall be provided only on and at the same time as execution of a contract or an amendment to a contract that commits the contractor to provide construction for a fixed price, guaranteed maximum price or other fixed amount within a designated time frame.
C. If the prime contract or specifications require any persons supplying labor or materials in the prosecution of the work to furnish payment or performance bonds, these bonds shall be executed solely by a surety company or companies holding a certificate of authority to transact surety business in this state issued by the director of the department of insurance and financial institutions pursuant to title 20, chapter 2, article 1. Notwithstanding the provisions of any other statute, the bonds shall not be executed by an individual surety or sureties, even if the requirements of section 7‑101 are satisfied.
Sec. 166. Section 41-3451, Arizona Revised Statutes, is amended to read:
41-3451. Automobile theft authority; powers and duties; fund; audit
A. The automobile theft authority is established in the department of insurance and financial institutions consisting of the following members:
1. Two police chiefs who are appointed by an Arizona association of chiefs of police, one of whom represents a city or town with a population of one hundred thousand or more persons and one of whom represents a city or town with a population of less than one hundred thousand persons, or their designees.
2. Two sheriffs who are appointed by an Arizona sheriffs association, one of whom represents a county with a population of five hundred thousand or more persons and one of whom represents a county with a population of less than five hundred thousand persons, or their designees.
3. Two county attorneys who are appointed by the governor, one of whom represents a county with a population of two million or more persons and one of whom represents a county with a population of less than two million persons, or their designees.
4. Two employees of insurers who are licensed to write motor vehicle liability insurance in this state and who are appointed by the governor.
5. Two members of the general public who are appointed by the governor.
6. The assistant director for the motor vehicle division in the department of transportation or the assistant director's designee.
7. The director of the department of public safety or the director's designee.
B. Members serve staggered four‑year terms beginning and ending on the third Monday in January. At the first meeting each year, the members shall select a chairman from among the members. The authority shall meet at the call of the chairman or seven members.
C. The authority may:
1. Subject to chapter 4, article 4 of this title, hire staff members as necessary.
2. Provide work facilities and equipment as necessary.
3. Determine the scope of the problem of motor vehicle theft, including particular areas of the state where the problem is greatest.
4. Analyze the various methods of combating the problem of motor vehicle theft.
5. Develop and implement a plan of operation.
6. Develop and implement a financial plan.
7. Solicit and accept gifts and grants.
8. Report by December 31 of each year to the governor, the president of the senate, the speaker of the house of representatives and the secretary of state on its activities during the preceding fiscal year.
D. If the chairman of the authority knows that a potential ground for the removal of a member of the authority exists under this subsection, the chairman shall notify the governor. The governor shall remove the member if the governor finds that any of the following applies:
1. The member was not qualified to serve at the time the member was appointed.
2. The member does not maintain the member's qualifications to serve.
3. The member cannot discharge the member's duties for a substantial part of the term due to illness or other disability.
4. The member is absent from more than one‑half of the regularly scheduled meetings during a calendar year unless the member's absence is excused by a majority vote of the authority.
E. The automobile theft authority fund is established consisting of any public or private monies that the authority may receive. The automobile theft authority shall administer the fund. Subject to legislative appropriation, monies in the fund shall only be used only to pay the expenses of the authority and to carry out the purposes of this section. Monies in the fund are exempt from the provisions of sections 35‑143.01 and 35‑190 relating to lapsing of appropriations. On notice from the authority, the state treasurer shall invest and divest monies in the fund as provided by section 35‑313, and monies earned from investment shall be credited to the fund. Monies appropriated from the fund that are included in the general appropriations act shall include at least the following separate line items:
1. Automobile theft authority operating lump sum appropriation.
2. Arizona vehicle theft task force.
3. Local grants.
F. The authority may accept nonmonetary contributions, including the services of individuals, office and secretarial assistance, mailings, printing, office equipment, facilities and supplies, that are necessary to carry out its functions. The nonmonetary contributions shall not be included in the costs of administration limitation prescribed by subsection H of this section.
G. The automobile theft authority shall allocate monies in the fund to public agencies for the purpose of establishing, maintaining and supporting programs that are designed to prevent motor vehicle theft, including:
1. Financial support to law enforcement and prosecution agencies for programs that are designed to increase the effectiveness of motor vehicle theft prosecution.
2. Financial support for programs that are designed to educate and assist the public in the prevention of motor vehicle theft.
H. Pursuant to section 20‑466, subsection A, the director of the department of insurance and financial institutions shall appoint an individual to operate the automobile theft authority in conjunction with operating the fraud unit established by section 20‑466. The costs of administration shall not exceed ten percent of the monies in the fund in any one year so that the greatest possible portion of the monies available to the authority is expended on combating motor vehicle theft.
I. Monies expended from the automobile theft authority fund shall be used to supplement, not supplant, other monies that are available for motor vehicle theft prevention.
J. Each insurer issuing motor vehicle liability insurance policies in this state shall pay a semiannual fee of $.50 per vehicle insured under a motor vehicle liability insurance policy issued by the insurer. The fee shall be fully earned and nonrefundable at the time the insurer collects the premium for the motor vehicle liability insurance policy. Each insurer shall transmit the fee on or before January 31 and on or before July 31 of each year to the automobile theft authority for deposit in the automobile theft authority fund. The payment due on or before January 31 shall cover vehicles insured under policies that are issued during the period from July 1 through December 31 of the previous year. The payment due on or before July 31 shall cover vehicles insured under policies that are issued during the period from January 1 through June 30 of the same year.
K. The authority shall cause an audit to be made of the automobile theft authority fund. The audit shall be conducted by a certified public accountant every two years. The authority shall file a certified copy of the audit with the auditor general immediately. The auditor general may make further audits and examinations as the auditor general deems necessary and may take appropriate action relating to the audit pursuant to chapter 7, article 10.1 of this title.
L. Authority members are not eligible to receive compensation but are eligible for reimbursement of expenses pursuant to title 38, chapter 4, article 2.
M. This section does not apply to vehicles or vehicle combinations with a declared gross weight of more than twenty‑six thousand pounds. Motor vehicle liability insurance policies issued in this state for vehicles or vehicle combinations with a declared gross weight of more than twenty‑six thousand pounds are exempt from subsection J of this section.
