735 - oregon state legislature · 735.105 regula tion of association as insurer; fi-nancial report...

Chapter 7352013 EDITION

Alternative Insurance

ESSENTIAL PROPERTY INSURANCE735.005 Definitions for ORS 735.005 to 735.145735.015 Purpose735.025 Construction735.035 Application735.045 Oregon FAIR Plan Association; insurers

required to be members; plan of operation735.055 Association board of directors; appoint-

ment; compensation, expenses of mem-bers; quorum

735.065 Required association functions; assess-ments

735.075 Discretionary association functions735.085 Plan of operation; submission to director;

approval of plan; compliance with plan;rules

735.095 Contents of plan of operation735.105 Regulation of association as insurer; fi-

nancial report to director735.115 Exemption of association from fees and

taxes735.145 Immunity from legal action in carrying

out duties

CAPTIVE INSURERS735.150 Definitions for ORS 735.150 to 735.190735.152 Application of laws735.154 Rules735.156 Confidentiality of documents and materi-

als; public disclosure735.158 Certificate of authority; restriction on

types of insurance; requirements for cer-tification; requirements for corporations;fees; expiration and renewal of certificate

735.160 Business name735.162 Capital and surplus requirements; form

permitted; security for branch captive in-surers; dividends and distributions

735.164 Incorporation of pure captive insurer andassociation captive insurer; application;fee; approval; alien captive insurer; appli-cation of corporation laws

735.166 Investment requirements for associationcaptive insurer

735.168 Allowable risks for captive insurer; riskdistribution pool; annual actuarial opin-ion; rules

735.170 Rating organization735.172 Reporting; contents; filing date; waiver of

annual statement for alien captive in-surer; rules

735.174 Examination; frequency; scope; paymentof expenses

735.176 Compliance with sound actuarial princi-ples

735.178 Suspension or revocation of certificate ofauthority

735.180 Branch captive insurer as pure captiveinsurer; rules

735.182 Examination of branch captive insurerand alien captive insurer; payment ofcharges and expenses

735.184 Requirements for foreign captive insurerto provide insurance in this state

735.186 Management of assets of captive reinsurer735.188 Application of captive reinsurer for cer-

tificate of authority735.190 Incorporation of captive reinsurer

MARKET ASSISTANCE PLANS; JOINTUNDERWRITING ASSOCIATIONS

735.200 Legislative findings; purpose735.205 Definitions for ORS 735.200 to 735.260735.210 Formation of market assistance plans;

rules735.215 Findings prior to formation of joint

underwriting association; hearing735.220 Formation of joint underwriting associ-

ation; funds735.225 Membership in joint underwriting associ-

ation735.230 Rates; approval735.235 Board of directors735.240 Annual statement735.245 Conditions for policyholder surcharge735.250 Exemption from liability735.255 State not liable to pay debts of association735.260 Rules735.265 Liquor liability insurance risk and rate

classifications; rules

LIABILITY RISK RETENTION LAW735.300 Purpose of ORS 735.300 to 735.365735.305 Definitions for ORS 735.300 to 735.365735.310 Qualifications for risk retention group;

plan of operation; application; notificationto National Association of InsuranceCommissioners

735.315 Foreign risk retention groups; conditionsof doing business in Oregon; prohibitedacts

735.320 Relationship to insurance guaranty fundand joint underwriting association

735.325 Exemption of purchasing groups fromcertain laws

735.330 Purchasing groups; notice of intent to dobusiness; registration; exceptions

735.335 Purchase of insurance by purchasinggroup

735.340 Insurance Code enforcement authoritysubject to federal law

735.345 Violation of ORS 735.300 to 735.365; penal-ties

735.350 Agent or broker; license735.355 Court orders enforceable in Oregon735.360 Rules735.365 Short title

Title 56 (2013 Edition)

INSURANCE

SURPLUS LINES LAW735.400 Purposes of ORS 735.400 to 735.495735.405 Definitions for ORS 735.400 to 735.495735.406 Cost of living adjustment to net worth,

revenues and expenses of exempt com-mercial purchasers

735.410 Conditions for procuring insurancethrough nonadmitted insurer; rules

735.415 Qualifications for placement of coveragewith nonadmitted insurer

735.417 Insured required to report and pay taxeson independently procured insurance cov-ering Oregon home state risks

735.418 Director authorized to enter into inter-state compact for premium tax allocation

735.420 Declaration of ineligibility of surplus linesinsurer

735.425 Filing by licensee after placement of sur-plus lines insurance

735.430 Surplus Line Association of Oregon; fees735.435 Evidence of insurance; contents; change;

penalty; notice regarding InsuranceGuaranty Association; rules

735.440 Validity of contracts735.445 Effect of payment of premium to surplus

lines licensee735.450 Requirements for license as surplus lines

insurance licensee735.455 Authority of licensee; rules735.460 Records of licensee; examination735.465 Monthly reports; rules735.470 Premium tax; collection; payment; refund;

rules735.475 Suit to recover unpaid tax735.480 Suspension or revocation of license; re-

fusal to renew; grounds735.485 Actions against surplus lines insurer735.490 Jurisdiction in action against insurer;

service of summons and complaint; re-sponse

735.492 Application of certain Insurance Codeprovisions to surplus lines insurers

735.495 Short title; severability

RETAINER MEDICAL PRACTICE735.500 Requirements for certification as retainer

medical practice; disclosures; rules735.510 Notice to department of specified changes

to practice

DENTAL SERVICES CONTRACTS735.515 Charges for services not covered by con-

tract

PHARMACY BENEFIT MANAGERS735.530 Definitions for ORS 735.530 to 735.552735.532 Registration of pharmacy benefit manag-

ers; fees; rules735.534 Claim reimbursement; maximum allow-

able costs735.540 Definitions for ORS 735.540 to 735.552735.542 Pharmacy claims audits; requirements735.544 Pharmacy claims audits; standards for re-

view of claims735.546 Pharmacy claims audits; auditors735.548 Pharmacy claims audits; validation of

claims735.550 Pharmacy claims audits; reports of find-

ings; opportunity to resubmit claim andto contest finding

735.552 Pharmacy claims audits; exception forfraud

MEDICAL INSURANCE POOL(Oregon Medical Insurance Pool)

735.600 Legislative intent735.605 Definitions for ORS 735.600 to 735.650735.610 Oregon Medical Insurance Pool Board;

members; authority; rules735.612 Oregon Medical Insurance Pool Account;

sources; uses735.615 Eligibility for pool coverage; rules735.616 Portability coverage under pool735.620 Administration of insurance pool program735.625 Coverage; rules735.630 Exemption from liability735.635 Exemption from taxation735.645 Notice of existence of pool735.650 Application of provisions of Insurance

Code

COMMUNITY-BASED HEALTH CARE INITIATIVES

735.721 Definitions for ORS 735.721 to 735.727735.723 Requirements for approval; rules735.725 Enrollment requirements735.727 Annual report to Legislative Assembly

OREGON REINSURANCE PROGRAM(Temporary provisions relating to the Or-egon Reinsurance Program are compiledas notes following ORS 735.727)


ALTERNATIVE INSURANCE 735.055

ESSENTIAL PROPERTY INSURANCE735.005 Definitions for ORS 735.005 to

735.145. As used in ORS 735.005 to 735.145,unless the context requires otherwise:

(1) “Association” means the OregonFAIR Plan Association created by ORS735.045.

(2) “Board” means the board of directorsof the association.

(3) “Essential property insurance” meansinsurance against direct loss to property asdefined and limited in standard fire policiesand extended coverage indorsements thereon,as approved by the Director of the Depart-ment of Consumer and Business Services,and insurance against the perils of vandalismand malicious mischief. “Essential propertyinsurance” does not include automobile in-surance or insurance on such types of man-ufacturing risks as may be excluded by thedirector.

(4) “Inspection bureau” means the personor persons designated by the association withthe approval of the director to make inspec-tions as required under ORS 731.418, 733.010and 735.005 to 735.145 and to perform suchother duties as may be authorized by the as-sociation.

(5) “Service insurer” means any insurerdesignated as such by the board.

(6) “Member insurer” means an insurerauthorized to transact insurance in this statethat writes any kind of essential propertyinsurance.

(7) “Net direct written premiums” meansdirect gross premiums written in this stateon insurance policies to which ORS 735.005to 735.145 apply, less return premiumsthereon and dividends paid or credited topolicyholders on such direct business. “Netdirect written premiums” does not includepremiums on contracts between insurers orreinsurers.

(8) “Plan” means the plan of operationof the association established pursuant toORS 735.085. [1971 c.321 §5; 1979 c.818 §2]

735.015 Purpose. The purpose of ORS735.005 to 735.145 is:

(1) To assure stability in the property in-surance market for certain property locatedin this state.

(2) To assure the availability of essentialproperty insurance to the owners ofinsurable property.

(3) To encourage maximum use, in ob-taining essential property insurance, of thenormal insurance market provided by au-thorized insurers.

(4) To provide for the equitable distrib-ution among authorized insurers of the re-

sponsibility for insuring certain insurableproperty for which essential property insur-ance cannot be obtained through the normalinsurance market by the establishment of theOregon FAIR Plan Association. [1971 c.321 §2]

735.025 Construction. ORS 735.005 to735.145 shall be liberally construed to effectthe purpose provided in ORS 735.015. [1971c.321 §3]

735.035 Application. ORS 735.005 to735.145 apply only to essential property in-surance on domestic risks. [1971 c.321 §4]

735.045 Oregon FAIR Plan Associ-ation; insurers required to be members;plan of operation. There is hereby createdthe Oregon FAIR Plan Association. Each in-surer that is a member insurer shall becomeand remain a member of the association asa condition of its authority to transact in-surance in this state. The association shallperform its functions in accordance with aplan of operation established pursuant toORS 735.085, and shall exercise its powersthrough its board of directors. [1971 c.321 §6]

735.055 Association board of directors;appointment; compensation, expenses ofmembers; quorum. (1) The board of direc-tors of the Oregon FAIR Plan Associationshall consist of five members selected by themember insurers, subject to the approval ofthe Director of the Department of Consumerand Business Services, and four persons se-lected by the Governor, one of whom shallbe an insurance producer holding an ap-pointment as an Oregon insurance producerof a member insurer. Of the other three per-sons appointed by the Governor, one shall bea resident of a county of over 400,000 popu-lation and none shall have been an employeeor insurance producer of a member insurer.The term of each member shall be as speci-fied in the plan, but in no event for longerthan four years. A vacancy on the boardshall be filled for the remainder of the unex-pired term in the same manner as for theinitial selection.

(2) In making or approving selections tothe board, the Director of the Department ofConsumer and Business Services shall con-sider among other things whether memberinsurers are fairly represented.

(3) A member of the board shall receiveno compensation for services as a member.However, a member shall be reimbursed fromthe assets of the association for actual andnecessary travel and other expenses incurredby the member in the performance of duties.

(4) A majority of the members of theboard constitutes a quorum for the transac-tion of business. [1971 c.321 §7; 1979 c.818 §2a; 2003c.364 §88]


735.065 INSURANCE

735.065 Required association func-tions; assessments. (1) The Oregon FAIRPlan Association shall:

(a) Have authority on behalf of its mem-bers to arrange for the issuance of propertyinsurance policies by service insurers and toreinsure any of those policies in whole or inpart and to cede such reinsurance, subject tothe plan.

(b) Assess member insurers the amountsnecessary to pay the expenses incurred bythe association in meeting its obligations andexercising its duties and powers under ORS735.005 to 735.145.

(2) Except as provided in subsection (3)(a)and (b) of this section, the assessment ofeach member insurer for a particular calen-dar year shall be in the proportion that thenet direct written premiums of the memberinsurer for the second preceding calendaryear bears to the net direct written premi-ums of all member insurers for the secondpreceding calendar year. Each member in-surer shall be notified of an assessment notlater than the 30th day before the day it isdue. If the funds of the association do notprovide in any one year an amount sufficientto pay the expenses of the association, thefunds available shall be prorated among theexpenses and the unpaid portion shall be paidas soon thereafter as funds become available.If an assessment would cause a memberinsurer’s financial statement to reflect anamount of surplus less than the minimumamount required for a certificate of authorityby any jurisdiction in which the member in-sured is authorized to transact insurance, theassociation may, in whole or in part, exemptthe member insurer from payment of the as-sessment or defer payments.

(3)(a) The maximum assessment of amember insurer for any calendar year shallbe two percent of the insurer’s net directwritten premiums for the second precedingcalendar year.

(b) The minimum assessment of a memberinsurer for any calendar year shall be $50.

(4) Reimburse inspection bureaus, serviceinsurers and employees of the association forexpenses incurred in the inspection or insur-ing of property on behalf of the association,and pay all other expenses the associationincurs in carrying out the provisions of ORS735.005 to 735.145.

(5) Undertake a continuing public educa-tion program in cooperation with memberinsurers and insurance producers to assurethat the plan receives adequate attention.

(6) Undertake a continuing educationprogram to advise the public of the stepswhich may be taken to make property moreinsurable against crime, personal liability

and the perils named in ORS 735.005 (3). [1971c.321 §8; 1979 c.818 §3; 2003 c.364 §89]

735.075 Discretionary associationfunctions. The Oregon FAIR Plan Associ-ation may:

(1) With the approval of the Director ofthe Department of Consumer and BusinessServices, employ or retain such persons anddesignate such inspection bureaus and ser-vice insurers as are necessary to handle ap-plications, inspect and insure property andperform the other duties of the association.

(2) Borrow funds as necessary to carryout ORS 735.005 to 735.145 in such manneras may be specified in the plan.

(3) Sue or be sued.(4) Negotiate and become a party to such

contracts as are necessary to carry out ORS735.005 to 735.145.

(5) At the end of any calendar year, re-fund to member insurers, in proportion toeach insurer’s payments to the association,the amount by which the board of directorsfinds that the funds of the association exceedits current liabilities plus the liabilities esti-mated for the coming year.

(6) Perform such other acts as are neces-sary or proper to carry out ORS 735.005 to735.145. [1971 c.321 §9]

735.085 Plan of operation; submissionto director; approval of plan; compliancewith plan; rules. (1) The Oregon FAIR PlanAssociation shall submit to the Director ofthe Department of Consumer and BusinessServices, not later than September 7, 1971, aplan of operation, and may thereafter submitsuch amendments thereto as will provide forthe reasonable and equitable exercise of theduties and powers of the association. Theplan of operation, and any amendmentsthereto, shall become effective upon approvalin writing by the director.

(2) If the association fails to submit aplan that receives the approval of the direc-tor as provided in subsection (1) of this sec-tion, or if the association after such approvalfails to maintain a plan satisfactory to thedirector, the director shall by rule prescribea plan of operation that meets the standardsprovided in subsection (1) of this section. Aplan prescribed by the director shall remainin effect until the director by rule providesotherwise.

(3) No member insurer shall fail to com-ply with the currently effective plan. [1971c.321 §10]

735.095 Contents of plan of operation.The plan shall:

(1) Establish procedures for the sub-mission and processing of applications for



insurance and the payment of claims forlosses.

(2) Establish procedures for record keep-ing, payment of other expenses and adminis-tration of all other financial affairs of theOregon FAIR Plan Association.

(3) Establish times and places for meet-ings of the board.

(4) Establish procedures for selection ofmembers of the board and for approval ofsuch selections by the Director of the De-partment of Consumer and Business Services.

(5) Establish a procedure for appeal tothe director of final actions or decisions ofthe association.

(6) Establish such other procedures asmay be necessary or proper to carry out theduties and powers of the association.

(7) Provide that the association shall fileperiodically with the director statements ofthe insurance provided through the associ-ation and estimates of anticipated claimsagainst the association. [1971 c.321 §11; 1979 c.818§4]

735.105 Regulation of association asinsurer; financial report to director. TheOregon FAIR Plan Association is subject toregulation by the Director of the Departmentof Consumer and Business Services in thesame manner as an insurer, to the extentdetermined by the director to be necessaryto carry out the purpose of ORS 735.005 to735.145. Not later than March 30 of eachyear the board shall submit to the director,in a form approved by the director, a finan-cial report for the preceding calendar year.[1971 c.321 §12]

735.115 Exemption of association fromfees and taxes. Except for taxes levied onreal or personal property, the Oregon FAIRPlan Association shall be exempt from thepayment of all fees and taxes levied by thisstate or by any city, county, district or otherpolitical subdivision of this state. [1971 c.321§13]

735.125 [1971 c.321 §14; repealed by 1979 c.818 §5]

735.135 [1971 c.321 §15; repealed by 1979 c.818 §5]

735.145 Immunity from legal action incarrying out duties. No person shall havea cause of action against the Oregon FAIRPlan Association or its employees or servic-ing facilities, any member of the board, orthe Director of the Department of Consumerand Business Services or the employees ofthe director for any action taken by them incarrying out ORS 735.005 to 735.145. [1971c.321 §16]

CAPTIVE INSURERS735.150 Definitions for ORS 735.150 to

735.190. As used in ORS 735.150 to 735.190:(1)(a) “Affiliate” means a business entity

that, because of common ownership, commoncontrol, common operation or common man-agement, is in the same corporate system asa parent or a member organization.

(b) For purposes of this subsection,“common ownership, common control, com-mon operation or common management”means that two or more business entities areowned, controlled, operated or managed bythe same person or group of persons with:

(A) Direct or indirect ownership of 80percent or more of the outstanding votingstock of the stock corporation for a captiveinsurer that is a stock corporation;

(B) Direct or indirect ownership of 80percent or more of the surplus and the vot-ing power of the mutual corporation for acaptive insurer that is a mutual corporation;or

(C) Direct or indirect ownership by thesame member or members of 80 percent ormore of the membership interests in the lim-ited liability company for a captive insurerthat is a limited liability company.

(2) “Alien captive insurer” means an in-surer:

(a) Formed to transact insurance for aparent or affiliate of the insurer; and

(b) Licensed under the laws of a nationother than the United States that imposesstatutory or regulatory standards:

(A) On a business entity transacting in-surance in the other nation; and

(B) In a form acceptable to the Directorof the Department of Consumer and BusinessServices.

(3) “Association” means a legal associ-ation of two or more persons that has beenin continuous existence for at least one yearif the association or its member organiza-tions:

(a) Own, control, or hold with power tovote, all of the outstanding voting securitiesof an association captive insurer incorpo-rated as a stock insurer;

(b) Have complete voting control over anassociation captive insurer incorporated as amutual insurer; or

(c) Have complete voting control over anassociation captive insurer formed as a lim-ited liability company.

(4) “Association captive insurer” meansa business entity that insures the risks of:

(a) A member organization of the associ-ation;


735.152 INSURANCE

(b) An affiliate of a member organizationof the association; or

(c) The association.(5) “Branch captive insurer” means an

alien captive insurer that holds a certificateof authority from the Director of the De-partment of Consumer and Business Servicesto transact insurance in this state through abusiness division with a principal place ofbusiness in this state.

(6) “Branch operation” means a businessoperation of a branch captive insurer in thisstate.

(7) “Captive insurer” means any of thefollowing that is formed or holds a certificateof authority issued under ORS 735.150 to735.190:

(a) A pure captive insurer;(b) A branch captive insurer;(c) An association captive insurer; or(d) A captive reinsurer.(8) “Captive reinsurer” means a reinsurer

that is:(a) Formed or holds a certificate of au-

thority under ORS 735.150 to 735.190;(b) Wholly owned by a qualifying rein-

surer parent company; and(c) A stock corporation.(9) “Controlled unaffiliated business”

means a business entity:(a) That is not in the same corporate

system as a parent or the parent’s affiliatebut has a contractual relationship with aparent or affiliate; and

(b) Whose risks are managed by a purecaptive insurer in accordance with rulesadopted by the Director of the Departmentof Consumer and Business Services underORS 735.154.

