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aggregate premium volume of essential property insurance written by participating insurers in relation to the total premium volume in such lines written by all property insurers in the State.
(e) Federal riot reinsurance will be offered only to those insurers that: (1) Have direct writings in one or more lines of essential property insurance and (2) are actually or potentially riskbearing members of any pool organized under the Plan, as certified by the State insurance authority.
(e) An inspection under the Plan shall be without cost to the property owner. Payment of a deposit premium may not be required as a precondition to inspection. However, the Plan may allow a property owner, at his option, to pay a deposit or provisional premium. at the time of application, rather than at the time insurance under a deemer or binder provision becomes effective.
(f) The Plan may not require the presence of the owner of the building for a tenant to obtain an inspection, but the inspection facility must be provided access to the relevant portions of the building in which the property to be insured is located.
§ 1905.5 Inspections and applications for
insurance. (a) The Plan shall designate one or more inspection facilities, which may also operate as placement facilities if desirable.
(b) The Plan shall make its inspection and placement facilities readily available and accessible to the general public by providing a central source of information on the services it provides and on the manner of application. To assure the public's access to such information, the telephone information number of the Plan shall be listed alphabetically as "FAIR Plan": (1) In the white sections and (2) under "Insurance" in the classified sections of the telephone directories of each city where these facilities maintain an office.
(c) The Plan shall require that there will be an inspection of any eligible risk that is submitted to a placement facility or to a servicing insurer if such facility or insurer is unwilling to write coverage at regular rates. The Plan may not require as a precondition for obtaining an inspection that the property owner make a showing or certification that he has been unable to obtain insurance in the regular market.
(d) The Plan shall provide that inspections may be requested by the property owner his authorized representative, the insurer, or the insurance agent, broker, or other producer. The Plan shall also provide that the request for an inspection need not be in writing, although it can provide for the transcribing of the pertinent information on a form.
8 1905.6 Deemer or binder requirement.
(a) Each Plan shall contain either a deemer or a binder provision in order to prevent lapses of insurance coverage for risks eligible under the Plan before coverage has been provided or declined under the Plan. A Plan may contain both a deemer and a binder provision.
(b) Plans adopting a deemer provision shall provide that eligible risks are automatically deemed insured if: (1) Through no fault of the applicant, coverage has not been either offered or denied within 20 calendar days after the date the request for inspection was received, and (2) the applicant, at the time of requesting the inspection or at any time prior to the receipt of an inspection report indicating that the property is uninsurable, pays either the estimated annual premium or the portion thereof that is appropriate for the period of time for which the coverage is provided. The period of coverage provided under any such deemer provision shall not be less than the time required to complete the inspection and to process fully in the ordinary course of business any related application for insurance of the property submitted either directiy to the place.nent facility or first to a designated insurer and thereafter to the placement facility if necessary.
(c) Plans adopting a binder provision shall provide that an applicant may apply for and obtain temporary coverage for a risk eligible under the Plan upon payment of a provisional premium at the time of requesting the inspection. The Plan, at its option, may also provide that coverage under the binder shall be extended for a suffi. cient period of time, after receipt of an unfavorable inspection report, to enable the applicant to bring the property up to insurable standards, but during the period of such rehabilitation reasonable condition surcharges inay be added to the normal premium rates otherwise applicable to such property.
(d) Coverage provided under the deemer or binder provisions of the Plan shall be at the normal rates for the class of property to be insured, exclusive of any surcharge, but shall be subject to an appropriate premium adjustment, if necessary, after the property has been inspected.
(e) It is expected that no policyholder will be without coverage following a cancellation nonrenewal under the Plar. or otherwise, due solely to delays in inspecting and placing the risk under the Plan, and the Plan shall set forth the manner in which the objective of maximum possible continuity of coverage is to be accomplished. Binding coverage immediately, subject to inspection, would accomplish this and is encouraged.
constitutes the basis for this determination.
(b) No surcharge shall be made on any risk unless it is based upon an appropriate, objective, and identifiable physical condition of the property, as disclosed by an inspection and specified in an inspection report, and no surcharge shall be made on the basis of environmental hazards.