Sec. 167. Section 42-1102, Arizona Revised Statutes, is amended to read:
42-1102. Taxpayer bonds; definition
A. If the department deems it necessary to protect the revenues to be collected under this title and title 43, it may require a person liable for the tax to file a bond to secure the payment of the tax, penalty or interest, which may become due from that person. The bond shall be:
1. Issued by a surety company authorized to transact business in this state and approved by the director of the department of insurance and financial institutions of this state as to solvency and responsibility or composed of securities or cash that are deposited with, and kept in the custody of, the department.
2. Except as otherwise provided in this section, in the amount which that the department prescribes by administrative rule to secure the payment of any tax, penalty or interest, which may become due from the person.
B. For the purposes of licenses to sell tobacco products issued under section 42‑3401, the amount of the bond required under this section is the greater of five hundred dollars $500 or four times the average monthly tax liability. For the purposes of determining the bond amount, the average monthly tax liability is equal to the average monthly tax due from the applicant for the preceding six consecutive months. If an applicant does not have a six‑month payment history, the bond amount is a minimum of five hundred dollars $500. If an applicant provides a surety bond and the bond lapses, the applicant shall deposit with the department cash or other security in an amount equal to the lapsed surety bond within five business days after the applicant's receipt of written notification by the department. The bond amount may be increased or decreased as necessary based on any reason listed in subsection D of this section or a change in the applicant's previous filing period, filing compliance record or payment history. If the bond amount is increased above the amount computed under this subsection, the applicant may request a hearing pursuant to subsection C of this section to show why the order increasing the bond amount is in error.
C. If the department determines that a person is to file such a bond it shall notify him the person to that effect, specifying the amount of the bond required. The person shall file the bond within five days after the giving of notice unless within that time he the person requests in writing a hearing before the department at which time the department shall determine the necessity, propriety and amount of the bond. The determination is final unless within fifteen days after the giving of notice of the determination the person appeals the determination to the state board of tax appeals. The board shall decide on the appeal within fifteen days of its receipt. The bond, at any time without notice, may be applied to any tax, penalties or interest due, and for that purpose the securities may be sold at public or private sale without notice to the depositor.
D. For purposes of this section a bond may be required if:
1. After investigation of financial status, the department determines that an applicant for a new license would be unable to timely remit amounts due.
2. An applicant for a new license held a license for a prior business, and the remittance record for the prior business falls within one of the conditions in paragraph 5 of this subsection.
3. The department experienced collection problems while the applicant was engaged in business under a prior license.
4. The applicant is substantially similar to a person who would have been required to post a bond under paragraph 5 of this subsection or the person had a previous license that was revoked. An applicant is substantially similar if it is owned or controlled by persons who owned or controlled a previous licensee.
5. An existing licensee has had two or more delinquencies in remitting tax during the preceding twenty‑four months if filing on a quarterly or less frequent basis or four or more delinquencies during the preceding twenty‑four months if filing on a monthly or more frequent basis.
E. If a licensee who is required to post a bond or security maintains a good filing and payment record for a period of two years, the licensee may request that the department waive the continued bond or security requirement.
F. In For the purposes of this section, "person" includes a firm, partnership, joint venture, association, corporation, sole proprietorship or any other business or governmental entity subject to a tax administered by this article but does not include an individual subject to individual income tax.
Sec. 168. Section 43-1183, Arizona Revised Statutes, is amended to read:
43-1183. Credit for contributions to school tuition organization
A. Beginning from and after June 30, 2006, a credit is allowed against the taxes imposed by this title for the amount of voluntary cash contributions made by the taxpayer during the taxable year to a school tuition organization that is certified pursuant to chapter 15 of this title at the time of donation.
B. The amount of the credit is the total amount of the taxpayer's contributions for the taxable year under subsection A of this section and is preapproved by the department of revenue pursuant to subsection D of this section.
C. The department of revenue:
1. Shall not allow tax credits under this section and section 20‑224.06 that exceed in the aggregate a combined total of $10,000,000 in any fiscal year. Beginning in fiscal year 2007‑2008, the aggregate dollar amount of the tax credit cap from the previous fiscal year shall be annually increased by twenty percent. Beginning in fiscal year 2020‑2021, the aggregate dollar amount of the tax credit cap from the previous fiscal year shall be increased as follows:
(a) For fiscal year 2020‑2021, by fifteen percent.
(b) For fiscal year 2021‑2022, by ten percent.
(c) For fiscal year 2022‑2023, by five percent.
(d) For fiscal year 2023‑2024 and each fiscal year thereafter, by the greater of:
(i) The percentage of the annual increase, if any, in the metropolitan Phoenix consumer price index published by the United States department of labor bureau of labor statistics.
(ii) Two percent.
2. Shall preapprove tax credits under this section and section 20‑224.06 subject to subsection D of this section.
3. Shall allow the tax credits under this section and section 20‑224.06 on a first‑come, first‑served basis.
D. For the purposes of subsection C, paragraph 2 of this section, before making a contribution to a school tuition organization, the taxpayer under this title or title 20 must notify the school tuition organization of the total amount of contributions that the taxpayer intends to make to the school tuition organization. Before accepting the contribution, the school tuition organization shall request preapproval from the department of revenue for the taxpayer's intended contribution amount. The department of revenue shall preapprove or deny the requested amount within twenty days after receiving the request from the school tuition organization. If the department of revenue preapproves the request, the school tuition organization shall immediately notify the taxpayer, and the department of insurance and financial institutions in the case of a credit under section 20‑224.06, that the requested amount was preapproved by the department of revenue. In order to receive a tax credit under this subsection, the taxpayer shall make the contribution to the school tuition organization within twenty days after receiving notice from the school tuition organization that the requested amount was preapproved. If the school tuition organization does not receive the preapproved contribution from the taxpayer within the required twenty days, the school tuition organization shall immediately notify the department of revenue, and the department of insurance and financial institutions in the case of a credit under section 20‑224.06, and the department of revenue shall no longer include this preapproved contribution amount when calculating the limit prescribed in subsection C, paragraph 1 of this section.