(10) “Foreign captive insurer” means aninsurer:

(a) Formed to transact insurance for aparent or affiliate of the insurer; and

(b) Licensed under the laws of anotherstate that imposes statutory or regulatorystandards:

(A) On a business entity transacting in-surance in the other state or jurisdiction;and

(B) In a form acceptable to the Directorof the Department of Consumer and BusinessServices.

(11) “Member organization” means a per-son that belongs to an association.

(12) “Parent” means a person that di-rectly or indirectly owns, controls, or holdswith power to vote, more than 50 percent of:

(a) The outstanding voting securities ofa pure captive insurer; or

(b) The pure captive insurer, if the purecaptive insurer is formed as a limited liabil-ity company.

(13) “Pure captive insurer” means abusiness entity that insures risks of a parentor affiliate of the business entity.

(14)(a) “Qualifying reinsurer parent com-pany” means an accredited reinsurer in thisstate that has:

(A) A consolidated GAAP net worth ofnot less than $500 million; and

(B) Complies with the consolidated debtto total capital ratio established by rule bythe Director of the Department of Consumerand Business Services.

(b) For purposes of this subsection “con-solidated GAAP net worth” means the con-solidated shareholders’ equity determined inaccordance with generally accepted account-ing principles for reporting to the UnitedStates Securities and Exchange Commission.[2012 c.84 §2]

Note: 735.150 to 735.190 were added to and made apart of the Insurance Code by legislative action butwere not added to ORS chapter 735 or any seriestherein. See Preface to Oregon Revised Statutes forfurther explanation.

735.152 Application of laws. (1) Theprovisions of the Insurance Code cited inORS 735.150 to 735.190 apply to captive in-surers. In addition, the provisions of the In-surance Code set forth in ORS chapter 731relating to administration of the insurancelaws apply to captive insurers to the extentnot inconsistent with the express provisionsof ORS 735.150 to 735.190.

(2) In addition to the provisions of theInsurance Code set forth in subsection (1) ofthis section, ORS 705.137 and 705.139 applyto captive insurers. [2012 c.84 §3]

Note: See note under 735.150.

735.154 Rules. The Director of the De-partment of Consumer and Business Servicesmay adopt rules for the administration ofORS 735.150 to 735.190. [2012 c.84 §4]


735.156 Confidentiality of documentsand materials; public disclosure. All docu-ments, materials and other information inthe possession of the Department of Con-sumer and Business Services under ORS735.150 to 735.190 are confidential and sub-ject to public disclosure only as provided inORS 705.137. [2012 c.84 §5]




735.158 Certificate of authority; re-striction on types of insurance; require-ments for certification; requirements forcorporations; fees; expiration and re-newal of certificate. (1)(a) When permittedby its articles of incorporation or its charterand bylaws, a captive insurer may apply tothe Director of the Department of Consumerand Business Services for a certificate of au-thority to transact any class of insurance.

(b) Notwithstanding paragraph (a) of thissubsection:

(A) A pure captive insurer may not in-sure a risk other than a risk of its parent oraffiliate or a controlled unaffiliated business.

(B) An association captive insurer maynot insure a risk other than a risk of:

(i) An affiliate;(ii) A member organization of its associ-

ation; or(iii) An affiliate of a member organization

of its association.(C) A captive insurer may not provide

workers’ compensation insurance, life insur-ance, health insurance or any personal prop-erty or personal casualty line of insurance,including but not limited to personal motorvehicle insurance coverage and homeowner’sinsurance, and any component of such cov-erage.

(D) A captive insurer may not accept orcede reinsurance except as provided in ORS735.168.

(2) To transact insurance in this state, acaptive insurer must:

(a) Obtain from the director a certificateof authority that authorizes the captive in-surer to transact insurance in this state;

(b) Appoint a resident registered agent toaccept service of process and to otherwiseact on behalf of the captive insurer in thisstate; and

(c)(A) Hold at least once each year inthis state a board of directors meeting; and

(B) Maintain in this state:(i) The principal place of business of the

captive insurer; or(ii) In the case of a branch captive in-

surer, the principal place of business for thebranch operations of the branch captive in-surer.

(3) In the case of a captive insurerformed as a corporation, if the registeredagent cannot be found with reasonable dili-gence at the registered office of the captiveinsurer, the director is the agent of the cap-tive insurer upon whom process, notice ordemand may be served.

(4)(a) An applicant captive insurerformed as a corporation shall file with thedirector:

(A) Certified copies of the articles of in-corporation or the charter and bylaws of thecorporation;

(B) A statement under oath of the presi-dent and secretary of the corporation show-ing the financial condition of thecorporation; and

(C) Any other statement or document re-quired by the director as adopted by rule.

(b) In addition to the other informationrequired by this subsection, an applicantcaptive insurer shall file with the directorevidence of:

(A) The amount and liquidity of the as-sets of the applicant captive insurer relativeto the risks to be assumed by the applicantcaptive insurer;

(B) The adequacy of the expertise, expe-rience and character of the individual whowill manage the applicant captive insurer;

(C) The overall soundness of the plan ofoperation of the applicant captive insurer;

(D) The adequacy of the loss preventionprograms for any parent or member organ-ization of the applicant captive insurer; and

(E) Any other factor the director adoptsby rule and considers relevant in ascertain-ing whether the applicant captive insurer isable to meet the policy obligations of the ap-plicant captive insurer.

(5)(a) A captive insurer shall pay to thedepartment nonrefundable fees established bythe director by rule for:

(A) Examining, investigating and pro-cessing the captive insurer’s application forissuance of a certificate of authority;

(B) Obtaining a certificate of authorityfor the year the director issues a certificateof authority to the captive insurer in anamount not less than $5,000; and

(C) Renewing a certificate of authority inan amount not less than $5,000.

(b) The fees a captive insurer pays to theDepartment of Consumer and Business Ser-vices for obtaining or renewing a certificateof authority are in lieu of any payment ofpremium assessment on receipt of premiumby the captive insurer. Fees for obtaining orrenewing a certificate of authority may beincreased by the department by rule and maybe scaled on the basis of premiums the cap-tive insurer collects in any given year.

(c) The director may retain legal, finan-cial and examination services from outsidethe department to perform any functions de-scribed in ORS 735.150 to 735.190 and may


735.160 INSURANCE

charge the applicant captive insurer the rea-sonable cost of services performed.

(6) If the director is satisfied that thedocuments and statements filed by the appli-cant captive insurer meet the requirementsof ORS 735.150 to 735.190, the director mayissue a certificate of authority that autho-rizes the captive insurer to transact insur-ance in this state.

(7) A certificate of authority issued underthis section expires annually and must berenewed by December 31 of each year begin-ning with the year following the year thatthe original certificate was issued.

(8) Upon approval of the director, a for-eign or alien captive insurer may become adomestic captive insurer by complying withall of the requirements of the Insurance Coderelative to the organization and licensing ofa domestic captive insurer of the same orequivalent type in this state and by filingwith the director certified copies of theinsurer’s articles of association, charter orother organizational document, together withany appropriate amendments adopted in ac-cordance with the laws of this state bringingthose articles of association, charter or otherorganizational document into compliancewith the laws of this state. After complyingwith these requirements, the captive insureris entitled to the necessary or appropriatecertificates and licenses to continue trans-acting insurance in this state and is subjectto the authority and jurisdiction of this state.In connection with this redomestication, thedirector may waive any requirements forpublic hearings. It is not necessary for acaptive insurer redomesticating into thisstate to merge, consolidate, transfer assetsor otherwise engage in any other reorgan-ization, other than as specified in this sec-tion. [2012 c.84 §6]


735.160 Business name. A captive in-surer may assume a business name only ifconsistent with the provisions of ORS731.430. [2012 c.84 §7]


735.162 Capital and surplus require-ments; form permitted; security forbranch captive insurers; dividends anddistributions. (1) To qualify for authority totransact insurance in this state, a captiveinsurer shall possess and thereafter maintaincapital or surplus, or any combinationthereof, of not less than:

(a) $250,000 for a pure captive insurer.(b) $750,000 for an association captive in-

surer incorporated as a stock insurer or asa mutual insurer.

(c) $300,000,000 for a captive reinsurer.

(2) In accordance with ORS 731.554 (6),for the protection of the public, the Directorof the Department of Consumer and BusinessServices may require a captive insurer topossess and maintain capital or surplus, orany combination thereof, in excess of theamount otherwise required under this sec-tion.

(3) The capital and surplus required un-der subsections (1) and (2) of this sectionmay be in the form of:

(a) Cash or cash equivalent; or(b) An irrevocable letter of credit issued

by an insured institution, as described inORS 731.510, and approved by the director.

(4)(a) Except as provided in paragraph (d)of this subsection, a branch captive insurer,as security for the payment of liabilities at-tributable to branch operations, must estab-lish and maintain, through its branchoperations, a trust fund funded by an irrev-ocable letter of credit or other asset ap-proved by the director.

(b) The trust fund established under thissubsection shall be for the benefit of UnitedStates policyholders and United States ced-ing insurers under insurance policies issuedor reinsurance contracts issued or assumed.

(c) The amount of the security requiredunder this subsection must be equal to orgreater than:

(A) The capital and surplus required un-der this section applicable to the line ofbusiness written by the captive insurer; and

(B) The net reserves on the insurancepolicies or reinsurance contracts described inthis subsection, including:

(i) Case basis loss and allocated loss ad-justment expense reserves;

(ii) Losses and allocated loss adjustmentexpense amounts incurred but not reported;and

(iii) Unearned premiums with regard toinsurance transacted by branch operations.

(d) In accordance with ORS 731.510, thedirector may permit a branch captive insurerthat is required to post security for loss re-serves on insurance transacted by its rein-surer to reduce the funds in the trust fundestablished under this section by the sameamount as the security posted if the securityremains posted with the reinsurer.

(5) A captive insurer may pay dividendsor make distributions if all the following re-quirements are met:

(a) Submission of a report to the directorlisting all dividends and distributions withinfive business days following the declaration,and not less than 10 business days prior topayment, of the dividends and distributions,



commencing from the date of receipt of thereport by the director.

(b) The report required under paragraph(a) of this subsection must demonstrate thatthe combined capital and surplus of the cap-tive insurer following any dividend or dis-tribution is reasonable in relation to thecaptive insurer’s outstanding liabilities andadequate to the captive insurer’s financialneeds.

(c) A captive insurer may pay dividendsor distributions only from earned surplusunless the director gives prior approval forpayment from another source. [2012 c.84 §8]


735.164 Incorporation of pure captiveinsurer and association captive insurer;application; fee; approval; alien captiveinsurer; application of corporation laws.(1) A pure captive insurer must be incorpo-rated as a stock insurer with the capital ofthe pure captive insurer divided into sharesand held by the shareholders of the purecaptive insurer.

(2) An association captive insurer maybe:

(a) Incorporated as a stock insurer withthe capital of the association captive insurerdivided into shares and held by the share-holders of the association captive insurer; or

(b) Incorporated as a mutual insurerwithout capital stock, with a governing bodyelected by the member organizations of theassociation captive insurer.

(3) The requirements of ORS 732.085 ap-ply to the incorporators of a captive insurer.

(4) Any person desiring to organize acaptive insurer must first file an applicationwith the Director of the Department of Con-sumer and Business Services for a permit toorganize the captive insurer. The applicantshall pay the applicable fee to the directorat the time the application is filed. The ap-plication shall be on forms provided by thedirector and shall be signed by the applicantsand verified. The form shall specify informa-tion about the following:

(a) The character, reputation, financialresponsibility and purposes of the proposedincorporators;

(b) The character, reputation, financialresponsibility, insurance experience andbusiness qualifications of the proposed offi-cers and directors and the proposed manag-ers;

(c) Any information provided to the De-partment of Consumer and Business Servicesin the application for a certificate of author-ity or that is maintained in the department’sfiles; and

(d) Other aspects the director considersadvisable.

(5) The director shall approve an appli-cation for a permit to organize a captive in-surer only if the director finds that:

(a) The application is complete;(b) The documents filed with the applica-

tion are in the proper form;(c) The proposed financial structure is

adequate;(d) The character, reputation, financial

responsibility and general fitness of the per-sons named in the application or otherwisefound to be associated with or have an in-terest in the proposed insurer are such as tocommand the confidence of the public;

(e) The proposed directors are collec-tively competent to assume responsibility forthe management and general policies andprocedures of the captive insurer;

(f) The proposed management, collec-tively, possess the requisite general businessability and experience in the business of in-surance of the class or classes specified inthe application; and

(g) No fact is then known to the directorthat would prevent the proposed insurer fromcompleting its organization and receiving acertificate of authority to transact insuranceas a captive insurer.

(6) To the extent not otherwise incon-sistent with the provisions of ORS 735.150 to735.190, ORS 732.095, 732.105 and 732.115 ap-ply for the filing of the articles of incorpo-ration of a captive insurer.

(7)(a) An alien captive insurer applyingto the director for a certificate of authorityto act as a branch captive insurer shall ob-tain from the director a certificate findingthat:

(A) The nation of an alien captive insurerimposes statutory or regulatory standards, ina form acceptable to the director, on captiveinsurers transacting insurance in that na-tion; and

(B) After considering the character, rep-utation, financial responsibility, insuranceexperience and business qualifications of theofficers and directors of the alien captive in-surer, and other relevant information, theestablishment and maintenance of the branchoperations will promote the general good ofthis state.

(b) After the director issues a certificateunder paragraph (a) of this subsection, thealien captive insurer may register with thedepartment to do business in this state as abranch captive insurer.


735.166 INSURANCE

(8) The capital stock of a captive insurerincorporated as a stock insurer may not beissued at less than par value.

(9) At least one-quarter of the membersof the board of directors of a captive insurerformed as a corporation shall be residents ofthis state.

(10)(a) A captive insurer formed as acorporation under ORS 735.150 to 735.190 hasthe privileges of and is subject to ORS735.150 to 735.190 and ORS chapters 60 and732.

(b) If a conflict exists between a pro-vision of ORS chapters 60 and 732 and aprovision of ORS 735.150 to 735.190, ORS735.150 to 735.190 shall control.

(c) Except as provided in paragraph (d)of this subsection, the provisions of ORS735.150 to 735.190 pertaining to a merger,consolidation, conversion, mutualization andredomestication apply in determining theprocedures to be followed by a captive in-surer in carrying out any of the transactionsdescribed in those provisions.

(d) The director may waive or modify therequirements of this subsection.

(11) The articles of incorporation or by-laws of a captive insurer may not authorizea quorum of a board of directors to consistof less than one-third of the fixed or pre-scribed number of directors as provided inrules adopted by the director. [2012 c.84 §9]


735.166 Investment requirements forassociation captive insurer. (1)(a) An asso-ciation captive insurer must comply with theinvestment requirements of ORS 733.510 to733.780.

(b) Notwithstanding paragraph (a) of thissubsection, the Director of the Departmentof Consumer and Business Services may byrule approve the use of alternative reliablemethods of valuation and rating for an asso-ciation captive insurer.

(2)(a) A pure captive insurer is not sub-ject to any restrictions on allowable invest-ments under ORS 733.510 to 733.780.

(b) The director may prohibit or limit aninvestment that threatens the solvency orliquidity of a pure captive insurer.

(3) A captive insurer may not make loansto the parent of the captive insurer or anaffiliate of the captive insurer. [2012 c.84 §10]


735.168 Allowable risks for captive in-surer; risk distribution pool; annualactuarial opinion; rules. (1) A captive in-surer may provide reinsurance on risks cededby an affiliate of the insurer or a controlledunaffiliated business.

(2) A captive insurer may take credit forreserves on risks or portions of risks cededto reinsurers if the credit is acceptable tothe Director of the Department of Consumerand Business Services.

(3) Subject to the prior written approvalof the director, a captive insurer may partic-ipate in a pool for the purpose of risk dis-tribution sharing. However, a captive insurermay not join or contribute financially to aplan, pool, association or guaranty or insol-vency fund in this state, and a captive in-surer, or its insured or its parent or anyaffiliated company or any member organiza-tion of its association, may not receive abenefit from a plan, pool, association orguaranty or insolvency fund for claims aris-ing out of the operations of the captive in-surer.

(4) A captive reinsurer must annually filewith the department an actuarial opinionprovided by a qualified actuary on loss andloss adjustment expense reserves. The quali-fied actuary providing the actuarial opinionmust be independent and may not be an em-ployee of the captive reinsurer or an affiliateof the captive reinsurer for which theactuarial opinion is filed.

(5) A captive reinsurer may discount itsloss and loss adjustment expense reservesonly as allowed in rules adopted by the di-rector.

(6) The director may disallow the dis-counting of loss and loss adjustment reservesof a captive reinsurer if the captive reinsurerviolates any provision of ORS 735.150 to735.190. [2012 c.84 §11]


735.170 Rating organization. A captiveinsurer is not required to join a rating or-ganization. [2012 c.84 §12]


735.172 Reporting; contents; filingdate; waiver of annual statement for al-ien captive insurer; rules. (1) A captive in-surer is not required to make a report exceptas specified in this section.

(2)(a) Before March 1 of each year, or inaccordance with rules adopted under subsec-tion (6) of this section, a captive insurershall submit to the Director of the Depart-ment of Consumer and Business Services areport of the financial condition of the cap-tive insurer, verified by oath of two of theexecutive officers of the captive insurer.

(b) A captive insurer shall report:(A) Using generally accepted accounting

principles, except to the extent that the di-rector requires, approves or accepts the useof statutory accounting principles;



(B) Using a useful or necessary modifica-tion or adaptation to an accounting principlethat is required, approved or accepted by thedirector for the type of insurance and kindof insurer to be reported upon; and

(C) Supplemental or additional informa-tion required by the director.

(c) Except as otherwise provided in ORS735.150 to 735.190, an association captive in-surer shall file the financial statement re-quired by ORS 731.574.

(d) For the purposes of this subsection,“statutory accounting” means a method ofaccounting using rules that insurance com-panies must follow in filing an annual finan-cial statement with the Department ofConsumer and Business Services.

(3)(a) A pure captive insurer may makea written request to file the required reporton a fiscal year end that is consistent withthe fiscal year of the parent company of thepure captive insurer.

(b) If the director grants an alternativereporting date for a pure captive insurer asdescribed under paragraph (a) of this subsec-tion, the annual report is due 60 days afterthe fiscal year end.

(4)(a) Not later than 60 days after thefiscal year end, an alien captive insurer op-erating as a branch captive insurer in thisstate shall file with the director a copy of allreports and statements required to be filedunder the laws of the jurisdiction in whichthe alien captive insurer is formed, verifiedby oath by two of the alien captive insurer’sexecutive officers.

(b) If the director is satisfied that theannual report filed by the alien captive in-surer in the jurisdiction in which the aliencaptive insurer is formed provides adequateinformation concerning the financial condi-tion of the alien captive insurer, the directormay waive the requirement for completionof the annual statement required for a cap-tive insurer under this section with respectto business written in the alien jurisdiction.

(c) A waiver granted by the director un-der paragraph (b) of this subsection shall bein writing and is subject to public inspection.

(5) All captive insurers transacting in-surance in this state shall engage a qualifiedactuary with knowledge of this state forpurposes of determining and setting premi-ums to be charged by the captive insurer.

(6) The director may establish by rulecriteria to waive or modify the requirementsof this section relating to the frequency ofreporting and the contents of the report.[2012 c.84 §13]


735.174 Examination; frequency;scope; payment of expenses. (1)(a) The Di-rector of the Department of Consumer andBusiness Services shall examine the affairsof each captive insurer once in each three-year period.

(b) The three-year period described inparagraph (a) of this subsection is deter-mined on the basis of three full annual ac-counting periods of operation.

(c) The examination is to be made as ofDecember 31 of the full three-year period oras of the last day of the month of an annualaccounting period authorized for a captiveinsurer under this section.

(d) In addition to an examination re-quired under this subsection, the directormay examine a captive insurer whenever thedirector determines it to be prudent.