(c) Reasonable underwriting standards for declination of risks must be relevant to the perils against which insurance is sought. For example, they may include:
(1) Physical condition of the property; however, the mere fact that a property does not satisfy all current building code specifications would not, in itself, suffice;
(2) The property's present use, such as extended vacancy (other than for rehabilitation purposes) or the improper storage of flammable materials;
§ 1905.7 Placement action after inspection
report. (a) The placement facility or insurer to which a risk is referred by the inspection facility shall complete an action report and promptly notify the applicant of the following:
(1) The amount of coverage that it agrees to write; and, if the coverage is with a surcharge, the amount of such surcharges and the improvements needed for coverage at a lower surcharged rate and at an unsurcharged rate;
(2) The amount of coverage it agrees to write if specified improvements are made; or
(3) That it declines to write the coverage because the property does not meet reasonable underwriting standards, in which case it will also state the specific information from the inspection report and other sources that
(3) Other specific characteristics of ownership, condition, occupancy, or maintenance that are violative of law or public policy and that result in a substantially increased exposure to loss.
(d) In the event that a risk is declined on the basis that it does not meet reasonable underwriting stand. ards, or that the coverage will be written on condition that the property be improved, the insurer or placement fa. cility shall promptly send copies of the inspection and action reports to the applicant, advising him of the appeal procedures available, including rights of appeal to the State insurance authority under applicable State law. Appeal procedures within the Plan shall provide for prompt handling. g 1905.8 Prohibition of unnecessary rein
spections. In order to avoid unduly increasing the costs of the program, no Plan shall require the annual or routine reinspection of eligible risks for which coverage has been previously obtained under the Plan. Once an eligible risk has been inspected and found insurable, the Plan may require its reinspection only: (a) Upon request of the property owner, (b) on a limited basis
for statistical purposes, (c) upon by three or more insurers, or (3) the change in type of occupancy, (d) upon obtaining of qualified loss adjusters at a reasonable periodic schedule of not the lowest administrative cost for a more often than once every 3 years, or reasonable period of time by FAIR (e) for cause, upon information or Plans through the adoption of an imwell-founded belief that the occupan- partial and periodic public bidding cy hazards or physical conditio of the
procedure. property have substantially changed since the last inspection.
$ 1905.11 Coding and reports under the
Plan. $ 1905.9 Notice of cancellation or renewal.
(a) The Plan shall provide for the
separate coding of policies written pur(a) Except in cases of owner or occu- suan: to the Plan. pant incendiarism, material misrepre.
(b) The Plan shall provide for the sentation, or nonpayment of premium,
submitting to the State insurance aueach Plan shall require its participat
thority and the Administrator of periing insurers to give, and each such in
odic reports setting forth the number surer shall give, property owners no
of requests for inspection, the number less than 30 days prior written notice
of risks inspected, and the results of of any cancellation or nonrenewal of
referrals by the facility, including by coverage initiated by the insurer with
individual insurer the number of risks respect to any eligible risk, whether or
accepted, the number of risks condinot such risk is then insured under the
tionally accepted and reinspections Plan, in order to allow the affected
made, the number of risks declined, property owner sufficient time to
and such other information as the apply for an inspection and to obtain
State insurance authority or the Adcoverage under the Plan if necessary.
ministrator may from time to time re(b) For the purposes of this § 1905.9,
quire. the term cancellation or nonrenewal shall include (1) reductions in amounts
(c) Not later than 90 days after the of insurance and adverse modifications
close of its fiscal year, each placement in coverage initiated by the insurer facility under the Plan shall furnish to with respect to any owner individually,
the Administrator a comprehensive and (2) refusals by the insurer or its report on its operations during the agents to renew any expiring coverage
year, which at the minimum shall inin any line of essential property insur
clude such information for the year as ance previously provided to the prop- may be called for on Form HUD-1603, erty owner.
Quarterly State FAIR Plan Report.