E. If the allowable tax credit exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, the taxpayer may carry the amount of the claim not used to offset the taxes under this title forward for not more than five consecutive taxable years' income tax liability.
F. Co-owners of a business, including corporate partners in a partnership and stockholders of an S corporation as defined in section 1361 of the internal revenue code, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest. The total of the credits allowed all such owners may not exceed the amount that would have been allowed a sole owner.
G. The credit allowed by this section is in lieu of any deduction pursuant to section 170 of the internal revenue code and taken for state tax purposes.
H. A taxpayer shall not claim a credit under this section and also under section 43‑1184 with respect to the same contribution.
I. The tax credit is not allowed if the taxpayer designates the taxpayer's contribution to the school tuition organization for the direct benefit of any specific student.
J. The department of revenue, with the cooperation of the department of insurance and financial institutions, shall adopt rules and publish and prescribe forms and procedures necessary for the administration of this section.
Sec. 169. Section 43-1504, Arizona Revised Statutes, is amended to read:
43-1504. Special provisions; corporate donations for low‑income scholarships; rules
A. A school tuition organization that receives contributions from a corporation for the purposes of section 20‑224.06 or 43‑1183 must use at least ninety per cent percent of those contributions to provide educational scholarships or tuition grants only to children whose family income does not exceed one hundred eighty-five per cent percent of the income limit required to qualify a child for reduced price lunches under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1785) and to whom any of the following applies:
1. Attended a governmental primary or secondary school as a full‑time student as defined in section 15‑901 or attended a preschool program that offers services to students with disabilities at a governmental school for at least ninety days of the prior fiscal year or one full semester and transferred from a governmental school to a qualified school.
2. Enroll in a qualified school in a kindergarten program or a preschool program that offers services to students with disabilities.
3. Is the dependent of a member of the armed forces of the United States who is stationed in this state pursuant to military orders.
4. Received an educational scholarship or tuition grant under paragraph 1, 2 or 3 of this subsection or chapter 16, article 1 of this title if the children continue to attend a qualified school in a subsequent year.
B. A child is eligible to receive an educational scholarship or tuition grant under subsection A of this section if the child meets the criteria to receive a reduced price lunch but does not actually claim that benefit.
C. In 2006, a school tuition organization shall not issue an educational scholarship or a tuition grant for the purposes of section 20‑224.06 or 43‑1183 in an amount that exceeds four thousand two hundred dollars $4,200 for students in a disabled preschool or kindergarten program, a preschool program that offers services to students with disabilities or grades one through eight or five thousand five hundred dollars $5,500 for students in grades nine through twelve. In each year after 2006, the limitation amount for a scholarship or a grant under this subsection shall be increased by one hundred dollars $100.
D. A school tuition organization shall require that student beneficiaries use the educational scholarships or tuition grants on a full‑time basis. If a child leaves the school before completing an entire school year, the school shall refund a prorated amount of the educational scholarship or tuition grant to the school tuition organization that issued the scholarship or grant. The school tuition organization shall allocate any refunds it receives under this subsection for educational scholarships or tuition grants.
E. Students who receive an educational scholarship or tuition grant under this section shall be allowed to attend any qualified school of their parents' choice.
F. The department of revenue, with the cooperation of the department of insurance and financial institutions, shall adopt rules and publish and prescribe forms and procedures necessary for the administration of this section.
Sec. 170. Section 44-288, Arizona Revised Statutes, is amended to read:
44-288. Insurance provisions of contract
A. The amount, if any, included for insurance, which may be purchased by the holder of the retail installment contract, shall not exceed the applicable premiums chargeable in accordance with the rates filed with the director of the department of insurance of the Arizona corporation commission and financial institutions.
B. If dual interest insurance on the motor vehicle is purchased by the seller or seller's assignee, as the case may be, it shall within thirty days after execution of the retail installment contract, send or cause to be sent to the buyer a policy, or policies, or certificates of insurance written by an insurance company authorized to do business in this state, clearly setting forth the amount of the premium, the kind or kinds of insurance, the coverages and all the terms, options, limitations, restrictions and conditions of the contract or contracts of insurance. The buyer shall have the privilege at the time of execution of the contract of purchasing may purchase such insurance from an agent or broker of his the buyer's own selection and of selecting may select an insurance company acceptable to the holder, but in such case the inclusion of the insurance premium in the retail installment contract shall be optional with the seller.
C. If any insurance is canceled, or the premium adjusted, any refund of the insurance premium received by the holder shall be credited to the contract except to the extent applied toward payment for similar insurance protecting the interests of the buyer and the holder or either of them.
Sec. 171. Section 44-1273, Arizona Revised Statutes, is amended to read:
44-1273. Limited exemptions
A. The following sellers are not required to register and, except for section 44‑1278, subsection B and section 44‑1282, are exempt from this article:
1. A person acting within the scope of a license issued under title 20.
2. A person who is either a:
(a) Charitable organization as defined in section 44‑6551, this state or any county or municipality of this state or its agencies.
(b) Political party, candidate for federal, state or local office or campaign committee required to file financial information with federal, state or local election agencies.
3. A person making telephone solicitations without the intent to complete and who does not complete the sales presentation during the telephone solicitation but completes the sales presentation at a later face‑to‑face meeting between the solicitor and the consumer provided that the later face‑to‑face meeting is not for the purpose of collecting the payment or delivering any item purchased.
4. A person who after making a telephone contact with a consumer sends the consumer descriptive literature and does not require payment before the consumer's review of the descriptive literature and the person is not conducting a solicitation involving any of the following:
(a) The sale of an investment or an opportunity for an investment that is not registered with any state or federal authority.
(b) A prize promotion or premium.
(c) A recovery service.
(d) A business opportunity or merchandise related to a business opportunity.
5. A person or solicitor for a person who operates a retail business establishment under the same name as the name used in the solicitation of sales by telephone, if on a continuing basis all of the following apply:
(a) Merchandise is displayed and offered for sale or services are offered for sale and provided at the person's business establishment.
(b) At least fifty percent of the person's business involves the buyer obtaining the merchandise at the person's business establishment.
(c) The person holds a transaction privilege tax license pursuant to title 42, chapter 5.