(2) During an examination under thissection, the director shall thoroughly exam-ine the affairs of the captive insurer to as-certain:

(a) The financial condition of the captiveinsurer;

(b) The ability of the captive insurer tofulfill the obligations of the captive insurer;and

(c) Whether the captive insurer meetsthe requirements of ORS 735.150 to 735.190.

(3) The director may expand the three-year period described in subsection (1) of thissection to five years if during that period acaptive insurer is subject to a comprehensiveannual audit:

(a) Of a scope satisfactory to the director;and

(b) Performed by independent auditorsapproved by the director.

(4) The director may accept a compre-hensive annual independent audit in lieu ofan examination if the scope of the examina-tion is satisfactory to the director and theexamination is performed by a qualified in-dependent auditor.

(5) A captive insurer that is examinedunder this section shall pay the expenses andcharges of the examination. [2012 c.84 §14]


735.176 Compliance with soundactuarial principles. Notwithstanding thelimits of risk set forth in ORS 731.504, anycaptive insurer for which the Director of theDepartment of Consumer and Business Ser-vices issues a certificate of authority underORS 735.150 to 735.190 must comply withsound actuarial principles as determined bythe director and must submit reports demon-strating such compliance to the director.[2012 c.84 §15]


735.178 INSURANCE


735.178 Suspension or revocation ofcertificate of authority. (1) The Directorof the Department of Consumer and BusinessServices may suspend or revoke the certif-icate of authority issued to a captive insurerto transact insurance in this state if thecaptive insurer:

(a) Is insolvent or impaired as defined inORS 734.014;

(b) Fails to meet the requirements ofORS 735.150 to 735.190;

(c) Refuses or fails to submit an annualreport required by ORS 735.172 or any otherreport or statement required by law or byorder of the director;

(d) Fails to comply with the charter, by-laws or other organizational document of thecaptive insurer;

(e) Fails to submit to an examination un-der ORS 735.174 or 735.182 or any legal obli-gation relative to an examination under ORS735.174 or 735.182;

(f) Refuses or fails to pay the cost of ex-amination under ORS 735.174 or 735.182;

(g) Uses methods that, although not oth-erwise specifically prohibited by law, render:

(A) The operation of the captive insurerdetrimental to the public or the policyholdersof the captive insurer according to standardsadopted by the director by rule; or

(B) The condition of the captive insurerunsound with respect to the public or to thepolicyholders of the captive insurer; or

(h) Otherwise fails to comply with lawsof this state.

(2) If the director finds, upon examina-tion, hearing or other evidence that a captiveinsurer has committed any of the acts speci-fied in subsection (1) of this section, the di-rector may suspend or revoke the certificateof authority issued to the captive insurer ifthe director considers it in the best interestof the public and the policyholders of thecaptive insurer. [2012 c.84 §16]


735.180 Branch captive insurer as purecaptive insurer; rules. Except as otherwiseprovided in ORS 735.150 to 735.190, a branchcaptive insurer must be a pure captive in-surer with respect to business operations inthis state, unless otherwise permitted by ruleof the Director of the Department of Con-sumer and Business Services. [2012 c.84 §17]


735.182 Examination of branch captiveinsurer and alien captive insurer; pay-ment of charges and expenses. (1) The Di-rector of the Department of Consumer andBusiness Services shall examine only the

branch operations of, and the insurancetransacted by, a branch captive insurer inthis state if the branch captive insurer:

(a) Provides annually to the director acertificate of compliance, or an equivalent,issued by or filed with the licensing author-ity of the jurisdiction in which the branchcaptive insurer is formed; and

(b) Demonstrates to the satisfaction ofthe director that the branch captive insureris operating in sound financial condition inaccordance with ORS 735.150 to 735.190 andall applicable laws and regulations of the ju-risdiction in which the branch captive in-surer is formed.

(2) As a condition of its authority as abranch captive insurer, an alien captive in-surer must authorize the director to examinethe affairs of the alien captive insurer in thejurisdiction in which the alien captive in-surer is formed.

(3) An alien captive insurer that is ex-amined under this section shall pay the ex-penses and charges of the examination. [2012c.84 §18]


735.184 Requirements for foreign cap-tive insurer to provide insurance in thisstate. Notwithstanding ORS 731.022, a for-eign captive insurer may provide insurancein this state if the foreign captive insurermeets both of the following conditions:

(1) The foreign captive insurer isdomiciled in a state that regulates the for-eign captive insurer as a captive insurer andthe captive insurer is in good standing inthat state.

(2) All activities related to the placementof the insurance occurs in the domicile stateand the insurance otherwise complies withthe laws of the domicile state, including theproposal to make an insurance contract, tak-ing or receiving an application for insurance,collecting a premium or other considerationfor the insurance and issuing or deliveringpolicies of insurance. [2012 c.84 §19]


735.186 Management of assets of cap-tive reinsurer. At least 35 percent of theassets of a captive reinsurer must be man-aged by an asset manager domiciled in thisstate. [2012 c.84 §20]


735.188 Application of captive rein-surer for certificate of authority. If per-mitted by its articles of incorporation orcharter, and in accordance with ORS 735.158and 735.190, a captive reinsurer may apply tothe Director of the Department of Consumerand Business Services for a certificate of au-thority to transact reinsurance. [2012 c.84 §21]




735.190 Incorporation of captive rein-surer. (1) A captive reinsurer must be in-corporated as a stock insurer with its capitaldivided into shares and held by the captivereinsurer’s shareholders. In incorporating, acaptive reinsurer must comply with the re-quirements of ORS 735.164.

(2) The capital stock of a captive rein-surer must be issued at par value or greater.

(3) At least one member of the board ofdirectors of a captive reinsurer incorporatedin this state must be a resident of this state.[2012 c.84 §22]


MARKET ASSISTANCE PLANS; JOINTUNDERWRITING ASSOCIATIONS735.200 Legislative findings; purpose.

(1) The Legislative Assembly finds that:(a) Some businesses and service providers

in Oregon have experienced major problemsin both the availability and affordability ofcommercial liability insurance. Premiums forsuch insurance policies have recently grownas much as 500 percent and the availabilityof such insurance in Oregon markets hasgreatly diminished.

(b) These businesses and service provid-ers are essential to achieve goals such as in-creased workforce productivity, familyself-sufficiency and the maintenance and im-provement of the health of the citizens ofOregon. The lack of adequate commercial li-ability insurance threatens these businessesand services.

(2) The Legislative Assembly thereforedeclares it is the purpose of ORS 735.200 to735.260 to remedy the problem of unavailablecommercial liability insurance for thesebusinesses and service providers by authoriz-ing the Director of the Department of Con-sumer and Business Services to assist in theestablishment of a market assistance plan forproviding commercial liability insurance forthese businesses and service providers, or, ifnecessary, by requiring all insurers author-ized to write commercial liability insurancein Oregon to be members of one or morejoint underwriting associations created toprovide commercial liability insurance forthese businesses and service providers. [1987c.774 §73]

735.205 Definitions for ORS 735.200 to735.260. As used in ORS 735.200 to 735.260:

(1) “Joint underwriting association”means a mechanism requiring casualty in-surers doing business in Oregon to providecommercial liability insurance to certainbusinesses and service providers on either anassigned risk basis or through a joint under-

writing pool underwritten to standardsadopted under the Insurance Code.

(2) “Market assistance plan” means amechanism through which admitted casualtyinsurers in this state provide commercial li-ability insurance for classes of risks desig-nated by the Director of the Department ofConsumer and Business Services. [1987 c.774§74]

735.210 Formation of market assist-ance plans; rules. (1) After a public hear-ing, the Director of the Department ofConsumer and Business Services may by rulerequire insurers authorized to write andwriting commercial liability insurance in thisstate to form a market assistance plan to as-sist businesses and service providers unableto purchase specified classes of commercialliability insurance in adequate amounts fromeither the admitted or nonadmitted market.

(2) The market assistance plan shall op-erate under a plan of operations prepared byadmitted insurers, eligible surplus line in-surers and insurance producers, and ap-proved by the director. [1987 c.774 §75; 2003 c.364§90]

735.215 Findings prior to formation ofjoint underwriting association; hearing.(1) The Director of the Department of Con-sumer and Business Services may mandatethe formation of a joint underwriting associ-ation under ORS 735.220 if after directingthe formation of a market assistance planand allowing it a reasonable time to alleviateinsurance availability problems, the directorfinds that:

(a) There exist in Oregon certain busi-nesses or service providers for which nocommercial liability insurance is available;and

(b) There is a need in Oregon for thegoods or services provided by these busi-nesses or service providers and the lack ofavailable commercial liability insurance willcause a substantial number of the entities tocease operations within the state.

(2) Notwithstanding subsection (1) of thissection, if the lack of availability of insur-ance is due to legitimate insurance under-writing considerations, including past claimsexperience, licensing noncompliance or inad-equate risk management, formation of a jointunderwriting association shall not be appro-priate.

(3) The director may make the findingsrequired under subsection (1) of this sectiononly after conducting a public hearing ac-cording to the applicable provisions of ORSchapter 183. The director must specify thespecific classes of business or lines of insur-ance determined to be unavailable.


735.220 INSURANCE

(4) At least once each year, the directorshall hold a public hearing to determine ifthe classes of business or lines of insuranceoffered by the joint underwriting associationare still unavailable in the voluntary insur-ance market. If any class or line is found tobe available, the joint underwriting associ-ation shall cease to underwrite such class ofbusiness or line of insurance. [1987 c.774 §76]

735.220 Formation of joint underwrit-ing association; funds. After finding underORS 735.215 that there is a need in Oregonfor a joint underwriting association, the Di-rector of the Department of Consumer andBusiness Services may form and put into op-eration a temporary, nonprofit, nonexclusivejoint underwriting association constituting alegal entity separate and distinct from itsmembers for commercial liability insurancesubject to the conditions and limitationscontained in the Insurance Code. All fundsand reserves of the association shall be sep-arately held and invested. [1987 c.774 §77]

735.225 Membership in joint under-writing association. The joint underwritingassociation established under ORS 735.220shall be comprised of all insurers authorizedto write and who are writing commercial li-ability insurance within this state on a directbasis, including the commercial liability por-tions of multiperil policies. Every such in-surer shall remain a member of theassociation as a condition of its authority tocontinue to transact insurance in this state.[1987 c.774 §78]

735.230 Rates; approval. The board ofdirectors of the joint underwriting associ-ation shall engage the services of an inde-pendent actuarial firm to develop andrecommend actuarially sound rates, ratingplans, rating rules and classifications. TheDirector of the Department of Consumer andBusiness Services shall approve rates filedby the joint underwriting association in ac-cordance with ORS 737.310. All rates ap-proved for the joint underwriting associationshall be actuarially sound and calculated tobe self-supporting. [1987 c.774 §79]

735.235 Board of directors. The jointunderwriting association formed under ORS735.220 shall be under the administrativecontrol of a seven person board of directorsappointed by the Governor. Two directorsshall represent insurance carriers participat-ing in the association; one director shallrepresent insurance producers; three direc-tors shall represent the affected classes ofinsureds; and one director shall be a publicmember with no ties to the insurance indus-try. The board shall elect one of its membersas chairperson. [1987 c.774 §80; 2003 c.364 §91]

735.240 Annual statement. The jointunderwriting association shall file an annualstatement prepared by an independent certi-fied public accountant containing a financialstatement, a summary of its transactions andoperations for the prior year and other in-formation as prescribed by the Director ofthe Department of Consumer and BusinessServices by rule. [1987 c.774 §81]

735.245 Conditions for policyholdersurcharge. (1) Upon a determination of theboard of directors that the joint underwritingassociation will be unable to pay its out-standing lawful obligations as they mature,the board shall certify the existence of thiscondition to the Director of the Departmentof Consumer and Business Services. Aschedule for policyholder surcharges shall besubmitted by the board at the time of certi-fication.

(2) The surcharge schedule shall becomefinal 30 days after certification unless thedirector finds, after a public hearing, thatthe surcharge amounts are unreasonable orunjustifiable. Such surcharges may be ad-justed to take into consideration the past andprospective loss and expense experience indifferent geographical areas within the state.Such surcharges shall be in addition to andnot in lieu of the premiums charged for thecoverages provided.

(3) Moneys collected in accordance withsubsection (2) of this section shall be held ina fund separate from other joint underwrit-ing association funds. Such funds shall beinvested in accordance with applicable lawgoverning publicly held trust funds. The as-sociation shall file an annual financial state-ment covering such funds.

(4) Surcharge funds shall be subject tothe control of the board of directors and maybe used to satisfy the legal obligations of thejoint underwriting association.

(5) No part of the profit or loss of thejoint underwriting association shall inure tothe benefit of any member insurer or be anobligation of any member insurer. [1987 c.774§82]

735.250 Exemption from liability.There shall be no liability or cause of actionagainst any member insurer, self-insurer, orits agents or employees, the joint underwrit-ing association or its agents or employees,members of the board of directors, the De-partment of Consumer and Business Servicesor its representatives for any action takenby or statement made by them in perform-ance of their powers and duties under ORS735.210 to 735.260. [1987 c.774 §83]



735.255 State not liable to pay debtsof association. The state is not liable to payany debts or obligations of any associationformed under ORS 735.220 and no personmay assert any claim against the state orany of its agencies for any act or omissionof the association. [1987 c.774 §84]

735.260 Rules. The Director of the De-partment of Consumer and Business Servicesmay adopt all rules necessary to insure theefficient, equitable operation of the marketassistance plan or the joint underwriting as-sociation, including but not limited to rulesrequiring or limiting certain policy pro-visions. [1987 c.774 §85]

735.265 Liquor liability insurance riskand rate classifications; rules. If a marketassistance plan is formed under ORS 735.210,or a joint underwriting association is formedunder ORS 735.220, the Director of the De-partment of Consumer and Business Servicesshall by rule establish such liquor liabilityinsurance risk and rate classifications asmay be necessary to facilitate the availabilityand affordability of this commercial insur-ance product. Risk and rate classificationsshall be established for all facets of the liq-uor industry including those who sell atwholesale or retail and the State of Oregon,as allowed by law. Risk classifications andrating plans shall be developed upon consid-erations including, but not limited to, thefollowing factors:

(1) Past loss experience and prospectiveloss experience of different license types.

(2) Past loss experience and prospectiveloss experience in different geographic areas.

(3) Prior claims experience of the indi-vidual licensee.

(4) Prior compliance with public safetyand alcoholic beverage laws, rules and ordi-nances pertaining to the sale and service ofalcoholic beverages.

(5) Evidence of responsible managementpolicies including, but not limited to, proce-dures and actions which:

(a) Encourage persons not to become in-toxicated if they consume alcoholic bever-ages on the licensee’s premises;

(b) Promote availability of nonalcoholicbeverages and food;

(c) Promote safe transportation alterna-tives to driving while intoxicated;

(d) Prohibit employees and agents of thelicensee from consuming alcoholic beverageswhile acting in their capacity as employeeor agent;

(e) Establish promotions and marketingefforts which publicize responsible business

practices to the licensee’s customers andcommunity;

(f) Implement comprehensive trainingprocedures; and

(g) Maintain an adequate, trained numberof employees and agents for the type and sizeof licensee’s business. [1987 c.774 §88]

LIABILITY RISK RETENTION LAW735.300 Purpose of ORS 735.300 to

735.365. The purpose of ORS 735.300 to735.365 is to regulate the formation and op-eration of risk retention groups and pur-chasing groups in this state formed pursuantto the provisions of the federal Liability RiskRetention Act of 1986 (P.L. 99-563). [1987 c.774§98; 1989 c.700 §10]


(1) “Director” means the Director of theDepartment of Consumer and Business Ser-vices of this state or the commissioner, di-rector or superintendent of insurance in anyother state.

(2) “Completed operations liability”means liability arising out of the installation,maintenance or repair of any product at asite that is not owned or controlled by anyperson who performs that work or by anyperson who hires an independent contractorto perform that work. The term also includesliability for activities that are completed orabandoned before the date of the occurrencegiving rise to the liability.

(3) “Domicile,” for purposes of determin-ing the state in which a purchasing group isdomiciled, means:

(a) For a corporation, the state in whichthe purchasing group is incorporated; and

(b) For an unincorporated entity, thestate of its principal place of business.

(4) “Hazardous financial condition”means that a risk retention group, based onits present or reasonably anticipated finan-cial conditions, although not yet financiallyimpaired or insolvent, is unlikely to be able:

(a) To meet obligations to policyholderswith respect to known claims and reasonablyanticipated claims; or

(b) To pay other obligations in thenormal course of business.

(5) “Insurance” means primary insurance,excess insurance, reinsurance, surplus linesinsurance and any other arrangement forshifting and distributing risk that is deter-mined to be insurance under the laws of thisstate.

(6) “Liability”:(a) Means legal liability for damages, in-

cluding costs of defense, legal costs and fees


735.305 INSURANCE

and other claims expenses, because of inju-ries to other persons, damage to their prop-erty or other damage or loss to such otherpersons resulting from or arising out of:

(A) Any business that is for-profit ornot-for-profit, or any trade, product, premises,operations or services, including professionalservices; or

(B) Any activity of any state or localgovernment, or any agency or political sub-division thereof.

(b) Does not include personal risk liabil-ity and an employer’s liability with respectto its employees other than legal liabilityunder the Federal Employers’ Liability Act(45 U.S.C. 51 et seq.).

(7) “Personal risk liability” means liabil-ity for damages because of injury to anyperson, damage to property or other loss ordamage resulting from any personal, familialor household responsibilities or activities,rather than from responsibilities or activitiesreferred to in subsection (6) of this section.

(8) “Plan of operation or a feasibilitystudy” means an analysis that presents theexpected activities and results of a risk re-tention group, and includes at a minimum:

(a) The coverages, deductibles, coveragelimits, rates and rating classification systemsfor each line of insurance the group intendsto offer;

(b) Historical and expected loss experi-ence of the proposed members and nationalexperience of similar exposures to the extentthat this experience is reasonably available;

(c) Pro forma financial statements andprojections;

(d) Appropriate opinions by a qualifiedindependent casualty actuary, including adetermination of minimum premium or par-ticipation levels required to commence oper-ations and prevent a hazardous financialcondition;

(e) Identification of management, under-writing procedures, managerial oversightmethods and investment policies; and

(f) Other matters that the director re-quires for liability insurance companies au-thorized by the insurance laws of the statein which the risk retention group is char-tered.

(9) “Product liability” means liability fordamages because of any personal injury,death, emotional harm, consequential eco-nomic damage or property damage, includingdamages resulting from the loss of use ofproperty, arising out the manufacture, de-sign, importation, distribution, packaging, la-beling, lease or sale of a product. The termdoes not include the liability of any personfor those damages if the product involved

was in the possession of such a person whenthe incident giving rise to the claim oc-curred.