The first such report shall include $ 1905.10 Impartial selection of adjusters. copies of all previously published (a) No Plan or placement facility
annual and interim reports not alshall discriminate by providing for the
ready furnished to the Administrator. primary use of services or any prefer
Subsequent reports shall include any ential treatment of any adjuster to the
additional printed or published report exclusion, detriment, or disadvantage
under the Plan. of any other adjuster of equal or (d) For periods beginning on and equivalent professional qualifications
after January 1, 1970, each placement in any formal or informal arrange- facility under the Plan shall also proments made or promulgated for the vide the Administrator with quarteradjustment of any insured losses annual reports of its current operunder policies or contracts of insur- ations on Form HUD-1603, which the ance issued under the Plan.
Administrator shall furnish to the fa(b) This § 1905.10 shall not be con- cility. Such reports shall be due not strued to prohibit (1) the use by ser- later than 90 days after the end of vicing insurers of their adjusting each quarter. With respect to any prestaffs, (2) the impartial appointment vious quarter for which the reports reof a supervisory adjuster with respect quired by this paragraph have not alto any individual loss directly insured ready been furnished, reports shall be
due not later than 90 days after the effective date of this § 1905.11.
$ 1905.12 Inapplicability and waiver of
regulations. (a) Notwithstanding the provisions of § 1905.3(a)(2), no Plan shall be required to offer vandalism and malicious mischief coverage in any State where by September 1, 1970, the State insurance authority certifies that the availability of such coverage in the normal market is adequate to meet the demand for such coverage, and that such adequate market availability also extends to properties that obtain fire and extended coverage under the Plan.
(b) Notwithstanding its effective date, the application of any requirement imposed by this part to any existing Federally approved statewide FAIR Plan shall automatically be deferred until the close of the first full regular session of the State legislative body following such effective date in any State where the implementation of such requirement is certified by the State insurance authority by September 1, 1970, to be inconsistent with or unauthorized by an applicable State statute in force on such effective date.
(c) In addition to the specific waiver authorized by paragraph (a) of this section, the Administrator may waive compliance with any other require. ment of this part with respect to any State, temporarily or indefinitely, and in whole or in part, if the State insurance authorit certifies that compli. ance is unnecessary or inadvisable under local conditions or State law and the Administrator concurs in such certification.
(b) Compliance with the requirements of paragraph (a) of this section will be satisfied provided the participating or cooperating insurer complies with a format of notice as designated by the Federal Insurance Administrator; such notices shall, as a minimum, include the following information employing the same terms or substantial. . ly similar terms.
Dear Policyholder: The attached FAIR Plan Insurance Policy, or renewal thereof, has been issued to you by the FAIR Plan in cooperation with your State Insurance Authority and the Federal Insurance Administration of the United States Department of Housing and Urban Development. The policy is serviced generally by the statewide FAIR Plan, as listed at the end of this Notice. The FAIR Plan or your insurance agent will assist you if you need to report a loss or if you have any questions pertaining to the premium charged or the scope of the coverage afforded under the policy. In addi. tion, your State Insurance Department which has regulatory authority over the FAIR Plan is ready to be of assistance to you in these matters, if the FAIR Plan or agent cannot help you. Moreover, since the FAIR Plan Program is intended to provide you with the highest caliber of service, your State Insurance Department would welcome any suggestions you may have for improving the program. Please do not hesitate to write, for assistance, to:
(1) FAIR Plan: (name, Address, Telephone Number).
(2) State Insurance Department (Name, Address, Telephone Number). (42 FR 3163, Jan. 17, 1977)
PART 1906-STANDARD REINSURANCE CONTRACT
$ 1905.13 Notice to policyholders.
(a) Each participating or cooperating insurer offering insurance pursuant to this program (12 U.S.C. 1749bbb1749bbb-21) shall provide a notice to all FAIR Plan policyholders with all new or renewal policies mailed on and after April 15, 1977, containing the following information: (1) Authority for issuance of policy; (2) FAIR Plan name, address, and telephone numbers; (3) State Insurance Department addresses and telephone numbers.