6. A person or solicitor for a person soliciting another business if all of the following apply:
(a) At least fifty percent of the person's dollar volume consists of repeat sales to existing businesses.
(b) The person does not conduct a prize promotion that requires or implies that to win a consumer must pay money or purchase merchandise.
(c) Neither The person nor has not, or any of the person's principals has have not, within twenty years been convicted in any state of a felony or crime of moral turpitude, breach of trust, fraud, theft, dishonesty or violation of telephone solicitation laws, been subject to a final judgment in a civil action involving fraud, deceit or misrepresentation or been subject to an administrative order involving fraud, deceit, misrepresentation or any violation of telephone solicitations laws of any agency of this state, another state, the federal government, a territory of the United States or another country.
(d) The person is not selling a business opportunity or merchandise related to a business opportunity.
7. A person or solicitor on behalf of a person who solicits sales by periodically publishing and delivering a catalog to consumers if all of the following apply:
(a) The catalog contains a written description or illustration of each item offered for sale and the price of each item offered for sale.
(b) The catalog includes the business address or home office address of the person.
(c) The catalog includes at least twenty‑four pages of written material and illustrations.
(d) The catalog is distributed in more than one state and has an annual circulation by mail of at least two hundred fifty thousand.
B. The following sellers shall file a limited registration statement pursuant to section 44‑1272.01 and, except for sections 44‑1278 and 44‑1282, are exempt from this article:
1. A person acting within the scope of a license issued under title 6 or 32 or by the corporation commission pursuant to this title, except persons licensed under title 6, chapter 13.
2. If soliciting within the scope of the license, any licensed securities, commodities or investments broker or dealer or investment advisor or any licensed associated person of a securities, commodities or investments broker or dealer or investment advisor.
3. An issuer or a subsidiary of an issuer that has a class of securities that is subject to section 12 of the securities exchange act of 1934 (15 United States Code sections 78a through 78mm) and that is either registered or exempt from registration under paragraph (A), (B), (C), (E), (F), (G) or (H) or subsection (g)(2) of section 12 of the act. A subsidiary of an issuer that qualifies for exemption under this paragraph is not exempt unless at least sixty percent of the voting power of the subsidiary's shares is owned by the qualifying issuer or issuers.
4. A person certificated or regulated by the corporation commission pursuant to title 40, chapter 2 or a subsidiary of that person or a federal communications commission licensed cellular telephone company or radio telecommunication services provider.
5. A person making telephone solicitations for a newspaper of general circulation, a magazine or a licensed cable television system or video service provider.
6. An issuer or subsidiary of an issuer that is subject to registration under chapter 12, article 6 or 7 of this title or that is exempt from registration under section 44‑1843, subsection A, paragraph 1, 2, 3, 4, 5, 7 or 9.
7. A person making telephone solicitations for the sale or purchase of books, recordings, videocassettes and similar goods through a membership group or club regulated by the federal trade commission or through a contractual plan or arrangement such as a continuity plan, subscription arrangement, series arrangement or single purchase under which the seller ships goods to a consumer who has consented in advance to receive those goods and the recipient is given the opportunity to review goods for at least seven days and to receive a full refund for return of undamaged goods.
8. A person or solicitor for a person when soliciting previous customers, if all of the following apply:
(a) The person is not offering to sell or selling a security that is not registered with any state or federal authority.
(b) The person makes the solicitation under the same name as the name used to sell merchandise to the customer previously.
(c) The person does not operate a recovery service.
(d) The person does not conduct a prize promotion that requires a consumer to, or implies that to win a consumer must, pay money or purchase merchandise.
(e) The person has not, or any of its principals have not, within twenty years been convicted in any state of a felony or a crime of moral turpitude, breach of trust, fraud, theft, dishonesty or a violation of telephone solicitation laws, been subject to a final judgment in a civil action involving fraud, deceit or misrepresentation or been subject to an administrative order involving fraud, deceit, misrepresentation or any violation of telephone solicitation laws of any agency of this state, another state, the federal government, a territory of the United States or another country.
9. A person making telephone solicitations exclusively for the purpose of the sale of telephone answering services to be provided by that person or that person's employer.
10. Any bank holding company, bank, financial institution, trust company, savings and loan association, credit union, mortgage banker or broker, consumer lender or insurer that is licensed or supervised by an official or agency of this state, any other state or the United States, including any parent, subsidiary or affiliate of these institutions.
11. A person providing telemarketing sales service continuously for at least five years under the same ownership and control that derives seventy‑five percent of its gross telemarketing sales revenues from contracts with persons exempted by this section. A seller using an exempt telemarketing sales service is not exempt unless otherwise qualifying for an exemption under this section.
C. On request by the secretary of state, the director of the department of insurance and financial institutions shall provide a current list in a mutually acceptable electronic format to the secretary of state of the requested licensees described in subsection A, paragraph 1 of this section that includes all of the following information:
1. The true legal name of the seller.
2. All of the names under which the seller is doing business or intends to do business.
3. The complete street address of the physical location of the principal place of business of the seller and the telephone number for the location.
4. The name and address of the seller's agent who is authorized to receive service of process in this state.
D. In any civil proceeding alleging a violation of this article, the burden of proving an exemption or an exception from a definition is on the person claiming the exemption or exception. In any criminal proceeding in which a violation of this article is alleged, the burden of producing evidence to support a defense based on an exemption or an exception from a definition is on the person claiming the exemption or exception.
E. Any person or solicitor exempted in part from this article by this section shall not make or submit a charge to a consumer's credit card account or a consumer's checking, savings, share or similar account unless any of the following applies:
1. The person provides that the consumer may receive a full refund for the return of undamaged and unused goods or a cancellation of services by providing notice to the person within seven days after the date that the consumer receives the merchandise and the person processes:
(a) A full refund within thirty days after the date that the person receives the returned merchandise from the consumer.
(b) A full refund within thirty days after the purchaser of services cancels an order for the services or a pro rata refund for any services not yet performed for the consumer.
2. The person provides the consumer with a signed copy of a written contract that includes the person's name, address and business telephone number and that fully describes the merchandise offered by the person, the total price to be charged by the person and any terms or conditions affecting the sale.