(10) “Purchasing group” means any groupthat:

(a) Has as one of its purposes the pur-chase of liability insurance on a group basis;

(b) Purchases such insurance only for itsgroup members and only to cover their simi-lar or related liability exposure, as describedin paragraph (c) of this subsection;

(c) Is composed of members whose busi-ness or activities are similar or related withrespect to the liability to which members areexposed by virtue of any related, similar orcommon business, trade, product, services,premises or operations; and

(d) Is domiciled in any state.(11) “Risk retention group” means any

corporation or other limited liability associ-ation formed under the laws of any state:

(a) Whose primary activity consists ofassuming and spreading all, or any portionof, the liability exposure of its group mem-bers;

(b) That is organized for the primarypurpose of conducting the activity describedin paragraph (a) of this subsection;

(c) That:(A) Is chartered and licensed as a liabil-

ity insurance company and authorized to en-gage in the business of insurance under thelaws of any state; or

(B) Before January 1, 1985, was charteredor licensed and authorized to engage in thebusiness of insurance under the laws ofBermuda or the Cayman Islands and, beforethat date, had certified to the insurancecommissioner of at least one state that itsatisfied the capitalization requirements ofthat state. However, any such group shallbe considered to be a risk retention grouponly if it has been engaged in business con-tinuously since that date and only for thepurpose of continuing to provide insuranceto cover product liability or completed oper-ations liability, as such terms were definedin the federal Product Liability Risk Re-tention Act of 1981, as amended by the RiskRetention Amendments of 1986, before thedate of the enactment of the federal LiabilityRisk Retention Act of 1986 (P.L. 99-563);

(d) That does not exclude any personfrom membership in the group solely to pro-vide for members of such a group a compet-itive advantage over such a person;

(e) That:(A) Has as its members only persons who

have an ownership interest in the group andhas as its owners only persons who are



members that are provided insurance by therisk retention group; or

(B) Has as its sole member and soleowner an organization that is owned by per-sons who are provided insurance by the riskretention group;

(f) Whose members are engaged in busi-nesses or activities similar or related withrespect to the liability to which such mem-bers are exposed by virtue of any related,similar or common business, trade, product,services, premises or operations;

(g) Whose activities do not include theprovision of insurance other than:

(A) Liability insurance for assuming andspreading all or any portion of the liabilityof its group members; and

(B) Reinsurance with respect to the li-ability of any other risk retention group, orany members of such other group, that isengaged in businesses or activities so thatsuch group or member meets the requirementdescribed in paragraph (f) of this subsectionfor membership in the risk retention groupthat provides such reinsurance; and

(h) The name of which includes “RiskRetention Group.”

(12) “State” means any state of theUnited States or the District of Columbia.[1987 c.774 §99; 1993 c.744 §29]

735.310 Qualifications for risk re-tention group; plan of operation; applica-tion; notification to National Associationof Insurance Commissioners. (1) A riskretention group seeking to be organized inthis state:

(a) Must be organized as a liability in-surer in this state and authorized by a sub-sisting certificate of authority issued by thedirector to transact liability insurance inthis state, as provided in ORS chapter 732;and

(b) Except as otherwise provided in ORS735.300 to 735.365, must comply with alllaws, rules and other requirements applicableto such insurers authorized to transact in-surance in this state and with ORS 735.315to the extent the requirements under ORS735.315 are not a limitation on other laws,rules or requirements of this state.

(2) Before a risk retention group may of-fer insurance in any state, the risk retentiongroup shall submit for approval to the direc-tor of this state a plan of operation or a fea-sibility study and revisions of such plan orstudy if the group intends to offer any addi-tional lines of liability insurance.

(3) Immediately upon receipt of an appli-cation for organization, the director shallprovide summary information concerning thefiling to the National Association of Insur-

ance Commissioners, including the name ofthe risk retention group, the identity of theinitial members of the group, the identity ofthose individuals who organized the group orwho will provide administrative services orotherwise influence or control the activitiesof the group, the amount and nature of ini-tial capitalization, the coverages to be af-forded and the states in which the groupintends to operate. Providing notification tothe National Association of Insurance Com-missioners is in addition to and shall not besufficient to satisfy the requirements of ORS735.300 to 735.365. [1987 c.774 §100]

735.315 Foreign risk retention groups;conditions of doing business in Oregon;prohibited acts. Risk retention groupschartered in states other than this state andseeking to do business as a risk retentiongroup in this state must observe and abideby the laws of this state as follows:

(1) Before transacting insurance in thisstate, a risk retention group shall submit tothe director:

(a) A statement identifying the state orstates in which the risk retention group ischartered and licensed as a liability insur-ance company, its date of chartering, itsprincipal place of business and such infor-mation, including information on its mem-bership, as the director may require to verifythat the risk retention group is qualified un-der ORS 735.305 (11);

(b) A copy of its plan of operation or afeasibility study and revisions of such planor study submitted to its state of domicile.The requirement of the submission of a planof operation or a feasibility study shall notapply with respect to any line or classifica-tion of liability insurance that:

(A) Was defined in the federal ProductLiability Risk Retention Act of 1981, asamended by the Risk Retention Amendmentsof 1986, before October 27, 1986; and

(B) Was offered before October 27, 1986,by any risk retention group that had beenchartered and operating for not less thanthree years before October 27, 1986; and

(c) A statement of registration that des-ignates the director as its agent for the pur-pose of receiving service of legal documentsor process.

(2) A risk retention group doing businessin this state shall submit to the director:

(a) A copy of the group’s financial state-ment submitted to its state of domicile,which shall be certified by an independentpublic accountant and contain a statementof opinion on loss and loss adjustment ex-pense reserves made by a member of theAmerican Academy of Actuaries or a quali-fied loss reserve specialist, under criteria es-


735.320 INSURANCE

tablished by the National Association ofInsurance Commissioners;

(b) A copy of each examination of therisk retention group as certified by the di-rector or public official conducting the ex-amination;

(c) Upon request by the director, a copyof any audit performed with respect to therisk retention group; and

(d) Such information as may be requiredto verify its continuing qualification as arisk retention group under ORS 735.305 (11).

(3) A risk retention group is subject totaxation in this state as follows:

(a) All premiums paid for coverage withinthis state to risk retention groups shall besubject to taxation at the rate applicable toforeign admitted insurers and the taxes ow-ing shall be subject to the same interest,fines and penalties for nonpayment as thoseapplicable to foreign admitted insurers.

(b) To the extent insurance producers areused, they shall report and pay the taxes forthe premiums for the risks that they haveplaced with or on behalf of a risk retentiongroup not organized in this state.

(c) To the extent insurance producers arenot used or fail to pay the tax, each risk re-tention group shall pay the tax for risks in-sured within the state. Further, each riskretention group shall report all premiumspaid to it for risks insured within the state.

(4) A risk retention group and its agentsand representatives shall comply with ORS746.230 and 746.240. If the director seeks aninjunction regarding such conduct, the in-junction must be obtained from a court ofcompetent jurisdiction.

(5) A risk retention group must submit toan examination by the director to determineits financial condition if the director of thejurisdiction in which the group is charteredhas not initiated an examination or does notinitiate an examination within 60 days aftera request by the director of this state. Anysuch examination shall be coordinated toavoid unjustified repetition. Examinationsmay be conducted in accordance with theexaminer handbook of the National Associ-ation of Insurance Commissioners.

(6) A policy issued by a risk retentiongroup shall contain in 10 point type on thefront page and the declaration page, the fol-lowing notice:__________________________________________

NoticeThis policy is issued by your risk re-

tention group. Your risk retention group maynot be subject to all of the insurance lawsand rules of your state. State insurance in-

solvency guaranty funds are not available foryour risk retention group.__________________________________________

(7) The following acts by a risk retentiongroup are prohibited:

(a) The solicitation or sale of insuranceby a risk retention group to any person whois not eligible for membership in such group;and

(b) The solicitation or sale of insuranceby, or operation of, a risk retention groupthat is in a hazardous financial condition oris financially impaired.

(8) No risk retention group shall be al-lowed to do business in this state if an in-surer is directly or indirectly a member orowner of the risk retention group, other thanin the case of a risk retention group all ofwhose members are insurers.

(9) No risk retention group may offer in-surance policy coverage prohibited by theInsurance Code.

(10) A risk retention group not organizedin this state and doing business in this statemust comply with a lawful order issued in avoluntary dissolution proceeding or in a de-linquency proceeding commenced by the in-surance commissioner of any state if therehas been a finding of financial impairmentafter an examination under subsection (5) ofthis section. [1987 c.774 §101; 2003 c.364 §92]

735.320 Relationship to insuranceguaranty fund and joint underwriting as-sociation. (1) No risk retention group shallbe permitted to join or contribute financiallyto any insurance insolvency guaranty fund,or similar mechanism, in this state. No riskretention group, or its insureds, shall receiveany benefit from any such fund for claimsarising out of the operations of the risk re-tention group.

(2) A risk retention group shall partic-ipate in this state’s joint underwriting asso-ciations and mandatory liability pools asprovided by the Insurance Code. [1987 c.774§102]

735.325 Exemption of purchasinggroups from certain laws. Any purchasinggroup meeting the criteria established underthe provisions of the federal Liability RiskRetention Act of 1986 (P.L. 99-563), shall beexempt from any law of this state relating tothe creation of groups for the purchase ofinsurance or the prohibition of group pur-chasing, or any law that would discriminateagainst a purchasing group or its members.In addition, an insurer shall be exempt fromany law of this state that prohibits providingor offering to provide advantages to a pur-chasing group or its members based on theirloss and expense experience not afforded to



other persons with respect to rates, policyforms, coverages or other matters. A pur-chasing group shall be subject to all otherapplicable laws of this state. [1987 c.774 §103]

735.330 Purchasing groups; notice ofintent to do business; registration; ex-ceptions. (1) A purchasing group that in-tends to do business in this state shallfurnish notice to the director, which shall:

(a) Identify the state in which the groupis domiciled;

(b) Specify the lines and classificationsof liability insurance that the purchasinggroup intends to purchase;

(c) Identify the insurer from which thegroup intends to purchase its insurance andthe domicile of the insurer;

(d) Identify the principal place of busi-ness of the group; and

(e) Provide such other information asmay be required by the director to verifythat the purchasing group is qualified underORS 735.305 (10).

(2) The purchasing group shall registerwith the director and designate the directoras its agent solely for the purpose of receiv-ing service of legal documents or process,except that such requirements shall not ap-ply in the case of a purchasing group thatmeets the following qualifications:

(a) That:(A) Was domiciled before April 1, 1986,

in any state; and(B) Is domiciled on and after October 27,

1986, in any state;(b) That:(A) Before October 27, 1986, purchased

insurance from an insurance carrier licensedin any state; and

(B) On and after October 27, 1986, pur-chased insurance from an insurance carrierlicensed in any state;

(c) That was a purchasing group underthe requirements of the federal Product Li-ability Risk Retention Act of 1981, asamended by the Risk Retention Amendmentsof 1986, before October 27, 1986; and

(d) That does not purchase insurancethat was not authorized for purposes of anexemption under the federal Product Liabil-ity Risk Retention Act of 1981, as in effectbefore October 27, 1986. [1987 c.774 §104]

735.335 Purchase of insurance by pur-chasing group. A purchasing group may notpurchase insurance from a risk retentiongroup that is not chartered in a state or froman insurer not admitted in the state in whichthe purchasing group is located, unless the

purchase is effected through a licensed in-surance producer acting pursuant to the sur-plus lines laws and regulations of that state.[1987 c.774 §105; 2003 c.364 §93]

735.340 Insurance Code enforcementauthority subject to federal law. The di-rector is authorized to make use of any ofthe powers established under the InsuranceCode to enforce the laws of this state so longas those powers are not specifically pre-empted by the federal Product Liability RiskRetention Act of 1981, as amended by theRisk Retention Amendments of 1986. Thisincludes, but is not limited to, the director’sadministrative authority to investigate, issuesubpoenas, conduct depositions and hearings,issue orders and impose penalties. With re-gard to any investigation, administrativeproceedings or litigation, the director mayrely on the procedural law and rules of thestate. The injunctive authority of the direc-tor in regard to risk retention groups is re-stricted by the requirement that anyinjunction be issued by a court of competentjurisdiction. [1987 c.774 §106]

735.345 Violation of 735.300 to 735.365;penalties. A risk retention group that vio-lates any provision of ORS 735.300 to 735.365is subject to criminal and civil penalties ap-plicable to insurers generally, and to suspen-sion or revocation of its certificate ofauthority to transact insurance. [1987 c.774§107]

735.350 Agent or broker; license. Anyperson acting or offering to act as an insur-ance producer for a risk retention group orpurchasing group that solicits members, sellsinsurance coverage, purchases coverage forits members located within this state or oth-erwise does business in this state shall, be-fore commencing any such activity, obtain alicense as an insurance producer from thedirector under ORS chapter 744. [1987 c.774§108; 1989 c.701 §71; 2003 c.364 §94]

735.355 Court orders enforceable inOregon. An order issued by any districtcourt of the United States enjoining a riskretention group from soliciting or selling in-surance or operating in any state or in allstates or in any territory or possession of theUnited States, upon a finding that such agroup is in a hazardous financial conditionshall be enforceable in the courts of thisstate. [1987 c.774 §109]

735.360 Rules. The director may adoptrules that the director determines are neces-sary for carrying out ORS 735.300 to 735.365.[1987 c.774 §110; 1989 c.700 §11]

735.365 Short title. ORS 735.300 to735.365 shall be known and may be cited asthe Oregon Liability Risk Retention Law.[1987 c.774 §98a]


735.400 INSURANCE

SURPLUS LINES LAW735.400 Purposes of ORS 735.400 to

735.495. ORS 735.400 to 735.495 shall be lib-erally construed and applied to promote itsunderlying purposes which include:

(1) Protecting persons seeking insurancein this state;

(2) Permitting surplus lines insurance tobe placed with reputable and financiallysound nonadmitted insurers and exportedfrom this state pursuant to ORS 735.400 to735.495;

(3) Establishing a system of regulationwhich will permit orderly access to surpluslines insurance in this state and encourageadmitted insurers to provide new and inno-vative types of insurance available to con-sumers in this state; and

(4) Protecting revenues of this state. [1987c.774 §117]


(1) “Admitted insurer” means an insurerauthorized to do an insurance business inthis state.

(2) “Affiliated group” means any groupof entities that, with respect to an insured,exercise control over the insured, are underthe control of the insured, or are undercommon control with the insured.

(3) “Capital” means funds paid in forstock or other evidence of ownership.

(4) “Control” means a situation where acontrolling entity:

(a) Directly, or acting through one ormore other persons, owns or has the powerto vote 25 percent or more of any class ofvoting securities of the controlled entity; or

(b) Directs in any manner the election ofa majority of directors or trustees of thecontrolled entity.

(5) “Eligible surplus lines insurer” meansa nonadmitted insurer with which a surpluslines licensee may place surplus lines insur-ance.

(6) “Exempt commercial purchaser”means any person purchasing commercial in-surance that, at the time of placement:

(a) Employs or retains a qualified riskmanager to negotiate insurance coverage;

(b) Has paid aggregate nationwide com-mercial property and casualty insurance pre-miums in excess of $100,000 in theimmediately preceding 12 months; and

(c) Meets at least one of the followingcriteria:

(A) The person possesses a net worth inexcess of $10 million, as such amount is ad-justed pursuant to ORS 735.406.

(B) The person generates annual reven-ues in excess of $20 million, as such amountis adjusted pursuant to ORS 735.406.

(C) The person employs more than 50full-time or full-time equivalent employeesfor each insured or is a member of an affil-iated group employing more than 100 em-ployees in the aggregate.

(D) The person is a not-for-profit organ-ization or public entity generating annualbudgeted expenses of at least $30 million, assuch amount is adjusted pursuant to ORS735.406.

(E) The person is a municipality with apopulation in excess of 50,000 individuals.

(7) “Export” means to place surplus linesinsurance with a nonadmitted insurer.

(8) “Home state” means, with respect toan insured:

(a) The state in which an insured main-tains the insured’s principal place of businessor, in the case of an individual, theindividual’s principal residence;

(b) If 100 percent of the insured risk islocated out of the state described in para-graph (a) of this subsection, the state towhich the greatest percentage of theinsured’s taxable premium for that insurancecontract is allocated; or

(c) If two or more insureds from an affil-iated group are named as insureds on a sin-gle nonadmitted insurance contract, thestate, as determined pursuant to paragraph(a) or (b) of this subsection, of the memberof the affiliated group that has the greatestpercentage of premium attributed to it underthe insurance contract.

(9) “Kind of insurance” means one of thetypes of insurance required to be reported inthe annual statement that must be filed withthe Director of the Department of Consumerand Business Services by authorized in-surers.

(10) “Nonadmitted insurer” means an in-surer not authorized to do an insurancebusiness in this state. “Nonadmittedinsurer” includes insurance exchanges asauthorized under the laws of various states.“Nonadmitted insurer” does not include arisk retention group as defined in ORS735.305.

(11) “Premium tax” means any tax, as-sessment or other charge imposed by thisstate directly or indirectly based upon anypayment made as consideration for insurancein an insurance contract.

(12) “Producing insurance producer”means the individual insurance producerdealing directly with the party seeking in-surance.



(13) “Qualified risk manager” means,with respect to a policyholder of commercialinsurance, a person who meets all of the fol-lowing requirements:

(a) The person is an employee of, or thirdparty consultant retained by, the commercialpolicyholder.

(b) The person provides skilled servicesin:

(A) Loss prevention;(B) Loss reduction; or(C) Risk and insurance coverage analysis

and purchase of insurance.(c) The person has:(A) A bachelor’s degree, from an accred-

ited college or university, in risk manage-ment, business administration, finance,economics or any other field determined byan insurance commissioner or other regula-tory official of this or any other state todemonstrate minimum competence in riskmanagement, and has:

(i) Three years of experience in risk fi-nancing, claims administration, loss pre-vention, risk and insurance coverageanalysis, or purchasing commercial lines ofinsurance; or

(ii) Any designation, certification or li-cense issued by a national insurance certi-fication organization that is determined bythe Director of the Department of Consumerand Business Services to demonstrate mini-mum competency in risk management;

(B) At least seven years of experience inrisk financing, claims administration, lossprevention, risk and insurance coverageanalysis, or purchasing commercial lines ofinsurance, and has a designation, certifica-tion or license specified in subparagraph(A)(ii) of this paragraph;

(C) At least 10 years of experience in riskfinancing, claims administration, loss pre-vention, risk and insurance coverage analysisor purchasing commercial lines of insurance;or

(D) A graduate degree, from an accred-ited college or university, in risk manage-ment, business administration, finance,economics or any other field determined bythe director to demonstrate minimum compe-tence in risk management.

(14) “Surplus” means funds over andabove liabilities and capital of the insurer forthe protection of policyholders.

(15) “Surplus lines licensee” means aninsurance producer licensed under ORSchapter 744 to place insurance on Oregonhome state risks with nonadmitted insurers.[1987 c.774 §118; 1991 c.810 §25; 2001 c.191 §44a; 2003 c.364§38; 2011 c.660 §6]

735.406 Cost of living adjustment tonet worth, revenues and expenses of ex-empt commercial purchasers. Beginningon January 1, 2015, and each fifth January 1occurring thereafter, the amounts in ORS735.405 (6)(c)(A), (B) and (D) shall be adjustedto reflect the percentage change for suchfive-year period in the Portland-Salem,OR-WA, Consumer Price Index for All UrbanConsumers for All Items as published by theBureau of Labor Statistics of the UnitedStates Department of Labor. [2011 c.660 §7]

735.410 Conditions for procuring in-surance through nonadmitted insurer;rules. (1) Insurance may be procuredthrough a surplus lines licensee from a non-admitted insurer if:

(a) The insurer is an eligible surpluslines insurer;

(b) A diligent search has first been madeamong the insurers who are authorized totransact and are actually writing the partic-ular kind and class of insurance in this state,and it is determined that the full amount orkind of insurance cannot be obtained fromthose insurers; and

(c) All other requirements of ORS 735.400to 735.495 are met.

(2) Subsection (1)(b) of this section doesnot apply to a surplus lines licensee seekingto procure or place nonadmitted insurance inthis state for an exempt commercial pur-chaser if:

(a) The surplus lines licensee procuringor placing the surplus lines insurance hasdisclosed to the exempt commercial pur-chaser that such insurance may or may notbe available from the admitted market thatmay provide greater protection with moreregulatory oversight; and

(b) The exempt commercial purchaser hassubsequently requested in writing that thesurplus lines licensee procure or place suchinsurance from a nonadmitted insurer.