Sec. 1906.20 Statement of applicable law. 1906.21 Definitions. 1906.22 Offer to provide reinsurance. 1906.23 Effective date of offer. 1906.24 Acceptance of offer. 1906.25 Policies reinsured. 1906.26 Premiums. 1906.27 Assessments. 1906.28 Claims. 1906.29 Inception and expiration dates. 1906.30 Cancellations. 1906.31 Adjustments. 1906.32 Insolvency. 1906.33 Errors and omissions. 1906.34 Restriction of benefits. 1906.35 Participation in statewide plans. 1906.36 Limitations on reinsurance.
(2) Any occurrence of property 1906.37 Arbitration.
damage in excess of $2,000 caused by 1906.38 Access to books and records.
persons whose unlawful conduct in 1906.39 Information and annual state- causing the occurrence clearly maniments.
fests their primary purpose of civil dis1906.40 Notice of offer of reinsurance.
ruption, civil disobedence, or civil proAUTHORITY: Sec. 7(d), 79 Stat. 670; 42
test; U.S.C. 3535(d); sec. 1103, 82 Stat. 566; 12 (c) “Company" means any company U.S.C. 1749bbb-17. Sec.'s delegation of au- authorized to engage in the insurance thority, 34 FR 2680, Feb. 27, 1969.
business under the laws of any State, SOURCE: 36 FR 25754, Dec. 22, 1971, unless except that if there are two or more otherwise noted.
companies within a State in which re
insurance is to be provided under the § 1906.20 Statement of applicable law. contract which as determined by the Title XII of the National Housing
reinsurer: Act (hereinafter referred to as the (1) Are under common ownership Act), added by the Urban Property and ordinarily cperate on a group Protection and Reinsurance Act of basis; or 1968, 12 U.S.C. 1749bbb--1749bbb-21, (2) Are under single management diprovides for a National Insurance De- rection; or velopment Program. Pursuant to this (3) Are otherwise determined by the title, the Secretary of Housing and reinsurer to have substantially Urban Development is authorized to common or interrelated ownership, dioffer to any insurer reinsurance rection, management, or control; then against losses resulting form riots or all such related, associated, or affilicivil disorders, in all standard lines of ated companies, excluding nonadmitproperty insurance enumerated under ted companies which are not specifisubparagraphs (A) through (E) of sec- cally included by endorsement to the tion 1203(a)(13) of the Act taken to- contract, shall be reinsured only as gether, and, with respect to any State one aggregate entity; in which such reinsurance is pur- (d) "Continuing organization, pool, chased, to offer reinsurance individ- or association of insurers” means an ually on the standard lines of property industry pool created to provide direct insurance enumerated under subpara- insurance to meet special problems of graphs (F) through (J) of said section. insurability, such as for a particular Principal eligibility requirements class or type of business; under the Act for such reinsurance are (e) “Contract” means the Standard set forth in § 1906.35.
(f) "Direct premiums earned” means $ 1906.21 Definitions.
direct premiums earned as reported in As used in this part:
column 2 on page 14 of the company's (a) “Aggregate losses” means the Fire and Casuality Annual Statement sum total of losses resulting from riots for the specified calendar year, in the or civil disorders occurring in a State form adopted by the National Associand allocable to a State in which rein- ation of Insurance Commissioners, surance is provided;
subject to (1) adjustment as approved (b) "Civil disorder" means:
by the reinsurer for cessions to pools, of unlawful inci- facilities, and associations, and for the dents taking place within close prox
inclusion of participations in such imity as to time and place and involv- pools, facilities, and associations, and ing property damage intentionally (2) such other appropriate adjustcaused by persons apparently having
ments as may be approved or required civil disruption, civil disobedience, or
by the reinsurer, which shall include civil protest as a primary motivation, adjustments for dividends paid or at least two of which incidents result credited to policyholders and reported in property damage in excess of $1,000 in column 3 on page 14, subject to a
maximum credit of 20 per centum of
(1) Any patt