3. The person is either a:
(a) Charitable organization as defined in section 44‑6551, this state or any county or municipality of this state or its agencies.
(b) Political party, candidate for federal, state or local office or campaign committee required to file financial information with federal, state or local election agencies.
Sec. 172. Section 44-3152, Arizona Revised Statutes, is amended to read:
44-3152. Exemption of certain investment advisers and investment adviser representatives; private fund adviser exemption; definitions
A. An investment adviser is not required to be licensed or make a notice filing under this chapter if that investment adviser does not have a place of business in this state and either:
1. Its only clients in this state are investment companies, other investment advisers, dealers, depository institutions, insurance companies, employee benefit plans with assets of not less than one million dollars $1,000,000 and governmental agencies or instrumentalities, whether acting for themselves or as trustees with investment control.
2. During the preceding twelve months it had fewer than six clients who are residents of this state other than those clients specified in paragraph 1 of this subsection.
B. An investment adviser is not required to be licensed or make a notice filing under this chapter if that investment adviser is a private fund adviser who that:
1. Satisfies each of the following conditions:
(a) The private fund adviser or any of its advisory affiliates are not subject to an event that would disqualify an issuer under SEC rule 262 of regulation A (17 Code of Federal Regulations section 230.262).
(b) The private fund adviser to a qualifying private fund that is not a venture capital company files with the commission each report and each report amendment that the investment adviser is required to file with the SEC pursuant to SEC rule 204-4 (17 Code of Federal Regulations section 275.204‑4). The private fund adviser shall electronically file the reports with the commission through the IARD. A report is deemed filed when the report and the fee required by subdivision (c) of this paragraph are accepted by the IARD on this state's behalf.
(c) The private fund adviser to a qualifying private fund that is not a venture capital company has paid a fee of one hundred twenty-five dollars $125 to the commission for each calendar year in which it relies on the exemption provided by this subsection.
2. Except as provided in subsection H of this section, advises at least one retail buyer fund and who that complies with paragraph 1 of this subsection and all of the following requirements with respect to each retail buyer fund advised by the private fund adviser:
(a) The private fund adviser only advises those retail buyer funds whose outstanding securities, other than short-term paper, are beneficially owned entirely by either:
(i) Any person who that, at the time that the securities are sold, the private fund adviser reasonably believes to be an accredited investor as defined in SEC rule 501(a) of regulation D (17 Code of Federal Regulations section 230.501(a)) or who that is a manager, director, officer or employee of the private fund adviser.
(ii) Any person that obtains the security through a transfer not involving a sale of that security.
(b) At or before the time of purchase of any security of a retail buyer fund, the private fund adviser discloses in writing to the purchaser of the security both of the following:
(i) All services, if any, to be provided by the investment adviser to a purchaser of securities of the retail buyer fund and to the retail buyer fund itself.
(ii) All duties, if any, that the investment adviser owes to a purchaser of securities of the retail buyer fund and to the retail buyer fund itself.
(c) The private fund adviser obtains on an annual basis audited financial statements of each retail buyer fund that is advised by the private fund adviser and delivers a copy of the audited financial statements to each purchaser of securities of the retail buyer fund. This subdivision does not apply to a limited retail buyer fund with respect to any annual period for which each owner of outstanding securities of the limited retail buyer fund has waived the application of this subdivision after the beginning of the annual period to which the waiver applies.
C. If a private fund adviser is registered with the SEC, the private fund adviser is not eligible for the exemption provided by subsection B of this section.
D. A person is not required to be licensed or to make a notice filing under this chapter if the person is employed by or associated with an investment adviser that is not required to be licensed or make a notice filing under this chapter pursuant to subsection B of this section and the person does not otherwise act as an investment adviser representative.
E. An investment adviser who that becomes ineligible for the exemption provided by subsection B of this section must comply with all applicable laws and rules requiring licensing or notice filing within ninety days after the date that the investment adviser's eligibility for the exemption ceases.
F. Subsection B, paragraph 1, subdivision (a) of this section does not apply on a showing of good cause and without prejudice to any other commission action if the commission determines that it is not necessary under the circumstances that an exemption be denied.
G. Compliance with subsection B, paragraph 2, subdivision (b) of this section does not relieve a private fund adviser of any disclosure obligation under any other state or federal law.
H. An investment adviser to a retail buyer fund that existed before September 1, 2016 and that does not satisfy the conditions prescribed by subsection B, paragraph 2, subdivision (a) of this section on September 1, 2016 may be eligible for the exemption prescribed by subsection B, paragraph 1 of this section if all of the following conditions are satisfied:
1. Beginning on September 1, 2016, the retail buyer fund ceases to sell securities to persons other than the persons described in subsection B, paragraph 2, subdivision (a), item (i) of this section.
2. The investment adviser discloses in writing the information described in subsection B, paragraph 2, subdivision (b) of this section to each purchaser of securities of the retail buyer fund by December 1, 2016.
3. For every fiscal year ending after August 31, 2016, the investment adviser delivers audited financial statements to each owner of securities of the retail buyer fund as required by subsection B, paragraph 2, subdivision (c) of this section.
I. If the commission determines that it is not necessary for any investment adviser or class of investment advisers or investment adviser representative or class of investment adviser representatives to be licensed to protect the public interest because of the special characteristics of the securities or transactions in which the investment adviser or investment adviser representative may be involved, the commission may by rule or order provide limited licensure requirements or exempt these persons from licensure under this article.
J. A dealer or salesman that is registered with the commission pursuant to chapter 12, article 9 of this title is not required to be licensed, make a notice filing or comply with reporting requirements under this article.
K. The authorized use of the designation "chartered financial consultant" by an insurance producer licensed by the department of insurance and financial institutions does not in and of itself constitute holding oneself out to the public as an investment adviser or require a license under this article.
L. Subsection B of this section does not exempt an investment adviser who that has custody of any securities or funds of any client from complying with commission rules relating to the custody of client funds or securities by investment advisers.
M. For the purposes of this section:
1. "Advisory affiliate" has the same meaning prescribed in the glossary of terms to form ADV, which is the uniform application for investment adviser registration (17 Code of Federal Regulations section 279.1) or its successor form.