(3) The Director of the Department ofConsumer and Business Services by rule mayestablish requirements applicable to theplacement of surplus lines insurance on Ore-gon home state risks by a nonresident sur-plus lines licensee. The rules may notinterfere with or hinder implementation ofthe federal Gramm-Leach-Bliley Act (P.L.106-102) with respect to licensing reciprocityamong the states, or the Nonadmitted andReinsurance Reform Act of 2010 (P.L.111-203, Title V, Subtitle B). [1987 c.774 §119;2001 c.191 §44b; 2011 c.660 §9]

735.415 Qualifications for placementof coverage with nonadmitted insurer. (1)A surplus lines licensee may not place anycoverage with a nonadmitted insurer unless


735.417 INSURANCE

at the time of placement the nonadmitted in-surer has done all of the following:

(a) Obtained authorization to write thekind of insurance to be placed by the surpluslines licensee by the insurance supervisoryofficial in the insurer’s domiciliary jurisdic-tion.

(b) Qualified under one of the followingsubparagraphs:

(A) Has capital and surplus or its equiv-alent under the laws of its domiciliary juris-diction that equals the greater of either theminimum capital and surplus requirementsof its domiciliary jurisdiction or $15 million,except that the requirements of this subpar-agraph may be satisfied by an insurer pos-sessing less than the minimum capital andsurplus upon an affirmative finding of ac-ceptability by the Director of the Departmentof Consumer and Business Services. Thefinding shall be based upon such factors asquality of management, capital and surplusof any parent company, company underwrit-ing profit and investment income trends,market availability and company record andreputation within the industry. In no eventshall the director make an affirmative find-ing of acceptability when the nonadmittedinsurer’s capital and surplus is less than $4.5million.

(B) In the case of an alien insurer, inaddition to the requirements in subparagraph(A) of this paragraph, maintains in theUnited States an irrevocable trust fund ineither a national bank or a member of theFederal Reserve System, in an amount notless than $5.4 million for the protection ofall its policyholders in the United States andsuch trust fund consists of cash, securities,irrevocable letters of credit, or of invest-ments of substantially the same characterand quality as those which are eligible in-vestments for the capital and statutory re-serves of admitted insurers authorized towrite like kinds of insurance in this state.Such trust fund, which shall be included inany calculation of capital and surplus or itsequivalent, shall have an expiration datewhich at no time shall be less than fiveyears.

(C) In the case of a group of insurersthat includes incorporated and individualunincorporated underwriters that are notlisted in accordance with subparagraph (E)of this paragraph, maintains a trust fund ofnot less than $100 million as security to thefull amount thereof for all policyholders andcreditors in the United States of each mem-ber of the group, and such trust shall like-wise comply with the terms and conditionsestablished in subparagraph (B) of this para-graph for alien insurers, except that the in-corporated members of the group may not be

engaged in any business other than under-writing as a member of the group and shallbe subject to the same level of solvency reg-ulation and control by the group’sdomiciliary regulators as are the unincor-porated members.

(D) In the case of an insurance exchangecreated by the laws of individual states,maintains capital and surplus, or the sub-stantial equivalent thereof, of not less than$75 million in the aggregate. For insuranceexchanges that maintain funds for the pro-tection of all insurance exchange policyhold-ers, each individual syndicate shall maintainminimum capital and surplus, or the sub-stantial equivalent thereof, of not less than$5 million. In the event the insurance ex-change does not maintain funds for the pro-tection of all insurance exchangepolicyholders, each individual syndicate shallmeet the minimum capital and surplus re-quirements of subparagraph (A) of this para-graph.

(E) Is listed on the NAIC Quarterly List-ing of Alien Insurers maintained by the Na-tional Association of InsuranceCommissioners and meets additional require-ments regarding the use of the list estab-lished by rule of the director.

(c) Unless qualified under paragraph(b)(E) of this subsection, provided to the di-rector no more than six months after theclose of the period reported upon a certifiedcopy of its current annual statement that is:

(A) Filed with and approved by the regu-latory authority in the domicile of the non-admitted insurer;

(B) Certified by an accounting or audit-ing firm licensed in the jurisdiction of theinsurer’s domicile; or

(C) In the case of an insurance exchange,an aggregate combined statement of allunderwriting syndicates operating during theperiod reported.

(2) When a nonresident surplus lines li-censee places surplus lines insurance outsidethis state that covers an Oregon home staterisk, the licensee or insurance producer issubject to the requirements of subsection (1)of this section. [1987 c.774 §120; 1995 c.99 §2; 2001c.191 §44c; 2005 c.185 §11; 2011 c.660 §10]

735.417 Insured required to report andpay taxes on independently procured in-surance covering Oregon home staterisks. (1) Each insured in this state who ob-tains independently procured insurance, orcontinues or renews independently procuredinsurance on Oregon home state risks, otherthan insurance procured through a surpluslines licensee, shall file, within 30 days afterthe date the insurance was procured, contin-ued or renewed, a written report with the



Director of the Department of Consumer andBusiness Services showing:

(a) The name and address of the insurer;(b) The subject of the insurance;(c) The amount of premium currently

charged; and(d) Additional pertinent information rea-

sonably requested by the director.(2) The insured filing a report under sub-

section (1) of this section shall pay, at thetime of filing the report, the director anamount equal to the taxes imposed underORS 735.470 for the premium reported undersubsection (1)(c) of this section. The filing ofthe report and payment of the taxes may bemade by a person authorized by the insuredto act on the insured’s behalf.

(3)(a) The director may require that re-ports filed under subsection (1) of this sec-tion be filed with the Surplus LineAssociation of Oregon. The director may re-quire that such filings be made electron-ically, but may allow an exemption to thisrequirement for good cause shown.

(b) The director may require thatamounts to be paid to the director undersubsection (2) of this section be paid to theSurplus Line Association of Oregon. [2011c.660 §5]

735.418 Director authorized to enterinto interstate compact for premium taxallocation. For purposes of carrying out theNonadmitted and Reinsurance Reform Act of2010 (P.L. 111-203, Title V, Subtitle B), afterreceiving express legislative approval, theDirector of the Department of Consumer andBusiness Services is authorized to enter intoa compact or to otherwise establish proce-dures with other states to allocate among thestates the premium taxes paid to an insured’shome state. [2011 c.660 §4]

735.420 Declaration of ineligibility ofsurplus lines insurer. (1) The Director ofthe Department of Consumer and BusinessServices may declare a surplus lines insurerdescribed in ORS 735.415 (1) ineligible if thedirector has reason to believe that the sur-plus lines insurer:

(a) Is in unsound financial condition;(b) Is no longer eligible under ORS

735.415;(c) Has willfully violated the laws of this

state; or(d) Does not make reasonably prompt

payment of just losses and claims in thisstate or elsewhere.

(2) The director shall promptly mail no-tice of all such declarations to each surpluslines licensee. [1987 c.774 §121; 2001 c.191 §44d]

735.425 Filing by licensee after place-ment of surplus lines insurance. (1)Within 90 days after the placing of any sur-plus lines insurance in this state on an Ore-gon home state risk, each surplus lineslicensee shall file with the Director of theDepartment of Consumer and Business Ser-vices:

(a) A statement signed by the licenseeregarding the insurance, which shall be keptconfidential as provided in ORS 705.137, in-cluding the following:

(A) The name and address of the insured;(B) The identity of the insurer or in-

surers;(C) A description of the subject and lo-

cation of the risk;(D) The amount of premium charged for

the insurance; and(E) Such other pertinent information as

the director may reasonably require.(b) A statement on a standardized form

furnished by the director, as to the diligentefforts by the producing insurance producerto place the coverage with admitted insurersand the results thereof. The statement shallbe signed by the producing insurance pro-ducer and shall affirm that the insured wasexpressly advised prior to placement of theinsurance that:

(A) The surplus lines insurer with whomthe insurance was to be placed is not li-censed in this state and is not subject to itssupervision; and

(B) In the event of the insolvency of thesurplus lines insurer, losses will not be paidby the state insurance guaranty fund.

(2) A surplus lines licensee placing non-admitted insurance in this state for an ex-empt commercial purchaser satisfies therequirements of subsection (1)(b) of this sec-tion if the surplus lines licensee providesproof of compliance with ORS 735.410 (2).

(3) The director may direct that filingsrequired under subsection (1) of this sectionbe made to the Surplus Line Association ofOregon. The director may also require thatsuch filings be made electronically but mayexempt a licensee from the requirement forgood cause shown.

(4) A nonresident surplus lines licenseewho places a surplus lines policy on an Ore-gon home state risk shall satisfy the re-quirements in ORS 735.410 and the filingrequirements in subsections (1) and (2) ofthis section.

(5) Facsimile signatures and electronicsignatures subject to ORS 84.001 to 84.061are acceptable and have the same force asoriginal signatures. [1987 c.774 §122; 1993 c.182 §1;


735.430 INSURANCE

2001 c.377 §§13,13a; 2003 c.364 §39; 2005 c.185 §12; 2011c.660 §11]

735.430 Surplus Line Association ofOregon; fees. (1) The Surplus Line Associ-ation of Oregon shall be the advisory organ-ization of surplus lines licensees to:

(a) Facilitate and encourage complianceby resident and nonresident surplus lines li-censees with the laws of this state and therules of the Director of the Department ofConsumer and Business Services relative tosurplus lines insurance;

(b) Provide means for the examination,which shall remain confidential as providedin ORS 705.137, of all surplus lines coveragewritten by resident and nonresident surpluslines licensees to determine whether thecoverages comply with the Oregon SurplusLines Law;

(c) Communicate with organizations ofadmitted insurers with respect to the properuse of the surplus lines market;

(d) Receive and disseminate to residentand nonresident surplus lines licensees in-formation relative to surplus lines coverages;and

(e) At the request of the director, receiveand collect on behalf of the state and remitto the state premium receipts taxes for sur-plus lines insurance pursuant to ORS 735.417or 735.470.

(2) The Surplus Line Association of Ore-gon shall file with the director:

(a) A copy of its constitution, articles ofagreement or association or certificate of in-corporation;

(b) A copy of its bylaws and rules gov-erning its activities;

(c) A current list of members;(d) The name and address of a resident

of this state upon whom notices or orders ofthe director or processes issued at the direc-tion of the director may be served;

(e) An agreement that the director mayexamine the Surplus Line Association of Or-egon in accordance with the provisions ofthis section; and

(f) A schedule of fees and charges.(3) The director may make or cause to be

made an examination of the Surplus LineAssociation of Oregon. The reasonable costof any such examination shall be paid by theassociation upon presentation to it by thedirector of a detailed account of each cost.The officers, managers, agents and employeesof the association may be examined at anytime, under oath, and shall exhibit all books,records, accounts, documents or agreementsgoverning its method of operation. The di-rector shall furnish two copies of the exam-

ination report to the association and shallnotify the association that it may, within 20days thereof, request a hearing on the reportor on any facts or recommendations therein.If the director finds the association or anymember thereof to be in violation of ORS735.400 to 735.495, the director may issue anorder requiring the discontinuance of suchviolation.

(4)(a) The Surplus Line Association ofOregon may charge resident and nonresidentsurplus lines licensees and nonresidentproducing insurance producers a fee for re-viewing surplus lines policies and for col-lecting, on behalf of the state, taxes imposedunder ORS 735.470.

(b) The association may charge insuredsa fee for collecting, on behalf of the state,reports required and taxes imposed underORS 735.417.

(c) The association shall adopt bylawsimplementing paragraphs (a) and (b) of thissubsection. [1987 c.774 §123; 2001 c.377 §14; 2005 c.185§13; 2007 c.71 §235; 2011 c.660 §12]

735.435 Evidence of insurance; con-tents; change; penalty; notice regardingInsurance Guaranty Association; rules.(1) Upon placing surplus lines insurance onan Oregon home state risk, the surplus lineslicensee shall promptly deliver to the insuredor the producing insurance producer the pol-icy, or if such policy is not then available, acertificate as described in subsection (4) ofthis section, cover note or binder. The cer-tificate, as described in subsection (4) of thissection, cover note or binder shall be exe-cuted by the surplus lines licensee and shallshow the description and location of thesubject of the insurance, coverages includingany material limitations other than those instandard forms, a general description of thecoverages of the insurance, the premium andrate charged and taxes to be collected fromthe insured, and the name and address of theinsured and surplus lines insurer or insurersand proportion of the entire risk assumed byeach, and the name of the surplus lines li-censee and the licensee’s license number.

(2) A surplus lines licensee may not issueor deliver any insurance policy or certificateof insurance or represent that insurance willbe or has been written by any eligible sur-plus lines insurer, unless the licensee hasauthority from the insurer to cause the riskto be insured, or has received informationfrom the insurer in the regular course ofbusiness that such insurance has beengranted.

(3) If, after delivery of an insurance pol-icy or certificate of insurance, there is anychange in the identity of the insurers, or theproportion of the risk assumed by any in-surer, or any other material change in cov-



erage as stated in the surplus lines licensee’soriginal insurance policy, or in any othermaterial as to the insurance coverage, thesurplus lines licensee shall promptly issueand deliver to the insured or the originalproducing insurance producer an appropriatesubstitute for, or indorsement of the originaldocument, accurately showing the currentstatus of the coverage and the insurers re-sponsible thereunder.

(4) As soon as reasonably possible afterthe placement of any such insurance thesurplus lines licensee shall deliver a copy ofthe policy or, if not available, a certificateof insurance to the insured or producing in-surance producer to replace an insurancepolicy or certificate of insurance theretoforeissued. Each certificate or policy of insur-ance shall contain or have attached theretoa complete record of all policy insuringagreements, conditions, exclusions, clauses,indorsements or any other material facts thatwould regularly be included in the policy.

(5) Any surplus lines licensee who failsto comply with the requirements of this sec-tion shall be subject to the penalties pro-vided in ORS 731.988.

(6) Each insurance policy or certificateof insurance negotiated, placed or procuredunder the provisions of ORS 735.400 to735.495 by the surplus lines licensee shallbear the name of the licensee and the fol-lowing legend in bold type: “This insurancewas procured and developed under the Ore-gon surplus lines laws. It is NOT covered bythe provisions of ORS 734.510 to 734.710 re-lating to the Oregon Insurance GuarantyAssociation. If the insurer issuing this in-surance becomes insolvent, the Oregon In-surance Guaranty Association has noobligation to pay claims under this insur-ance.”

(7) The Director of the Department ofConsumer and Business Services by rule mayestablish requirements relating to insurancepolicies and certificates of insurance andother applicable requirements governingplacement of insurance by a nonresidentsurplus lines licensee outside this state thatcovers an Oregon home state risk. [1987 c.774§124; 2001 c.191 §45a; 2003 c.364 §40; 2011 c.660 §13]

735.440 Validity of contracts. Insurancecontracts procured under ORS 735.400 to735.495 shall be valid and enforceable as toall parties. [1987 c.774 §125]

735.445 Effect of payment of premiumto surplus lines licensee. A payment ofpremium to a surplus lines licensee actingfor a person other than the surplus lines li-censee in negotiating, continuing or renew-ing any policy of insurance under ORS735.400 to 735.495 shall be deemed to be pay-ment to the insurer, whatever conditions or

stipulations may be inserted in the policy orcontract notwithstanding. [1987 c.774 §126]

735.450 Requirements for license assurplus lines insurance licensee. A personmay not procure any contract of surpluslines insurance with any nonadmitted insurerfor an Oregon home state risk unless theperson is licensed under ORS chapter 744 totransact surplus lines insurance. A personmay obtain a license to transact surplus linesinsurance only if the person is licensed as aninsurance producer under ORS chapter 744to transact property and casualty insurance.[1987 c.774 §127; 1989 c.288 §1; 1991 c.810 §26; 1995 c.639§14; 2001 c.191 §46; 2003 c.364 §41; 2011 c.660 §14]

735.455 Authority of licensee; rules. (1)A surplus lines licensee may originate sur-plus lines insurance on an Oregon homestate risk or accept such insurance from anyother insurance producer duly licensed as tothe kinds of insurance involved on an Ore-gon home state risk, and the surplus lineslicensee may compensate the insurance pro-ducer therefor.

(2) A surplus lines licensee may chargea producing insurance producer a fee or acombination of a fee and a commission whentransacting surplus lines for the producinginsurance producer if the surplus lines li-censee has a written agreement with theproducing insurance producer prior to thebinding or issuance of a surplus lines insur-ance policy. When a surplus lines licenseetransacts surplus lines insurance directly fora prospective insured, the surplus lines li-censee may charge the prospective insured afee or a combination of a fee and a commis-sion if the surplus lines licensee has a writ-ten agreement with the prospective insuredprior to the binding or issuance of a surpluslines insurance policy.

(3) A producing insurance producer maycharge a fee to a prospective insured whenthe producing insurance producer pays a feeor a combination of a fee and a commissionto a surplus lines licensee under subsection(2) of this section if the producing insuranceproducer has a written agreement with theprospective insured prior to the binding orissuance of the surplus lines insurance pol-icy. The fee may not exceed the amount ofcompensation paid by the producing insur-ance producer to the surplus lines licensee.

(4) For the purpose of determining thecharge under subsection (2) of this section,the producing insurance producer and thesurplus lines licensee may agree to any allo-cation of the fee that the producing insur-ance producer charges the prospectiveinsured under this section.

(5) The fee or the fee and commissioncharged by a surplus lines licensee undersubsection (2) of this section must be com-


735.460 INSURANCE

mensurate with the services provided by thesurplus lines licensee. The Director of theDepartment of Consumer and Business Ser-vices may establish by rule minimum condi-tions for written agreements entered intounder this section. An insurer or insuranceproducer who enters into a written agree-ment as provided in this section is not in vi-olation of ORS 746.035 or 746.045. [1987 c.774§128; 2003 c.364 §42; 2011 c.660 §15]

735.460 Records of licensee; examina-tion. (1) Each surplus lines licensee shallkeep a full and true record of each surpluslines insurance contract placed on an Oregonhome state risk by or through the licenseeas required by ORS 744.068, including a copyof the policy, certificate, cover note or otherevidence of insurance showing any of thefollowing items that are applicable:

(a) Amount of the insurance and perilsinsured;

(b) Brief description of the property in-sured and its location;

(c) Gross premium charged;(d) Any return premium paid;(e) Rate of premium charged upon the

several items of property;(f) Effective date of the contract and the

terms thereof;(g) Name and address of the insured;(h) Name and address of the insurer;(i) Amount of tax and other sums to be

collected from the insured; and(j) Identity of the producing insurance

producer, any confirming correspondencefrom the insurer or its representative andthe application.

(2) The record of each contract shall bekept open at all reasonable times to exam-ination by the Director of the Department ofConsumer and Business Services without no-tice for a period not less than five years fol-lowing termination of the contract. [1987 c.774§129; 2001 c.191 §47; 2003 c.364 §43; 2011 c.660 §16]

735.465 Monthly reports; rules. (1) Onor before the end of each month, each sur-plus lines licensee shall file with the Direc-tor of the Department of Consumer andBusiness Services, as prescribed by the di-rector, a verified report of all surplus linesinsurance transacted on Oregon home staterisks during the preceding 90 days. The re-port need not show transacted surplus linesinsurance that was reported in an earlier re-port. The report shall show:

(a) Aggregate gross premiums written;(b) Aggregate return premiums; and(c) Amount of aggregate tax.

(2) The director may direct that reportsrequired under subsection (1) of this sectionbe made to the Surplus Line Association ofOregon and that the Surplus Line Associ-ation of Oregon file a combined reportthereof with the director. The director mayalso require that reports required under sub-section (1) of this section be made electron-ically but may exempt a licensee from therequirement for good cause shown.

(3) For the purpose of collecting taxes oninsurance covering Oregon home state riskswhen the insurance is placed outside thisstate, the director may establish by rule re-quirements for filing reports on surplus linesinsurance transacted outside this state onOregon home state risks. [1987 c.774 §130; 2001c.191 §48; 2007 c.71 §236; 2011 c.660 §17]

735.470 Premium tax; collection; pay-ment; refund; rules. (1)(a) The surplus lineslicensee shall pay the Director of the De-partment of Consumer and Business Servicesa surplus lines premium tax equal to twopercent of the gross amount of premiums re-ceived on Oregon home state risks as shownin the report required by ORS 735.465.

