Whereas, The deferred operation of this act would tend to defeat its purpose, which is to authorize the creation of a new mutual insurance company to write motor vehicle and other forms of insurance in the commonwealth, therefore it is hereby declared to be an emergency law, necessary for the immediate preservation of the public convenience.
Be it enacted by the Senate and House of Representatives
in General Court assembled, and by the authority of the same,
WHEREAS, A new domestic mutual company, shall be created to take the place of Lumberman's Mutual Casualty Company, American Motorists Insurance Company, American Manufacturers Mutual Insurance Company and American Protection Insurance Company otherwise known as the Kemper Group in the motor vehicle and homeowners insurance market in Massachusetts, and
WHEREAS, the Kemper Group has committed to funding the domestic mutual company with capital and other support services, including support services, including one hundred and nineteen million dollars in guaranty funds, and
WHEREAS, the new domestic mutual company shall not be considered a newly emerging company or a newly writing company for the purpose of the company's status as a member of Commonwealth Automobile Reinsurers otherwise known as CAR pursuant to the rules of operation of CAR in effect on the effective of this act, and
WHEREAS, the new domestic mutual company shall assume the Kemper Group's participation share of the CAR deficit and other CAR obligations for policy year 1988 and later, subject to terms and conditions as shall be approved by the Commissioner of Insurance.
SECTION 1. The commissioner of insurance is hereby authorized and directed to approve the formation of a mutual insurance company, to be known as Arbella Mutual Insurance Company, which shall be authorized to transact any and all kinds of insurance, as the commissioner shall approve. Except as provided herein, or in its articles of organization or by-laws, such company shall have all powers conferred upon a mutual insurance company incorporated in the commonwealth and shall be subject to all provisions of the General Laws which are now or may in the future be applicable to such companies.
SECTION 2. Arbella Mutual Insurance Company shall be governed by a board of directors elected by the policyholders of the company in accordance with the General Laws; provided, however, that the commissioner of insurance shall have the authority to remove any director of the company, upon notice and a finding that said director violated any provision of law or fiduciary duty for the protection of policyholders of the company, or negligently did or omitted to do any act, which materially impaired the sound financial condition of the company or caused the company to refuse to issue motor vehicle policies which action resulted in a material disruption of the motor vehicle insurance market in Massachusetts. In making such determination, the commissioner may rely in whole or in part on the report of any competent person appointed in accordance with section three.
SECTION 3. In addition to any other powers contained in the General Laws with respect to the examination of the financial condition of insurance companies, whenever the commissioner of insurance deems it advisable, he may appoint a competent person who shall make such examination of the company as the commissioner determines, at the expense of the company. The commissioner may disapprove any auditor selected by the company and the commissioner may require appointment of a different auditor.
SECTION 4. Notwithstanding any other provision of any general or special law, Arbella Mutual Insurance Company shall:
(a) have in lieu of guarantee capital a guaranty fund in an amount as the commissioner shall initially determine. Said guaranty fund shall be considered surplus for the purpose of all provisions of chapter one hundred and seventy-five of the General Laws. Said guaranty fund shall be in the form of guarantee fund certificates and shall be subject to terms and conditions with respect to interest, repayment, and voting rights as the commissioner shall approve. The company shall not be subject to the provisions of said chapter one hundred and seventy-five, insofar as the provisions thereof relating to guarantee capital are inconsistent with this section, including but not limited to, sections seventy-seven, seventy-nine, eighty-five A, ninety-three and ninety-three F of said chapter one hundred and seventy-five;
(b) not be subject to the provisions of sections seventy-three, ninety A, ninety C, ninety-two, ninety-three, ninety-three A and ninety-three B of said chapter one hundred and seventy-five, insofar as they relate to subscriptions for insurance or securing initial applications for insurance;
(c) not be subject to the provisions of the first paragraph of sections fifty-eight and fifty-nine of said chapter one hundred and seventy-five;
(d) be authorized to issue nonassessable policies.
SECTION 5. Arbella Mutual Insurance Company may at any time submit a plan to the commissioner of insurance for conversion to a domestic stock insurance company. The commissioner shall, after due hearing and investigation, approve such conversion unless he determines that it is not in the best interest of the policyholders of the company or the public. The commissioner may at any time require the conversion of the company to a stock company if he determines that the financial condition of the company may become impaired and that no reasonable alternative methods are available to restore the financial stability of the company. Any such plan for conversion shall:
(a) be adopted by vote of a majority of the directors of the company; provided however, that if the commissioner of insurance requires said company to convert to a stock company, approval of the plan by the directors shall not be required;
(b) be approved by a majority of the members of the company voting, in person or by proxy, at a meeting duly called for such purpose; provided, however, that if the commissioner of insurance requires said company to convert to a stock company, approval of the plan by the policyholders shall not be required;
(c) be approved by the commissioner of insurance as conforming to the requirements of this act and not prejudicial to the policyholders of such company or to the public interest;
(d) provide that an equitable share of the value of such company immediately prior to conversion, over and above all outstanding obligations of the company, shall be determined and distributed among the policyholders of such company, in accordance with a formula approved by the commissioner, which distribution may be in the form of shares of stock of the resulting stock company, or in cash, or in such other forms as the commissioner shall approve; provided, however, that if the commissioner finds that the value of such company prior to conversion is insufficient to warrant any such distribution, the plan may provide for conversion without any such distribution;
(e) establish the class or classes of stock of the resulting stock corporation, and determine the voting and other rights of each such class, all as shall be approved by the commissioner;
(f) specify the terms and condition of the issuance of shares of stock of the company, after conversion, to any other person or entity which has or will make an investment in such company, including, but not limited to, the issuance of securities in exchange for outstanding securities, claims, or property interests, or partly in such exchange or partly in cash, all as shall be approved by the commissioner;
(g) include, as a part thereof, such amendments to the charter, articles of organization or by-laws of the company as are necessary or appropriate in connection with such conversion, which amendments, notwithstanding any other provision of law, may be adopted by a vote of the majority of the directors of such company and which shall be approved by the commissioner as conforming to the requirements of this act, without compliance with the notice and other requirements which may now exist in the charter or by-laws of such company if the commissioner finds that in view of the existing financial condition of such company, or the need for immediate remedial action or otherwise, non-compliance is in the best interests of the policyholders of such company.
SECTION 6. Any conversion authorized by this act shall not take effect until the commissioner of insurance issues a written certification that such conversion is in accordance with the requirements of this act and is fair and reasonable to the policyholders and in the public interest and such certificate is filed with the state secretary, together with the articles of organization of the stock company resulting from such conversion. The stock company resulting from said conversion shall be subject to and shall comply with all provisions of the general or special laws applicable to insurance companies. The stock company shall be deemed to have been organized at the time the converted mutual was organized.
SECTION 7. Upon conversion, the officers and directors of Arbella Mutual Insurance Company shall remain as the officers and directors of the resulting stock company until their successors shall have been duly elected and qualified in accordance with the by-laws of the company, as the same may have been amended pursuant to the plan. No contracts, claims, suits, or other rights of or against the company shall be affected by such conversion. All rights, interests and properties of the mutual company shall, without any further deed or act, be transferred to and continue to be the property of the resulting stock company, and the resulting stock company shall assume and remain bound by all obligations and liabilities of the mutual company.