2. "Affiliated person" means a person that controls, is controlled by or is under common control with the other specified persons.
3. "Control" means possessing, directly or indirectly, the power to direct or cause the direction of management and policies.
4. "Derivative investment" means an acquisition of securities by a venture capital company in the ordinary course of its business in exchange for an existing venture capital investment, either on the exercise or conversion of the existing venture capital investment or in connection with a public offering of securities or the merger or reorganization of the operating company to which the existing venture capital investment relates.
5. "Entity" means a partnership, corporation, trust, limited liability company, limited liability partnership, sole proprietorship or other organization.
6. "Family member":
(a) Means a lineal descendant, including a child related by adoption or blood and an individual who was a minor when another family member became the individual's legal guardian, of a common ancestor who is living or deceased if the common ancestor is not more than ten generations removed from the youngest generation of family members.
(b) Includes:
(i) A spouse of the lineal descendant described in subdivision (a) of this paragraph.
(ii) A stepchild and the stepchild's spouse.
(iii) A foster child and the foster child's spouse.
7. "Former family member" means a spouse or stepchild who was a family member but who is no longer a family member.
8. "Limited retail buyer fund" means a retail buyer fund that satisfies all of the following conditions:
(a) Has no more than, or the private fund adviser reasonably believes that the fund has no more than, fifteen purchasers of securities, individually or collectively with all other limited retail buyer funds, that are advised by the private fund adviser or an affiliated person. For the purposes of calculating the number of purchasers under this subdivision, a purchaser that is an entity shall be counted as the number of individuals who are directly or indirectly beneficial owners in the entity, except that all individuals who are family members or former family members shall be counted as a single purchaser.
(b) When the securities are sold the private fund adviser reasonably believes that each purchaser of securities from the limited retail buyer fund that is not a qualified purchaser, as defined in section 2(a)(51) of the investment company act of 1940, is a qualified client as defined in 17 Code of Federal Regulations section 275.205-3.
(c) The private fund adviser and any affiliated person do not hold themselves out to the public as an investment adviser and the private fund adviser and any affiliated person do not act as an investment adviser to any investment company registered under the investment company act of 1940.
(d) The private fund adviser and any affiliated person have not offered or sold any securities of the limited retail buyer fund by any form of general solicitation or general advertising.
9. "Management rights" means the right, obtained contractually or through ownership of securities, either through one person alone or in conjunction with one or more persons acting together or through an affiliated person, to substantially participate in, substantially influence the conduct of or provide or offer to provide significant guidance and counsel concerning the management, operations or business objectives of the operating company in which the venture capital investment is made.
10. "Operating company":
(a) Means an entity that is primarily engaged, directly or through a majority owned majority-owned subsidiary, in the production or sale, including any research or development, of a product or service other than the management or investment of capital.
(b) Does not include an individual or sole proprietorship.
11. "Person" means an individual or an entity.
12. "Private fund adviser" means an investment adviser who that provides advice solely to one or more qualifying private funds.
13. "Qualifying private fund" means an issuer that qualifies for the exclusion from the definition of an investment company under section 3(c)(1), 3(c)(5) or 3(c)(7) of the investment company act of 1940.
14. "Retail buyer fund" means a qualifying private fund that is neither a venture capital company nor a qualifying private fund that qualifies for the exclusion from the definition of an investment company under section 3(c)(7) of the investment company act of 1940.
15. "Venture capital company" means an entity that satisfies at least one of the following conditions:
(a) The entity is a venture capital fund as defined in SEC rule 203(l)-1 (17 Code of Federal Regulations section 275.203(l)-1).
(b) The entity is a venture capital operating company as defined in SEC rule 2510.3-101(d) (29 Code of Federal Regulations section 2510.3‑101(d)).
(c) On at least one occasion during the annual period commencing with the date of its initial capitalization, and on at least one occasion during each annual period thereafter, at least fifty percent of its assets other than short-term investments pending long-term commitment or distribution to investors, valued at cost, are venture capital investments or derivative investments.
16. "Venture capital investment" means an acquisition of securities of an operating company as to which the investment adviser, the entity advised by the investment adviser or an affiliated person of either has or obtains management rights.
Sec. 173. Section 44-6951, Arizona Revised Statutes, is amended to read:
44-6951. Definitions
In this chapter, unless the context otherwise requires:
1. "Audited financial statement report" means a financial report on a provider that is prepared by an independent certified public accountant.
2. "Department" means the department of insurance and financial institutions.
3. "Director" means the director of the department of insurance and financial institutions.
4. "Entrance fee" means an initial or deferred transfer to a provider of a facility of a sum of money or property by a person entering into a senior residential entrance fee contract that in amount or value is at least six hundred per cent percent of the periodic fee charged to a resident, all or a portion of which may be refunded to that resident, a benefactor or a beneficiary on the resident's termination of residence in the facility.
5. "Facility" means a place or places in which a provider undertakes to provide a resident with a living unit pursuant to a senior residential entrance fee contract. Facility does not include any provider that is regulated by the department of insurance and financial institutions pursuant to title 20, chapter 8.
6. "Living unit" means any apartment, room or other area in a facility set aside for the exclusive use of one or more identified residents.
7. "Periodic fee" means the monthly calculated amount charged to a resident for lodging in a living unit provided pursuant to a senior residential entrance fee contract.
8. "Provider" means a person who provides lodging to seniors in a living unit pursuant to a senior residential entrance fee contract.
9. "Resident" means an individual who enters into a senior residential entrance fee contract with a provider or who is designated in a senior residential entrance fee contract to receive lodging.
10. "Senior residential entrance fee contract" means a contract to provide a living unit in a facility for the duration of a resident's life or for a term of more than one year that is conditioned on the transfer of an entrance fee to the provider in addition to or in lieu of the payment of periodic charges for the living unit and that is further conditioned on the resident's ability to live independently.
Sec. 174. Section 48-586, Arizona Revised Statutes, is amended to read:
48-586. Form and execution of contract; liquidated damages; supervision of performance; delivery of assessment
A. The superintendent of streets shall make all written contracts and receive all bonds authorized by this article. The contracts shall specify a reasonable time for completion of the improvement.