(b) Notwithstanding ORS 731.820, thesurplus lines licensee shall also pay to thedirector a tax equal to 0.3 percent of thepremium or fees charged by the insurer orthe insurer’s insurance producer and otherintermediaries for the insurance, for thepurpose of maintaining the office of the StateFire Marshal and paying the expenses inci-dent thereto.

(c) The taxes shall be collected by thesurplus lines licensee as specified by the di-rector, in addition to the gross amount ofpremiums charged by the insurer or theinsurer’s insurance producer and other in-termediaries for the insurance. The taxes onany portion of the premium unearned at ter-mination of insurance having been creditedby the state to the licensee shall be returnedto the policyholder directly by the surpluslines licensee or through the producing in-surance producer, if any. The surplus lineslicensee is prohibited from absorbing thetaxes, and from rebating for any reason, anypart of the taxes.

(2) The surplus lines taxes are due quar-terly on the 45th day following the calendarquarter in which the premium is collected.The taxes shall be paid to and reported onforms prescribed by the director or upon thedirector’s order paid to and reported onforms prescribed by the Surplus Line Associ-ation of Oregon.

(3) Notwithstanding subsection (2) of thissection, if a surplus lines license is termi-nated or nonrenewed for any reason, thetaxes described in this section are due on the



30th day after the termination or nonre-newal.

(4) For the purposes of carrying out theNonadmitted and Reinsurance Reform Act of2010 (P.L. 111-203, Title V, Subtitle B), thedirector may collect taxes on 100 percent ofthe gross amount of premiums on Oregonhome state risks. If the director enters intoa compact or otherwise establishes proce-dures with other states pursuant to ORS735.418, the director by rule shall establishprocedures to facilitate the reporting, col-lection, payment, allocation and disburse-ment of premium taxes on Oregon home staterisks that also include risks allocable toother states.

(5) As used in this section, “gross amountof premiums” has the meaning given thatterm in ORS 731.808. [1987 c.774 §131; 1989 c.288§2; 1995 c.786 §10; 2001 c.191 §48a; 2003 c.364 §44; 2007c.71 §237; 2011 c.660 §8]

735.475 Suit to recover unpaid tax. Ifthe tax collectible by a surplus lines licenseeunder ORS 735.400 to 735.495 is not paidwithin the time prescribed, the same shall berecoverable in a suit brought by the Directorof the Department of Consumer and BusinessServices against the surplus lines licensee.[1987 c.774 §132; 1989 c.288 §3; 2001 c.191 §48b]

735.480 Suspension or revocation of li-cense; refusal to renew; grounds. The Di-rector of the Department of Consumer andBusiness Services may suspend, revoke orrefuse to renew the license of a surplus lineslicensee after notice and hearing as providedunder the applicable provision of this state’slaws upon any one or more of the followinggrounds:

(1) Removal of the surplus lineslicensee’s office from this state, if the li-censee is a resident insurance producer;

(2) Removal of the surplus lineslicensee’s office accounts and records fromthe principal place of business of the licenseeunder ORS 744.068 during the period duringwhich such accounts and records are re-quired to be maintained under ORS 735.460;

(3) Closing of the surplus lines licensee’soffice for a period of more than 30 businessdays, unless permission is granted by the di-rector;

(4) Failure to make and file required re-ports;

(5) Failure to transmit required tax onsurplus lines premiums;

(6) Violation of any provision of ORS735.400 to 735.495; or

(7) For any cause for which an insurancelicense could be denied, revoked, suspendedor renewal refused under ORS 744.074. [1987c.774 §133; 1989 c.288 §4; 2001 c.191 §49; 2003 c.364 §45]

735.485 Actions against surplus linesinsurer. (1) A surplus lines insurer may besued upon any cause of action arising in thisstate under any surplus lines insurance con-tract on an Oregon home state risk made byit or evidence of insurance issued or deliv-ered by the surplus lines licensee pursuantto the procedure provided in ORS 735.490.Any surplus lines policy issued by the sur-plus lines licensee shall contain a provisionstating the substance of this section anddesignating the person to whom process shallbe delivered.

(2) Each surplus lines insurer assumingsurplus lines insurance shall be consideredthereby to have subjected itself to ORS735.400 to 735.495.

(3) The remedies provided in this sectionare in addition to any other methods pro-vided by law for service of process upon in-surers.

(4) When a nonresident surplus lines in-surance producer transacts outside this statea surplus lines insurance contract coveringan Oregon home state risk, the producer andthe surplus lines insurer of the contract aresubject to this section and to ORS 735.490 orto rules adopted by the director in lieuthereof. [1987 c.774 §134; 1989 c.288 §5; 2001 c.191 §49a;2011 c.660 §18]

735.490 Jurisdiction in action againstinsurer; service of summons and com-plaint; response. (1) An insurer transactinginsurance on an Oregon home state risk un-der the provisions of ORS 735.400 to 735.495may be sued upon any cause of action, aris-ing under any policy of insurance so issuedand delivered by it, in the courts for thecounty where the insurance producer whoregistered or delivered the policy resides ortransacts business, by the service of sum-mons and complaint made upon the insur-ance producer for the insurer.

(2) Any insurance producer served withsummons and complaint in any such causeshall forthwith mail the summons and com-plaint, or a true and complete copy thereof,by registered or certified mail with properpostage affixed and properly addressed, to theinsurer being sued.

(3) The insurer shall have 40 days fromthe date of the service of the summons andcomplaint upon the insurance producer inwhich to plead, answer or defend any suchcause.

(4) Upon service of summons and com-plaint upon the insurance producer for theinsurer, the court in which the action is be-gun shall be deemed to have duly acquiredpersonal jurisdiction of the defendant insurerso served.


735.492 INSURANCE

(5) An insurer and policyholder mayagree to waive the provisions of subsections(1) to (4) of this section governing serviceand venue with respect to a surplus lines in-surance contract for commercial propertyand casualty risk if the waiver is specificallyreferred to in the contract or in an indorse-ment attached to the contract. [1987 c.774 §137;2001 c.191 §49b; 2003 c.364 §46; 2011 c.660 §19]

735.492 Application of certain Insur-ance Code provisions to surplus lines in-surers. ORS 731.324, 731.328, 731.512 and731.624 do not apply to surplus lines in-surers. [2005 c.185 §17]

735.495 Short title; severability. (1)ORS 735.400 to 735.495 shall be known andmay be cited as “The Oregon Surplus LinesLaw.”

(2) If any provisions of ORS 735.400 to735.495, or the application of such provisionto any person or circumstance, is held in-valid, the remainder of ORS 735.400 to735.495 and the application of such provisionto persons or circumstances other than thoseas to which it is held invalid, shall not beaffected. [1987 c.774 §§116,136]

RETAINER MEDICAL PRACTICE735.500 Requirements for certification

as retainer medical practice; disclosures;rules. (1) As used in this section and ORS735.510:

(a) “Control” means the possession, di-rectly or indirectly, of the power to direct orcause the direction of the management andpolicies of a person, whether through theownership of voting stock, by contract orotherwise. A person who is the owner of 10percent or more ownership interest in aretainer medical practice or applicant for acertificate to operate a retainer medicalpractice is presumed to have control.

(b) “Primary care” means outpatient,nonspecialty medical services or the coordi-nation of health care for the purpose of:

(A) Promoting or maintaining mental andphysical health and wellness; and

(B) Diagnosis, treatment or managementof acute or chronic conditions caused by dis-ease, injury or illness.

(c) “Provider” means a health care pro-fessional licensed or certified under ORSchapter 677, 678, 684 or 685 who providesprimary care in the ordinary course of busi-ness or practice of a profession.

(d) “Retainer medical agreement” meansa written agreement between a retainermedical practice and a patient or a legalrepresentative or guardian of a patient spec-ifying a defined and predetermined set of

primary care services to be provided in con-sideration for a retainer medical fee.

(e) “Retainer medical fee” means any feepaid to a retainer medical practice pursuantto a medical retainer agreement.

(f) “Retainer medical practice” means aprovider, a group of providers or a personthat employs or contracts with a provider ora group of providers to provide services un-der the terms of a retainer medical agree-ment.

(2) A retainer medical practice must becertified by the Department of Consumer andBusiness Services. To qualify to become acertified retainer medical practice or to re-new a certificate, the practice:

(a) May not have or have ever had acertificate of authority to transact insurancein this state.

(b) May not be or have ever been li-censed, certified or otherwise authorized inthis state or any other state to act as an in-surer, managed care organization, healthcare service contractor or similar entity.

(c) May not be controlled by an entitydescribed in paragraph (a) or (b) of this sub-section.

(3) A certified retainer medical practice:(a) Must provide only primary care and

must limit the scope of services provided orthe number of patients served to an amountthat is within the capacity of the practice toprovide in a timely manner;

(b) May not bill an insurer, a self-insuredplan or the state medical assistance programfor a service provided by the practice to apatient pursuant to a retainer medicalagreement;

(c) Must be financially responsible andhave the necessary business experience orexpertise to operate the practice;

(d) Must give the written disclosures de-scribed in subsection (4) of this section;

(e) May not use or disseminate mislead-ing, deceptive or false statements in market-ing, advertising, promotional, sales orinformational materials regarding the prac-tice or in communications with patients orprospective patients;

(f) May not engage in dishonest, fraudu-lent or illegal conduct in any business orprofession; and

(g) May not discriminate based on race,religion, gender, sexual identity, sexual pref-erence or health status.

(4) A certified retainer medical practicemust make the following written informationavailable to prospective patients by promi-nently disclosing, in the manner prescribed



by the department by rule, in marketing ma-terials and retainer medical agreements:

(a) That the practice is not insurance;(b) That the practice provides only the

limited scope of primary care services speci-fied in the retainer medical agreement;

(c) That a patient must pay for all ser-vices not specified in the retainer medicalagreement; and

(d) Any other disclosures required by thedepartment by rule.

(5) The department may by written orderdeny, suspend or revoke a retainer medicalpractice certificate or may refuse to renew aretainer medical practice certificate if thedepartment finds that:

(a) The retainer medical practice doesnot meet the criteria in subsections (2) to (4)of this section;

(b) The retainer medical practice hasprovided false, misleading, incomplete or in-accurate information in the application for acertificate or renewal of a certificate;

(c) The retainer medical practice providesmedical services through a provider whoselicense to provide the medical services of-fered on behalf of the retainer medical prac-tice is revoked;

(d) The authority of the retainer medicalpractice to operate a retainer medical prac-tice or similar practice in another jurisdic-tion is denied, suspended, revoked or notrenewed;

(e) The retainer medical practice, a per-son who has control over the retainer med-ical practice or a health care providerproviding services on behalf of the retainermedical practice is charged with a felony ormisdemeanor involving dishonesty; or

(f) The retainer medical practice fails tocomply with subsection (7) of this section.

(6) With respect to a certified retainermedical practice or a retainer medical prac-tice operating without a certificate, the de-partment is authorized to:

(a) Investigate;(b) Subpoena documents and records re-

lated to the business of the practice; and(c) Take any actions authorized by the

Insurance Code that are necessary to admin-ister and enforce this section.

(7) A retainer medical practice subject toan investigation under subsection (5) of thissection must:

(a) Within five business days, respond toinquiries in the form and manner specifiedby the department; and

(b) Reimburse the expenses incurred bythe department in conducting the investi-gation.

(8) A retainer medical practice may con-test any order made under subsection (5) ofthis section in accordance with ORS chapter183.

(9) A certificate issued under subsection(2) of this section is effective for one year orfor a longer period as prescribed by the de-partment by rule.

(10) The department may adopt rulesnecessary or appropriate to implement theprovisions of this section. [2011 c.499 §2]

Note: 735.500 and 735.510 were added to and madea part of the Insurance Code by legislative action butwere not added to ORS chapter 735 or any seriestherein. See Preface to Oregon Revised Statutes forfurther explanation.

735.510 Notice to department of speci-fied changes to practice. A certifiedretainer medical practice shall:

(1) Notify the Department of Consumerand Business Services immediately whenever:

(a) The license of a provider who hasprovided services on behalf of the practice isdenied, suspended, revoked or not renewed inthis state or in any other jurisdiction; or

(b) The authority of the practice to oper-ate in another jurisdiction is denied, sus-pended, revoked or not renewed.

(2) Notify the department no later than30 days after any change to the name, ad-dress or contact information that is providedin the application for certification underORS 735.500. [2011 c.499 §3]


DENTAL SERVICES CONTRACTS735.515 Charges for services not cov-

ered by contract. (1) As used in this sec-tion:

(a) “Dental services contract” means acontract between an insurer and a provideror a group of providers to provide dentalhealth services for enrollees. “Dental ser-vices contract” does not include a contractof employment or a contract creating legalentities and ownership thereof that are au-thorized under ORS chapter 58, 60 or 70, orother similar professional organizations per-mitted by statute.

(b) “Enrollee” means a person entitled toreceive dental health benefits from an in-surer.

(c) “Provider” means a person licensedor otherwise authorized by the laws of thisstate to administer dental health services inthe ordinary course of business or practiceof a profession.


735.530 INSURANCE

(2) A dental services contract may notrestrict the price that a provider may chargefor services provided to an enrollee unlessthe services are covered by the insurer. [2010c.74 §2]

Note: 735.515 was added to and made a part of theInsurance Code by legislative action but was not addedto ORS chapter 735 or any series therein. See Prefaceto Oregon Revised Statutes for further explanation.

PHARMACY BENEFIT MANAGERS735.530 Definitions for ORS 735.530 to

735.552. As used in ORS 735.530 to 735.552:(1) “Claim” means a request from a

pharmacy or pharmacist to be reimbursed forthe cost of filling or refilling a prescriptionfor a drug or for providing a medical supplyor service.

(2) “Insurer” has the meaning given thatterm in ORS 731.106.

(3) “Pharmacist” has the meaning giventhat term in ORS 689.005.

(4) “Pharmacy” has the meaning giventhat term in ORS 689.005.

(5)(a) “Pharmacy benefit manager” meansa person that contracts with pharmacies onbehalf of an insurer, a third party adminis-trator or the Oregon Prescription Drug Pro-gram established in ORS 414.312 to:

(A) Process claims for prescription drugsor medical supplies or provide retail networkmanagement for pharmacies or pharmacists;

(B) Pay pharmacies or pharmacists forprescription drugs or medical supplies; or

(C) Negotiate rebates with manufacturersfor drugs paid for or procured as describedin this paragraph.

(b) “Pharmacy benefit manager” does notinclude a health care service contractor asdefined in ORS 750.005.

(6) “Third party administrator” means aperson licensed under ORS 744.702. [2013 c.570§2]

Note: 735.530 to 735.552 were added to and made apart of the Insurance Code by legislative action butwere not added to ORS chapter 735 or any seriestherein. See Preface to Oregon Revised Statutes forfurther explanation.

735.532 Registration of pharmacy ben-efit managers; fees; rules. (1) To conductbusiness in this state, a pharmacy benefitmanager must register with the Departmentof Consumer and Business Services and an-nually renew the registration.

(2) To register under this section, apharmacy benefit manager must:

(a) Submit an application to the depart-ment on a form prescribed by the departmentby rule.

(b) Pay a registration fee, not to exceed$50, adopted by the department by rule.

(3) To renew a registration under thissection, a pharmacy benefit manager mustpay a renewal fee, not to exceed $50, adoptedby the department by rule.

(4) The department shall deposit all mon-eys collected under this section into theConsumer and Business Services Fund cre-ated in ORS 705.145. [2013 c.570 §3]


735.534 Claim reimbursement; maxi-mum allowable costs. (1) As used in thissection:

(a) “List” means the list of drugs forwhich maximum allowable costs have beenestablished.

(b) “Maximum allowable cost” means themaximum amount that a pharmacy benefitmanager will reimburse a pharmacy for thecost of a drug.

(c) “Multiple source drug” means a ther-apeutically equivalent drug that is availablefrom at least two manufacturers.

(d) “Network pharmacy” means a retaildrug outlet registered under ORS 689.305that contracts with a pharmacy benefit man-ager.

(e) “Therapeutically equivalent” has themeaning given that term in ORS 689.515.

(2) A pharmacy benefit manager:(a) May not place a drug on a list unless

there are at least two therapeutically equiv-alent, multiple source drugs, or at least onegeneric drug available from only one man-ufacturer, generally available for purchaseby network pharmacies from national or re-gional wholesalers.

(b) Shall ensure that all drugs on a listare generally available for purchase by phar-macies in this state from national or regionalwholesalers.

(c) Shall ensure that all drugs on a listare not obsolete.

(d) Shall make available to each networkpharmacy at the beginning of the term of acontract, and upon renewal of a contract, thesources utilized to determine the maximumallowable cost pricing of the pharmacy bene-fit manager.

(e) Shall make a list available to a net-work pharmacy upon request in a formatthat is readily accessible to and usable bythe network pharmacy.

(f) Shall update each list maintained bythe pharmacy benefit manager every sevenbusiness days and make the updated lists,including all changes in the price of drugs,available to network pharmacies in a readilyaccessible and usable format.



(g) Shall ensure that dispensing fees arenot included in the calculation of maximumallowable cost.

(3) A pharmacy benefit manager must es-tablish a process by which a network phar-macy may appeal its reimbursement for adrug subject to maximum allowable costpricing. A network pharmacy may appeal amaximum allowable cost if the reimburse-ment for the drug is less than the netamount that the network pharmacy paid tothe supplier of the drug. An appeal requestedunder this section must be completed within30 calendar days of the pharmacy making theclaim for which appeal has been requested.

(4) A pharmacy benefit manager mustprovide as part of the appeals process estab-lished under subsection (3) of this section:

(a) A telephone number at which a net-work pharmacy may contact the pharmacybenefit manager and speak with an individ-ual who is responsible for processing appeals;

(b) A final response to an appeal of amaximum allowable cost within seven busi-ness days; and

(c) If the appeal is denied, the reason forthe denial and the national drug code of adrug that may be purchased by similarly sit-uated pharmacies at a price that is equal toor less than the maximum allowable cost.

(5)(a) If an appeal is upheld under thissection, the pharmacy benefit manager shallmake an adjustment on the date that thepharmacy benefit manager makes the deter-mination. The pharmacy benefit managershall make the adjustment effective for allsimilarly situated pharmacies in this statethat are within the network.

(b) If the request for an adjustment hascome from a critical access pharmacy, as de-fined by the Oregon Health Authority byrule for purposes related to the Oregon Pre-scription Drug Program, the adjustment ap-proved under paragraph (a) of this subsectionshall apply only to critical access phar-macies.

(6) This section does not apply to thestate medical assistance program. [2013 c.570§11]

Note: The amendments to 735.534 by section 13,chapter 570, Oregon Laws 2013, become operative Janu-ary 1, 2015, and apply to contracts entered into, renewedor extended on or after January 1, 2015. See sections 12and 14, chapter 570, Oregon Laws 2013. The text that isoperative on and after January 1, 2015, is set forth forthe user’s convenience.

735.534. (1) As used in this section:

(a) “List” means the list of drugs for which maxi-mum allowable costs have been established.

(b) “Maximum allowable cost” means the maximumamount that a pharmacy benefit manager will reimbursea pharmacy for the cost of a drug.

(c) “Multiple source drug” means a therapeuticallyequivalent drug that is available from at least twomanufacturers.

(d) “Network pharmacy” means a retail drug outletregistered under ORS 689.305 that contracts with apharmacy benefit manager.

(e) “Therapeutically equivalent” has the meaninggiven that term in ORS 689.515.