B. The governing body may prescribe a form of contract not inconsistent with this article and fix a reasonable time for completion of the work, which may be extended from time to time by the superintendent with the consent of the governing body.
C. The governing body may prescribe in the form of the contract, an amount, not as a forfeit or penalty, but as liquidated damages, per calendar day to be paid by the contractor if the contractor fails to complete the work within the time fixed in the contract or as the time for completion of the work may have been extended by the superintendent with the consent of the governing body. Permitting Allowing the contractor to finish the work or any part of the work after the time fixed for its completion, or after the date to which the time fixed for its completion may have been extended, does not operate as a waiver by the governing body or the superintendent of any of their rights under the contract or subsections E and F of this section. Any liquidated damages received shall be used to decrease the amounts assessed. Any assessments that are affected by a decrease in the contract amount as a result of the imposition of liquidated damages may be adjusted pursuant to section 48‑590, subsection F, except that where the city municipality has contributed its funds to the construction of the improvements, the liquidated damages so received shall be prorated between the city municipality and the properties assessed.
D. The work shall be done under the direction of the superintendent, but the governing body may prescribe rules and regulations relating to the supervision of the work. The superintendent may appoint a suitable person to take charge of and superintend the construction of an improvement who shall see that the contract is fulfilled. The governing body shall fix the compensation to be allowed such person.
E. If the work is not prosecuted with diligence, the governing body, after a hearing upon on notice served upon on the contractor and his the contractor's bondsmen, may prescribe such terms and conditions as it deems proper before permitting allowing the contractor to continue with the work.
F. If the governing body finds that the contractor is unable to continue with the work or to perform the work according to the contract, the governing body shall hold the contractor in default and make demand upon on the surety to act in accordance with the contract and terms and conditions of the performance bond. Should the surety fail to act within sixty days from written notice, the governing body may order that bids be received from other contractors to complete the work. After receiving bids, the governing body may award the contract to the lowest responsible bidder. If, after receiving the new bids, the cost of completion exceeds the monies or bonds available for payment, the governing body shall make a demand upon on the defaulting contractor's bondsman surety for payment of the differential within twenty days of after the mailing of the notice. If the bondsman surety is represented by an attorney-in-fact, the demand may be served upon on the attorney-in-fact or at the bondsman's surety's principal office within this state. If the bondsman surety has no attorney‑in‑fact and no principal office within this state, the demand shall be served upon on the director of the department of insurance and financial institutions. The demand may not exceed the penal sum of the performance bond. Monies collected from the bondsman surety shall be used to pay the added costs of the work. Any difference between the actual costs of the work and the amount assessed shall be advanced by the municipality, which shall use its contingency funds or any other available funds to make payments to the new contractor. The municipality shall reimburse itself from the amounts paid by the former contractor or his bondsman the former contractor's surety or from assessments and bonds when funds become available. All additional costs of the work not received from the original contractor's bondsman surety shall ultimately be assessed against the benefitting parcels of property.
G. If the contractor is not to be paid pursuant to section 48‑597, subsection G or section 48‑618, subsection F, upon on completion of the work the contractor shall be entitled to the issuance and delivery of the assessment as provided in this article.
Sec. 175. Section 48-924, Arizona Revised Statutes, is amended to read:
48-924. Form and execution of contract; supervision of performance; default; new bids; delivery of assessment
A. The superintendent of streets shall make all written contracts and receive all bonds authorized by this article. The contract shall require the contractor to timely repair any defects in the work determined to exist within one year after completion of the contract. The contracts shall specify a reasonable time for the completion of the improvement.
B. The board of directors may prescribe a form of contract not inconsistent with this article and fix a reasonable time for the completion of the work, which may be extended from time to time by the superintendent.
C. The work shall be done pursuant to contract and under the direction of the superintendent, but the board of directors may prescribe rules and regulations relating to the supervision of the work. The superintendent may appoint a suitable person to take charge of and superintend the construction of an improvement who shall see that the contract is fulfilled. The board of directors shall fix the compensation to be allowed such person.
D. If the work is not prosecuted with diligence, the board of directors, after a hearing upon on notice mailed or personally served upon on the contractor, the contractor's surety and all persons shown as the owners of property affected by the assessments as their names and addresses appear on the last certified property tax roll, may prescribe such terms and conditions as it deems proper before permitting allowing the contractor to continue with the work if the board of directors determines that the contractor is capable of continuing the work. The determination of the board of directors shall be final and conclusive, and the determination may be reviewed only by a special action. Any such action shall be given priority by the court. The board of directors may cause a reporter's transcript to be made of the hearing. Such transcript, when made and certified and filed with the clerk, shall be the official record of the hearing. Upon On request by the contractor, the surety, any owner, or the superintendent of streets, the board of directors may issue subpoenas or subpoenas duces tecum directed to any witness desired by any party to the hearing. The subpoena shall have the same effect as subpoenas in civil actions. If the subpoena is not obeyed, the board of directors may, on a majority vote of its members, may cite the disobedient party for contempt and certify such action to the superior court. The superior court shall act upon on such citation in the same manner as other cases of civil contempt.
E. If the board of directors finds that the contractor is unable to continue with the work or to perform the work according to the contract or has not performed the work according to the contract, the board of directors shall hold the contractor in default and make demand on the surety to act in accordance with the contract and terms and conditions of the performance bond. If the surety fails to act within sixty days from after receiving written notice, the board of directors may order that bids be received from other contractors to complete the work. After receiving bids, the board of directors may award the contract to the lowest responsible bidder. If, after receiving the new bids, the cost of completion exceeds the monies or bonds available for payment, the board of directors shall make a demand on the defaulting contractor's surety for payment of the difference within twenty days of after the mailing of the notice. If the surety is represented by an attorney‑in‑fact, the demand may be served on the attorney-in-fact or at the surety's principal office within this state. If the surety has no attorney-in-fact and no principal office within this state, the demand shall be served upon on the director of the department of insurance and financial institutions. The demand may not exceed the penal sum of the performance bond. Monies collected from the surety shall be used to pay the added costs of the work. The district shall advance any difference between the actual costs of the work and the amount assessed and shall use its contingency fund or any other available monies to make payments to the new contractor. The district shall reimburse itself from the amounts paid by the former contractor or surety or from assessments and bonds when monies become available. All additional costs of the work not received from the original contractor or such contractor's surety may be assessed against the benefiting parcels of property if the board of directors finds that such action is necessary both to prevent a default on the district's bonds and to complete the work.
F. If the contractor is not to be paid pursuant to section 48‑935, subsection G or section 48‑962, subsection F, upon on completion of the work the contractor is entitled to the issuance and delivery of the assessment as provided by this article.
G. This section governs over any other law. Notwithstanding any other law, the contractor and the surety shall not be paid interest on amounts due during any period of contract suspension or termination unless the findings of the board of directors are arbitrary and capricious.
Sec. 176. Section 48-2054, Arizona Revised Statutes, is amended to read:
48-2054. Form and execution of contract; supervision of performance; delivery of assessment
A. The district shall make all written contracts and receive all bonds authorized by this article. The contracts shall specify a reasonable time for completing the improvement.
B. The board may prescribe a form for the contract which that is not inconsistent with this article and fix a reasonable time for completing the work, which may be extended by the board.
C. The work shall be done under the direction of the board or its engineer. The board may prescribe administrative rules relating to supervising the work. The board may appoint a suitable person to take charge of and superintend the construction of an improvement. The person appointed is responsible for supervising fulfillment of the contract. The board shall fix the compensation for such person.
D. If the work is not performed with diligence, the board, after a hearing and service of notice on the contractor and his the contractor's surety, may prescribe such terms and conditions as it deems proper before permitting allowing the contractor to continue with the work.
E. If the board finds that the contractor is unable to continue with the work or to perform the work according to the contract, the board shall hold the contractor in default and make demand on the surety to act according to the contract and the terms and conditions of the performance bond. If the surety fails to act within sixty days from after the date of the written notice, the board may order that bids be received from other contractors to complete the work. After receiving bids, the board may award the contract to the lowest responsible bidder. If, after receiving the new bids, the cost of completion exceeds the monies or bonds available for payment, the board shall make a demand on the defaulting contractor's surety for payment of the difference within twenty days of the mailing of the notice. If the surety is represented by an attorney‑in‑fact, the demand may be served on the attorney-in-fact or at the surety's principal office in this state. If the surety has no attorney-in-fact and no principal office in this state, the demand shall be served on the director of the department of insurance and financial institutions. The demand may not exceed the penal sum of the performance bond. Monies collected from the surety shall be used to pay the added costs of the work. Any difference between the actual costs of the work and the amount assessed shall be advanced by the district, which shall use its contingency fund or any other available monies to pay the new contractor. The district shall reimburse itself from the amounts paid by the former contractor or his the contractor's surety or from assessments and bonds when monies become available. All additional costs of the work not received from the original contractor's surety shall ultimately be assessed against the benefitting parcels of property.
F. If the contractor is not to be paid pursuant to section 48‑2065, subsection G or section 48‑2081, subsection F, on completion of the work the contractor is entitled to the issuance and delivery of the assessment as provided in this article.
Sec. 177. Section 48-2842, Arizona Revised Statutes, is amended to read:
48-2842. Form and execution of contract; supervision of performance; surety
A. The district shall make all written contracts and receive all bonds authorized by this article. The contracts shall specify a reasonable time for completing the flood protection facility.
B. The board may prescribe a form for the contract that is not inconsistent with this article or with title 34, chapter 6, article 1, if that procurement method is chosen, and fix a reasonable time for completing the work, which may be extended by the board.
C. The work shall be done under the direction of the board or its engineer. The board may prescribe administrative rules relating to supervising the work. The board may appoint its engineer or a suitable person to take charge of and direct the construction of a flood protection facility on behalf of the district. The person appointed is responsible for supervising fulfillment of the contract. The board shall fix the compensation for that person.
D. If the work is not performed with diligence, the board, after a hearing and service of notice on the contractor and the contractor's surety, may prescribe those terms and conditions as it deems proper before permitting allowing the contractor to continue with the work.
E. If the board finds that the contractor is unable to continue with the work or to perform the work according to the contract, the board shall hold the contractor in default and make demand on the surety to act according to the contract and the terms and conditions of the performance bond. If the surety fails to act within sixty days after the date of the written notice, the board may order that proposals be received from other contractors to complete the work. After receiving proposals, the board may award the contract to the lowest responsible bidder. If, after receiving the new proposals, the cost of completion exceeds the monies or bonds available for payment, the board shall make a demand on the defaulting contractor's surety for payment of the difference within twenty days after the mailing of the notice. If the surety is represented by an attorney-in-fact, the demand may be served on the attorney-in-fact or at the surety's principal office in this state. If the surety has no attorney-in-fact and no principal office in this state, the demand shall be served on the director of the department of insurance and financial institutions. The demand may not exceed the penal sum of the performance bond. Monies collected from the surety shall be used to pay any added costs of completing the work. Any difference between the actual costs of the work and the amount assessed shall be advanced by the district, which shall use its contingency fund or any other available monies to pay the new contractor. The district shall reimburse itself from the amounts paid by the former contractor or its surety or from assessments and bonds when monies become available. All additional costs of the work not received from the original contractor's surety shall ultimately be assessed against the benefiting parcels of property.
Sec. 178. Rules; exemption
A. The department of insurance and financial institutions shall adopt rules to establish fees relating to direct and indirect costs in connection with examinations pursuant to section 20‑142, Arizona Revised Statutes, as amended by this act.
B. For the purposes of this section, the department of insurance and financial institutions is exempt from the rulemaking requirements of title 41, chapter 6, Arizona Revised Statutes, for one year after the effective date of this act.
Sec. 179. Conforming legislation
The legislative council staff shall prepare proposed legislation conforming the Arizona Revised Statutes to the provisions of this act for consideration in the fifty‑fifth legislature, first regular session.
Sec. 180. Retroactivity
This act applies retroactively to from and after June 30, 2020.
APPROVED BY THE GOVERNOR MARCH 24, 2020.
FILED IN THE OFFICE OF THE SECRETARY OF STATE MARCH 24, 2020.