(2) A pharmacy benefit manager:(a) May not place a drug on a list unless there are

at least two therapeutically equivalent, multiple sourcedrugs, or at least one generic drug available from onlyone manufacturer, generally available for purchase bynetwork pharmacies from national or regional whole-salers.

(b) Shall ensure that all drugs on a list are gener-ally available for purchase by pharmacies in this statefrom national or regional wholesalers.

(c) Shall ensure that all drugs on a list are notobsolete.

(d) Shall make available to each network pharmacyat the beginning of the term of a contract, and uponrenewal of a contract, the sources utilized to determinethe maximum allowable cost pricing of the pharmacybenefit manager.

(e) Shall make a list available to a network phar-macy upon request in a format that is readily accessibleto and usable by the network pharmacy.

(f) Shall update each list maintained by the phar-macy benefit manager every seven business days andmake the updated lists, including all changes in theprice of drugs, available to network pharmacies in areadily accessible and usable format.

(g) Shall ensure that dispensing fees are not in-cluded in the calculation of maximum allowable cost.

(3) A pharmacy benefit manager must establish aprocess by which a network pharmacy may appeal itsreimbursement for a drug subject to maximum allowablecost pricing. A network pharmacy may appeal a maxi-mum allowable cost if the reimbursement for the drugis less than the net amount that the network pharmacypaid to the supplier of the drug. An appeal requestedunder this section must be completed within 30 calendardays of the pharmacy making the claim for which ap-peal has been requested.

(4) A pharmacy benefit manager must provide aspart of the appeals process established under subsection(3) of this section:

(a) A telephone number at which a network phar-macy may contact the pharmacy benefit manager andspeak with an individual who is responsible for pro-cessing appeals;

(b) A final response to an appeal of a maximumallowable cost within seven business days; and

(c) If the appeal is denied, the reason for the denialand the national drug code of a drug that may be pur-chased by similarly situated pharmacies at a price thatis equal to or less than the maximum allowable cost.

(5)(a) If an appeal is upheld under this section, thepharmacy benefit manager shall make an adjustment forthe pharmacy that requested the appeal from the dateof initial adjudication forward.

(b) If the request for an adjustment has come froma critical access pharmacy, as defined by the OregonHealth Authority by rule for purposes related to theOregon Prescription Drug Program, the adjustment ap-proved under paragraph (a) of this subsection shall ap-ply only to critical access pharmacies.

(6) This section does not apply to the state medicalassistance program.



735.540 INSURANCE


(1) “Audit” means an on-site or remotereview of the records of a pharmacy by or onbehalf of an entity.

(2) “Clerical error” means a minor error:(a) In the keeping, recording or tran-

scribing of records or documents or in thehandling of electronic or hard copies of cor-respondence;

(b) That does not result in financial harmto an entity; and

(c) That does not involve dispensing anincorrect dose, amount or type of medicationor dispensing a prescription drug to thewrong person.

(3) “Entity” includes:(a) A pharmacy benefit manager;(b) An insurer;(c) A third party administrator;(d) A state agency; or(e) A person that represents or is em-

ployed by one of the entities described in thissubsection.

(4) “Fraud” means knowingly andwillfully executing or attempting to executea scheme, in connection with the delivery ofor payment for health care benefits, items orservices, that uses false or misleading pre-tenses, representations or promises to obtainany money or property owned by or underthe custody or control of any person. [2013c.570 §4]


735.542 Pharmacy claims audits; re-quirements. An entity that audits claims oran independent third party that contractswith an entity to audit claims:

(1) Must establish, in writing, a proce-dure for a pharmacy to appeal the entity’sfindings with respect to a claim and mustprovide a pharmacy with a notice regardingthe procedure, in writing or electronically,prior to conducting an audit of thepharmacy’s claims;

(2) May not conduct an audit of a claimmore than 24 months after the date the claimwas adjudicated by the entity;

(3) Must give at least 15 days’ advancewritten notice of an on-site audit to thepharmacy or corporate headquarters of thepharmacy;

(4) May not conduct an on-site auditduring the first five days of any month with-out the pharmacy’s consent;

(5) Must conduct the audit in consulta-tion with a pharmacist who is licensed by

this or another state if the audit involvesclinical or professional judgment;

(6) May not conduct an on-site audit ofmore than 250 unique prescriptions of apharmacy in any 12-month period except incases of alleged fraud;

(7) May not conduct more than one on-site audit of a pharmacy in any 12-month pe-riod;

(8) Must audit each pharmacy under thesame standards and parameters that the en-tity uses to audit other similarly situatedpharmacies;

(9) Must pay any outstanding claims of apharmacy no more than 45 days after theearlier of the date all appeals are concludedor the date a final report is issued underORS 735.550 (3);

(10) May not include dispensing fees orinterest in the amount of any overpaymentassessed on a claim unless the overpaidclaim was for a prescription that was notfilled correctly;

(11) May not recoup costs associatedwith:

(a) Clerical errors; or(b) Other errors that do not result in fi-

nancial harm to the entity or a consumer;and

(12) May not charge a pharmacy for adenied or disputed claim until the audit andthe appeals procedure established under sub-section (1) of this section are final. [2013 c.570§5]


735.544 Pharmacy claims audits; stan-dards for review of claims. An entity’sfinding that a claim was incorrectly pre-sented or paid must be based on identifiedtransactions and not based on probabilitysampling, extrapolation or other means thatproject an error using the number of patientsserved who have a similar diagnosis or thenumber of similar prescriptions or refills forsimilar drugs. [2013 c.570 §6]


735.546 Pharmacy claims audits; audi-tors. An entity that contracts with an inde-pendent third party to conduct audits maynot:

(1) Agree to compensate the independentthird party based on a percentage of theamount of overpayments recovered; or

(2) Disclose information obtained duringan audit except to the contracting entity, thepharmacy subject to the audit or the holderof the policy or certificate of insurance thatpaid the claim. [2013 c.570 §7]




735.548 Pharmacy claims audits; vali-dation of claims. For purposes of ORS735.540 to 735.552, an entity, or an independ-ent third party that contracts with an entityto conduct audits, must allow as evidence ofvalidation of a claim:

(1) An electronic or physical copy of aprescription that complies with ORS chapter689 if the prescribed drug was, within 14days of the dispensing date:

(a) Picked up by the patient or thepatient’s designee;

(b) Delivered by the pharmacy to the pa-tient; or

(c) Sent by the pharmacy to the patientusing the United States Postal Service orother common carrier;

(2) Point of sale electronic register datashowing purchase of the prescribed drug,medical supply or service by the patient orthe patient’s designee; or

(3) Electronic records, including elec-tronic beneficiary signature logs, electron-ically scanned and stored patient recordsmaintained at or accessible to the auditedpharmacy’s central operations and any otherreasonably clear and accurate electronicdocumentation that corresponds to a claim.[2013 c.570 §8]


735.550 Pharmacy claims audits; re-ports of findings; opportunity to resubmitclaim and to contest finding. (1)(a) Afterconducting an audit, an entity must providethe pharmacy that is the subject of the auditwith a preliminary report of the audit. Thepreliminary report must be received by thepharmacy no later than 45 days after thedate on which the audit was completed andmust be sent:

(A) By mail or common carrier with areturn receipt requested; or

(B) Electronically with electronic receiptconfirmation.

(b) An entity shall provide a pharmacyreceiving a preliminary report under thissubsection no fewer than 45 days after re-ceiving the report to contest the report orany findings in the report in accordance withthe appeals procedure established under ORS735.542 (1) and to provide additional doc-umentation in support of the claim. The en-tity shall consider a reasonable request foran extension of time to submit documenta-tion to contest the report or any findings inthe report.

(2) If an audit results in the dispute ordenial of a claim, the entity conducting theaudit shall allow the pharmacy to resubmitthe claim using any commercially reasonable

method, including facsimile, mail or elec-tronic mail.

(3) An entity must provide a pharmacythat is the subject of an audit with a finalreport of the audit no later than 60 days af-ter the later of the date the preliminary re-port was received or the date the pharmacycontested the report using the appeals pro-cedure established under ORS 735.542 (1).The final report must include a final ac-counting of all moneys to be recovered bythe entity.

(4) Recoupment of disputed funds from apharmacy by an entity or repayment of fundsto an entity by a pharmacy, unless otherwiseagreed to by the entity and the pharmacy,shall occur after the audit and the appealsprocedure established under ORS 735.542 (1)are final. If the identified discrepancy for anindividual audit exceeds $40,000, any futurepayments to the pharmacy may be withheldby the entity until the audit and the appealsprocedure established under ORS 735.542 (1)are final. [2013 c.570 §9]


735.552 Pharmacy claims audits; ex-ception for fraud. ORS 735.540 to 735.552do not:

(1) Preclude an entity from instituting anaction for fraud against a pharmacy;

(2) Apply to an audit of pharmacy recordswhen fraud or other intentional and willfulmisrepresentation is evidenced by physicalreview, review of claims data or statementsor other investigative methods; or

(3) Apply to a state agency that is con-ducting audits or a person that has con-tracted with a state agency to conduct auditsof pharmacy records for prescription drugspaid for by the state medical assistance pro-gram. [2013 c.570 §10]


MEDICAL INSURANCE POOL(Oregon Medical Insurance Pool)

735.600 Legislative intent. The intentof the Legislative Assembly in enacting ORS735.600 to 735.650 is to provide access tomedical insurance coverage to all residentsof this state who are denied adequate med-ical insurance, while at the same timeavoiding undue financial impact on the stateand on private insurers. [1987 c.838 §2]

Note: 735.600 is repealed July 1, 2017. See section42, chapter 698, Oregon Laws 2013, as amended by sec-tion 20, chapter 640, Oregon Laws 2013.


(1) “Benefits plan” means the coveragesto be offered by the pool to eligible personspursuant to ORS 735.600 to 735.650.


735.610 INSURANCE

(2) “Board” means the Oregon MedicalInsurance Pool Board.

(3) “Insured” means any individual resi-dent of this state who is eligible to receivebenefits from any insurer.

(4) “Insurer” means:(a) Any insurer as defined in ORS 731.106

or fraternal benefit society as defined in ORS748.106 required to have a certificate of au-thority to transact health insurance businessin this state, and any health care servicecontractor as defined in ORS 750.005.

(b) Any reinsurer reinsuring medical in-surance in this state.

(c) To the extent consistent with federallaw, any self-insurance arrangement coveredby the Employee Retirement Income SecurityAct of 1974, as amended, that provides healthcare benefits in this state.

(d) All self-insurance arrangements notcovered by the Employee Retirement IncomeSecurity Act of 1974, as amended, that pro-vides health care benefits in this state.

(5) “Medical insurance” means insuranceof humans against bodily injury, disablementor death by accident or accidental means, orthe expense thereof, or against disablementor expense resulting from sickness orchildbirth, or against expense incurred inprevention of sickness, in dental care oroptometrical service, and every insuranceappertaining thereto, including insuranceagainst the risk of economic loss assumedunder a less than fully insured employeehealth benefit plan. “Medical insurance”does not include workers’ compensation cov-erages.

(6) “Medicare” means coverage underPart A, Part B and Part D of Title XVIII ofthe Social Security Act, 42 U.S.C. 1395c etseq., as amended.

(7) “Plan of operation” means the planof operation of the pool, including articles,bylaws and operating rules, adopted by theboard pursuant to ORS 735.600 to 735.650.

(8) “Pool” means the Oregon Medical In-surance Pool as created by ORS 735.610.

(9) “Reinsurer” means any insurer as de-fined in ORS 731.106 from whom any personproviding medical insurance to Oregon in-sureds procures insurance for itself in theinsurer, with respect to all or part of themedical insurance risk of the person.

(10) “Self-insurance arrangement” meansany plan, program, contract or any other ar-rangement under which one or more employ-ers, unions or other organizations providehealth care services or benefits to their em-ployees or members in this state, either di-rectly or indirectly through a trust or third

party administrator, unless the health careservices or benefits are provided by an in-surance policy issued by an insurer otherthan a self-insurance arrangement. [1987 c.838§3; 1989 c.838 §6; 2003 c.33 §4; 2005 c.634 §4; 2009 c.695§1]


735.610 Oregon Medical InsurancePool Board; members; authority; rules.(1) There is created in the Oregon HealthAuthority the Oregon Medical InsurancePool Board. The board shall establish theOregon Medical Insurance Pool and other-wise carry out the responsibilities of theboard under ORS 735.600 to 735.650 andsections 1, 2 and 4, chapter 698, Oregon Laws2013.

(2)(a) The board shall consist of 12 indi-viduals, 10 of whom shall be appointed by theDirector of the Oregon Health Authority.The Director of the Department of Consumerand Business Services or the director’s des-ignee and the Director of the Oregon HealthAuthority or the director’s designee shall bemembers of the board. The chair of the boardshall be elected from among the members ofthe board. The board shall at all times, to theextent possible, include at least:

(A) One representative of a domestic in-surance company licensed to transact healthinsurance;

(B) One representative of a domesticnot-for-profit health care service contractor;

(C) One representative of a health main-tenance organization;

(D) One representative of reinsurers; and(E) Four members of the general public:(i) Who are not associated with the med-

ical profession, a hospital or an insurer; and(ii) Two of whom represent businesses

that purchase health insurance coverage thatis subject to the assessments under section2, chapter 698, Oregon Laws 2013.

(b) A majority of the voting members ofthe board constitutes a quorum for thetransaction of business. An act by a majorityof a quorum is an official act of the board.

(3) The Director of the Oregon HealthAuthority may fill any vacancy on the boardby appointment.

(4) The board shall have the specific au-thority to:

(a) Enter into such contracts as are nec-essary or proper to carry out the provisionsand purposes of ORS 735.600 to 735.650 in-cluding the authority to enter into contractswith similar pools of other states for thejoint performance of common administrativefunctions, or with persons or other organiza-



tions for the performance of administrativefunctions;

(b) Recover any assessments for, on be-half of, or against insurers;

(c) Take such legal action as is necessaryto avoid the payment of improper claimsagainst the pool or the coverage provided byor through the pool;

(d) Appoint from among insurers appro-priate actuarial and other committees asnecessary to provide technical assistance inthe operation of the pool and the OregonReinsurance Program, and for any otherfunction within the authority of the board;

(e) Seek advances to effect the purposesof the pool and the program; and

(f) Establish rules, conditions and proce-dures for reinsuring risks under ORS 735.600to 735.650 and the operation of and partic-ipation of issuers of reinsurance eligiblehealth benefit plans in the program.

(5) Each member of the board is entitledto compensation and expenses as provided inORS 292.495.

(6) The Director of the Oregon HealthAuthority shall adopt rules, as provided un-der ORS chapter 183, implementing policiesrecommended by the board for the purposeof carrying out ORS 735.600 to 735.650 andsections 1, 2 and 4, chapter 698, Oregon Laws2013.

(7) In consultation with the board, theDirector of the Oregon Health Authorityshall employ such staff and consultants asmay be necessary for the purpose of carryingout responsibilities under ORS 735.600 to735.650 and sections 1, 2 and 4, chapter 698,Oregon Laws 2013. [1987 c.838 §4; 1989 c.838 §7;1993 c.744 §190; 1995 c.79 §361; 2001 c.356 §1; 2003 c.364§95; 2009 c.595 §1118; 2009 c.828 §71; 2011 c.70 §19; 2013c.698 §6]


735.612 Oregon Medical InsurancePool Account; sources; uses. (1) There isestablished in the State Treasury, the OregonMedical Insurance Pool Account, which shallconsist of:

(a) Moneys appropriated to the accountby the Legislative Assembly.

(b) Interest earnings from the investmentof moneys in the account.

(c) Assessments and other revenues col-lected or received by the Oregon MedicalInsurance Pool Board.

(2) All moneys in the Oregon MedicalInsurance Pool Account are continuouslyappropriated to the Oregon Medical Insur-ance Pool Board to carry out the provisions

of ORS 735.600 to 735.650 and sections 1, 2and 4, chapter 698, Oregon Laws 2013.

(3) The Oregon Medical Insurance PoolBoard shall transfer to the Oregon HealthAuthority Fund established in ORS 413.101an amount equal to the operating budget au-thorized by the Legislative Assembly or asthat budget may be modified by the Emer-gency Board or the Oregon Department ofAdministrative Services, for operation of theOregon Medical Insurance Pool Board. [1989c.838 §§2,3; 1993 c.744 §191; 2009 c.595 §1119; 2013 c.698§14]


735.614 [1989 c.838 §4; 1991 c.333 §1; 1995 c.603 §28;2005 c.304 §1; 2005 c.635 §1; 2009 c.595 §1120; 2009 c.695§3; 2011 c.131 §1; repealed by 2013 c.698 §42 and 2013c.640 §20]

735.615 Eligibility for pool coverage;rules. (1) Except as provided in subsection(3) of this section, a person who is a residentof this state, as defined by the Oregon Med-ical Insurance Pool Board, is eligible formedical pool coverage if:

(a) An insurer, or an insurance companywith a certificate of authority in any otherstate, has made within a time frame estab-lished by the board an adverse underwritingdecision, as defined in ORS 746.600 (1)(a)(A),(B) or (D), on individual medical insurancefor health reasons while the person was aresident;

(b) The person has a history of any med-ical or health conditions on the list adoptedby the board under subsection (2) of thissection;

(c) The person is a spouse or dependentof a person described in paragraph (a) or (b)of this subsection; or

(d) The person is eligible for the creditfor health insurance costs under section 35of the federal Internal Revenue Code, asamended and in effect on December 31, 2004.

(2) The board may adopt a list of medicalor health conditions for which a person iseligible for pool coverage without applyingfor individual medical insurance pursuant tothis section.

(3) A person is not eligible for coverageunder ORS 735.600 to 735.650 if:

(a) Except as provided in ORS 735.625 (3)and subsection (5) of this section, the personis eligible for Medicare;

(b) The person is eligible to receivehealth services as defined in ORS 414.025that meet or exceed those adopted by theboard;

(c) The person has terminated coveragein the pool within the last 12 months and thetermination was for:


735.616 INSURANCE

(A) A reason other than becoming eligi-ble to receive health services as defined inORS 414.025; or

(B) A reason that does not meet excep-tion criteria established by the board;

(d) The person has exceeded the maxi-mum lifetime benefit established by theboard;

(e) The person is an inmate of or a pa-tient in a public institution named in ORS179.321;

(f) The person has, on the date of issueof coverage by the board, coverage underhealth insurance or a self-insurance arrange-ment that is substantially equivalent to cov-erage under ORS 735.625; or

(g) The person has the premiums paid orreimbursed by a public entity or a healthcare provider, reducing the financial loss orobligation of the payer.

(4) A person applying for coverage shallestablish initial eligibility by providing evi-dence that the board requires.

(5)(a) Notwithstanding ORS 735.625 (4)(c),if a person:

(A) Becomes eligible for Medicare afterbeing enrolled in the pool for a period oftime as determined by the board by rule, thatperson may continue coverage within thepool as secondary coverage to Medicare.

(B) Is eligible for Medicare but is not yeteligible to enroll in Medicare Parts B andD, the individual may receive coverage underthe pool until enrolled in Medicare Parts Band D.

(b) The board may adopt rules concerningthe terms and conditions for the coverageprovided under paragraph (a) of this subsec-tion.

(6) The board may adopt rules to estab-lish additional eligibility requirements for aperson described in subsection (1)(d) of thissection. [1987 c.838 §5; 1989 c.838 §11; 1993 c.130 §1;1993 c.212 §1; 1999 c.754 §1; 2005 c.305 §§1,3; 2005 c.634§1; 2005 c.635 §§2,3; 2009 c.695 §4; 2011 c.70 §20; 2011 c.602§57]


735.616 Portability coverage underpool. (1) An applicant may qualify for porta-bility health insurance coverage under theOregon Medical Insurance Pool if:

(a) An application for coverage is madenot later than the 63rd day after the date offirst eligibility and is made before December1, 2013; and

(b) The individual is an Oregon residentat the time of the application.

(2) In addition to individuals otherwisequalified under ORS 735.615, the followingindividuals qualify for portability health in-surance coverage under the Oregon MedicalInsurance Pool:

(a) An individual who has left coveragethat was in effect for a minimum of 180 con-secutive days under one or more grouphealth benefit plans, if the terminated cover-age was in a plan issued or established in astate other than Oregon;

(b) An eligible individual, as defined inORS 743.760, who has left coverage under agroup health benefit plan or a portabilityhealth benefit plan and whose carrier cannotoffer a portability plan under ORS 743.760 (6)because of:

(A) A change in residence of the eligibleindividual within Oregon;

(B) A change in the geographic areaserved by the group carrier; or

(C) The carrier’s withdrawal from thegroup market in Oregon in accordance withORS 743.737 and 743.754;

(c) An individual who has left coveragethat was in effect for an uninterrupted periodof 180 days or more under one or more Ore-gon group health benefit plans and the ter-minated coverage was provided by:

(A) An employee welfare benefit planthat is exempt from state regulation underthe federal Employee Retirement Income Se-curity Act of 1974, as amended;

(B) A multiple employer welfare arrange-ment subject to ORS 750.301 to 750.341; or

(C) A public body of this state in accor-dance with ORS 731.036; and

(d) On or after January 1, 1998, an indi-vidual who meets the eligibility requirementsof 42 U.S.C. 300gg-41, as amended and in ef-fect on January 1, 1998, and does not other-wise qualify to obtain portability coveragefrom an Oregon group carrier in accordancewith ORS 743.760.

(3) Eligibility for coverage pursuant tosubsections (1) and (2) of this section is sub-ject to the following provisions:

(a) An eligible individual does not in-clude:

(A) An individual who remains eligiblefor the individual’s prior group coverage orwould remain eligible for prior group cover-age in a plan under the federal EmployeeRetirement Income Security Act of 1974, asamended, were it not for action by the plansponsor relating to the actual or expectedhealth condition of the individual;

(B) An individual who is covered underanother health benefit plan at the time thatportability coverage would commence;



(C) An individual who is eligible to enrollin another health benefit plan offered by theemployer, other than as a late enrollee, atthe time that portability coverage wouldcommence; or

(D) An individual who is eligible for thefederal Medicare program.

(b) If an eligible individual has left groupcoverage issued by an insurance company, ahealth care service contractor or a healthmaintenance organization, the date of firsteligibility is the day following the termi-nation date of the group coverage, includingany period of continuation coverage that waselected by the individual under federal lawor under ORS 743.600 or 743.610.

(c) If an eligible individual has left groupcoverage issued by an entity other than aninsurance company, a health care servicecontractor or a health maintenance organ-ization, the date of first eligibility is the dayfollowing the termination date of the groupcoverage, including the full extent of contin-uation coverage available to the individualunder federal law and ORS 743.600 and743.610.

(d) If an individual is eligible for cover-age pursuant to subsection (2)(b) of this sec-tion, the date of first eligibility is the dayfollowing the loss of the group or portabilitycoverage.

(4) Coverage under the Oregon MedicalInsurance Pool pursuant to subsections (1)and (2) of this section shall be offered ac-cording to the following provisions:

(a) Coverage is subject to ORS 743.760 (2)and (8);

(b) Coverage may not be subject to apreexisting conditions provision, exclusionperiod, waiting period, residency period orother similar limitation on coverage; and

(c) The individual shall be required topay a premium rate not more than the appli-cable portability risk rate determined by theOregon Medical Insurance Pool Board pur-suant to ORS 735.625. [Formerly 743.763; 1999c.987 §1; 2001 c.356 §2; 2009 c.695 §5; 2013 c.698 §15]


Note: 743.760 was repealed by section 65, chapter681, Oregon Laws 2013, as amended by section 21,chapter 640, Oregon Laws 2013. The text of 735.616 wasnot amended by enactment of the Legislative Assemblyto reflect the repeal. Editorial adjustment of 735.616 forthe repeal of 743.760 has not been made.

735.620 Administration of insurancepool program. (1) Except as provided insubsection (4) of this section, the OregonMedical Insurance Pool Board shall select aninsurer or insurers through a competitivebidding process to administer the insuranceprogram or components of the insurance

program. The board shall evaluate bids sub-mitted based on criteria established by theboard that include but are not limited to:

(a) The insurer’s proven ability to handleindividual medical insurance.

(b) The efficiency of the insurer’s claimpaying procedures.

(c) An estimate of total charges for ad-ministering the plan.

(d) The insurer’s ability to administer thepool in a cost-effective manner.

(2)(a) The administering insurer shallserve for a period of three years subject toremoval for cause.

(b) At least one year prior to the expira-tion of each three-year period of service byan administering insurer, the board shall in-vite all insurers, including the current ad-ministering insurer, to submit bids to serveas the administering insurer for the succeed-ing three-year period. Selection of the ad-ministering insurer for the succeeding periodshall be made at least six months prior to theend of the current three-year period.

(3) The administering insurer shall beresponsible for one or more of the following:

(a) Performing eligibility and administra-tive claims payment functions relating to thepool.

(b) Establishing a premium billing proce-dure for collection of premiums from insuredpersons on a periodic basis as determined bythe board.

(c) Performing all necessary functions toassure timely payment of benefits to coveredpersons under the pool including:

(A) Making available information relat-ing to the proper manner of submitting aclaim for benefits and distributing formsupon which submission shall be made.

(B) Evaluating the eligibility of eachclaim for payment.

(d) Submitting regular reports to theboard regarding the operation of the pool.The frequency, content and form of the re-port shall be as determined by the board.

(e) Following the close of each calendaryear, determining net written and earnedpremiums, the expense of administration andthe paid and incurred losses for the year andreporting this information to the board on aform prescribed by the board.

(f) Being paid as provided in the plan ofoperation for its expenses incurred in theperformance of its services.

(4) The board may contract with thirdparty administrators or other vendors toprovide services described in subsection (5)of this section that are in addition to or that


735.625 INSURANCE

replace services provided by the administer-ing insurer.

(5) A third party administrator or vendormay provide services that include but are notlimited to:

(a) Any or all of the services provided byan administering insurer.

(b) Disease case management.(c) Direct provider or provider network

contracts.(d) Pharmacy benefit management. [1987

c.838 §6; 1989 c.838 §12; 2005 c.635 §4]Note: 735.620 is repealed July 1, 2017. See section

42, chapter 698, Oregon Laws 2013, as amended by sec-tion 20, chapter 640, Oregon Laws 2013.

735.625 Coverage; rules. (1) Except asprovided in subsection (3)(c) of this section,the Oregon Medical Insurance Pool Boardshall offer major medical expense coverageto every eligible person. The board may notoffer coverage under this section after De-cember 31, 2013.

(2) The coverage to be issued by theboard, its schedule of benefits, exclusions andother limitations, shall be establishedthrough rules adopted by the board, takinginto consideration the advice and recommen-dations of the pool members. In the absenceof such rules, the pool shall adopt by rule theminimum benefits prescribed by section 6(Alternative 1) of the Model Health Insur-ance Pooling Mechanism Act of the NationalAssociation of Insurance Commissioners(1984).

(3)(a) In establishing portability coverageunder the pool, the board shall consider thelevels of medical insurance provided in thisstate and medical economic factors identifiedby the board. The board may adopt rules toestablish benefit levels, deductibles, coinsur-ance factors, exclusions and limitations thatthe board determines are equivalent to theportability health benefit plans establishedunder ORS 743.760.

(b) In establishing medical insurancecoverage under the pool, the board shallconsider the levels of medical insurance pro-vided in this state and medical economicfactors identified by the board. The boardmay adopt rules to establish benefit levels,deductibles, coinsurance factors, exclusionsand limitations that the board determines areequivalent to those found in the commercialgroup or employer-based medical insurancemarket.

(c) The board may provide a separateMedicare supplement policy for individualsunder the age of 65 who are receiving Medi-care disability benefits. The board shall adoptrules to establish benefits, deductibles, coin-surance, exclusions and limitations, premi-

ums and eligibility requirements for theMedicare supplement policy.

(d) In establishing medical insurancecoverage for persons eligible for coverageunder ORS 735.615 (1)(d), the board shallconsider the levels of medical insurance pro-vided in this state and medical economicfactors identified by the board. The boardmay adopt rules to establish benefit levels,deductibles, coinsurance factors, exclusionsand limitations to create benefit plans thatqualify the person for the credit for healthinsurance costs under section 35 of the fed-eral Internal Revenue Code, as amended andin effect on December 31, 2004.

(4)(a) Premiums charged for coverages is-sued by the board may not be unreasonablein relation to the benefits provided, the riskexperience and the reasonable expenses ofproviding the coverage.

(b) Separate schedules of premium ratesbased on age and geographical location mayapply for individual risks.

(c) The board shall determine the appli-cable medical and portability risk rates ei-ther by calculating the average rate chargedby insurers offering coverages in the statecomparable to the pool coverage or by usingreasonable actuarial techniques. The riskrates shall reflect anticipated experience andexpenses for such coverage. Rates for poolcoverage may not be more than 125 percentof rates established as applicable for med-ically eligible individuals or for persons eli-gible for pool coverage under ORS 735.615(1)(d), or 100 percent of rates established asapplicable for portability eligible individuals.

(d) The board shall annually determineadjusted benefits and premiums. The adjust-ments shall be in keeping with the purposesof ORS 735.600 to 735.650, subject to a limi-tation of keeping pool losses under one per-cent of the total of all medical insurancepremiums, subscriber contract charges and110 percent of all benefits paid by memberself-insurance arrangements. The board maydetermine the total number of persons thatmay be enrolled for coverage at any time andmay permit and prohibit enrollment in orderto maintain the number authorized. Nothingin this paragraph authorizes the board toprohibit enrollment for any reason otherthan to control the number of persons in thepool.

(5)(a) The board may apply:(A) A waiting period of not more than 90

days during which the person has no avail-able coverage; or

(B) Except as provided in paragraph (c)of this subsection, a preexisting conditionsprovision of not more than six months fromthe effective date of coverage under the pool.



(b) In determining whether a preexistingconditions provision applies to an eligibleenrollee, except as provided in this subsec-tion, the board shall credit the time the eli-gible enrollee was covered under a previoushealth benefit plan if the previous healthbenefit plan was continuous to a date notmore than 63 days prior to the effective dateof the new coverage under the Oregon Med-ical Insurance Pool, exclusive of any appli-cable waiting period. The Oregon MedicalInsurance Pool Board need not credit thetime for previous coverage to which the in-sured or dependent is otherwise entitled un-der this subsection with respect to benefitsand services covered in the pool coveragethat were not covered in the previous cover-age.

(c) The board may adopt rules applying apreexisting conditions provision to a personwho is eligible for coverage under ORS735.615 (1)(d).

(d) For purposes of this subsection, a“preexisting conditions provision” means aprovision that excludes coverage for services,charges or expenses incurred during a speci-fied period not to exceed six months follow-ing the insured’s effective date of coverage,for a condition for which medical advice, di-agnosis, care or treatment was recommendedor received during the six-month period im-mediately preceding the insured’s effectivedate of coverage.

(6)(a) Benefits otherwise payable underpool coverage shall be reduced by allamounts paid or payable through any otherhealth insurance, or self-insurance arrange-ment, and by all hospital and medical ex-pense benefits paid or payable under anyworkers’ compensation coverage, automobilemedical payment or liability insurancewhether provided on the basis of fault ornonfault, and by any hospital or medicalbenefits paid or payable under or providedpursuant to any state or federal law or pro-gram except the Medicaid portion of themedical assistance program.

(b) The board shall have a cause of ac-tion against an eligible person for the recov-ery of the amount of benefits paid which arenot for covered expenses. Benefits due fromthe pool may be reduced or refused as asetoff against any amount recoverable underthis paragraph.

(7) Except as provided in ORS 735.616, nomandated benefit statutes apply to pool cov-erage under ORS 735.600 to 735.650.

(8) Pool coverage may be furnishedthrough a health care service contractor orsuch alternative delivery system as will con-tain costs while maintaining quality of care.[1987 c.838 §8; 1989 c.838 §13; 1993 c.130 §2; 1995 c.603§27; 1999 c.987 §2; 2001 c.356 §3; 2003 c.684 §5; 2005 c.634

§2; 2005 c.635 §5a; 2009 c.595 §1120a; 2013 c.688 §93; 2013c.698 §16]


Note: 743.760 was repealed by section 65, chapter681, Oregon Laws 2013, as amended by section 21,chapter 640, Oregon Laws 2013. The text of 735.625 wasnot amended by enactment of the Legislative Assemblyto reflect the repeal. Editorial adjustment of 735.625 forthe repeal of 743.760 has not been made.

735.630 Exemption from liability. Nei-ther participation in the Oregon Medical In-surance Pool or the Oregon ReinsuranceProgram as members, the establishment ofrates, forms or procedures, nor any other ac-tion taken in the performance of the powersand duties under ORS 735.600 to 735.650 andsections 1, 2 and 4, chapter 698, Oregon Laws2013, shall be the basis of any legal action,criminal or civil liability or penalty againstthe Oregon Medical Insurance Pool Board,any members, the Director of the OregonHealth Authority, the Director of the De-partment of Consumer and Business Servicesor any of their agents or employees. [1987 c.838§9; 1989 c.838 §14; 2009 c.595 §1121; 2013 c.698 §7]


735.635 Exemption from taxation. TheOregon Medical Insurance Pool establishedpursuant to ORS 735.600 to 735.650 and theOregon Reinsurance Program established insection 1, chapter 698, Oregon Laws 2013,shall be exempt from any and all taxes as-sessed by the State of Oregon. [1987 c.838 §10;1989 c.838 §15; 2013 c.698 §8]


735.640 [1987 c.838 §12; 1989 c.838 §16; repealed by2013 c.698 §42 and 2013 c.640 §20]

735.645 Notice of existence of pool.Every insurer shall include a notice of theexistence of the Oregon Medical InsurancePool in any adverse underwriting decision,issued on or before November 30, 2013, onindividual medical insurance for reasons ofthe health of the applicant, as described inORS 735.615 (1)(a). [1987 c.838 §13; 1989 c.838 §17;1993 c.130 §3; 2005 c.22 §489; 2005 c.634 §3; 2013 c.698 §17]


735.650 Application of provisions ofInsurance Code. The following provisionsof the Insurance Code shall apply to the poolto the extent applicable and not inconsistentwith the express provisions of ORS 735.600to 735.650: ORS 731.004 to 731.022, 731.052 to731.146, 731.162, 731.216 to 731.328, 742.023,742.028, 742.046, 742.051, 742.056, 743.024,743.027, 743.028, 743.041, 743.050, 743.100 to743.106, 743.402, 743.801, 743.803, 743.804,


735.721 INSURANCE

743.806, 743.807, 743.808, 743.811, 743.814,743.817, 743.819, 743.821, 743.823, 743.827,743.829, 743.834, 743.837, 743.839, 743.845,743A.084, 743A.090, 746.005 to 746.370,746.600, 746.605, 746.607, 746.608, 746.610,746.615, 746.625, 746.635, 746.650, 746.655,746.660, 746.668, 746.670, 746.675, 746.680 and746.690. [1987 c.838 §14; 1989 c.701 §72; 1989 c.838 §18;1999 c.987 §3; 2001 c.356 §4; 2003 c.87 §20; 2013 c.698 §18]


735.700 [Formerly 653.705; 2003 c.742 §§1,6; 2005 c.238§§1,2; 2005 c.262 §§1,2; 2005 c.727 §§1,2; 2005 c.744 §§14,15;2011 c.70 §23; repealed by 2013 c.681 §65 and 2013 c.640§21]

735.701 [2005 c.744 §2; 2009 c.595 §1123; 2009 c.867§49; 2013 c.365 §5; repealed by 2013 c.681 §65 and 2013c.640 §21]

735.702 [Formerly 653.715; 2003 c.364 §96; 2003 c.742§§2,7; 2005 c.744 §§16,17; 2011 c.70 §24; repealed by 2013c.681 §65 and 2013 c.640 §21]

735.703 [2005 c.744 §3; repealed by 2013 c.681 §65 and2013 c.640 §21]

735.704 [Formerly 653.725; repealed by 2005 c.744§41]


735.706 [2001 c.716 §16; 2005 c.744 §18; 2009 c.595§1124; repealed by 2009 c.595 §1204]


735.708 [Formerly 653.735; repealed by 2005 c.744§41]

735.709 [2005 c.744 §10; repealed by 2013 c.681 §65and 2013 c.640 §21]

735.710 [Formerly 653.745; 2003 c.742 §§3,8; 2005 c.238§§3,4; 2005 c.262 §§3,4; 2005 c.727 §§3,4; 2005 c.744 §§19,20;2011 c.70 §25; 2013 c.365 §6; repealed by 2013 c.681 §65and 2013 c.640 §21]

735.711 [2007 c.619 §3; repealed by 2011 c.720 §228]735.712 [Formerly 653.747; 2005 c.744 §21; repealed

by 2013 c.681 §65 and 2013 c.640 §21]735.714 [2003 c.742 §12; 2005 c.744 §22; repealed by

2011 c.70 §26]735.720 [Formerly 653.800; 2003 c.684 §8; 2005 c.727

§§5,5a; 2005 c.744 §§23d,23e,23g; 2007 c.70 §317; renum-bered 414.841 in 2009]

COMMUNITY-BASED HEALTH CARE INITIATIVES


(1) “Community” means the area of ge-ographically contiguous political subdivisionsas determined by the Office for OregonHealth Policy and Research in collaborationwith the board of directors of a community-based health care initiative.

(2) “Qualified employee” means an indi-vidual who:

(a) Is employed by a qualified employer;(b) Resides or works within a community;(c) Does not have health insurance; and

(d) Does not qualify for publicly fundedhealth care.

(3) “Qualified employer” means an em-ployer that:

(a) Employs 1 to 50 full-time equivalentemployees;

(b) Pays a median wage to its employeesthat is equal to or below an amount that is300 percent of the federal poverty guidelines;

(c) For two months prior to enrollmentin a community-based health care improve-ment program, or for the duration of theemployer’s operation if the employer hasbeen in operation less than two months, hasnot provided to employees employer-basedhealth insurance coverage for which the em-ployer contributes at least 50 percent of thecost of premiums;

(d) Offers community-based health careservices through a community-based healthcare improvement program to all qualifiedemployees and their dependents regardless ofhealth status;

(e) Agrees to participate in acommunity-based health care improvementprogram for at least 12 months; and

(f) Agrees to provide information that isdeemed necessary by the community-basedhealth care initiative to determine eligibility,assess dues and pay claims. [2009 c.470 §1; 2013c.69 §1]

Note: 735.721 to 735.727 were enacted into law bythe Legislative Assembly but were not added to or madea part of ORS chapter 735 or any series therein by leg-islative action. See Preface to Oregon Revised Statutesfor further explanation.

735.722 [Formerly 653.805; 2003 c.128 §1; 2003 c.683§4; 2003 c.784 §12; 2005 c.238 §6; 2005 c.262 §6; 2005 c.727§6; 2005 c.744 §24a; 2009 c.595 §1125; renumbered 414.842in 2009]

735.723 Requirements for approval;rules. (1) The Administrator of the Office forOregon Health Policy and Research shalladopt rules for the approval of onecommunity-based health care initiative percommunity that meets the requirements un-der subsection (2) of this section and of acommunity-based health care improvementprogram that meets the requirements undersubsection (3) of this section. The office maynot approve community-based health care in-itiatives for more than three communitiesduring the period beginning with June 23,2009, and ending June 30, 2013.

(2) An approved community-based healthcare initiative shall:

(a) Be a nonprofit corporation governedby a board of directors that includes, but isnot limited to, representatives of participat-ing health care providers and qualified em-ployers. At least 80 percent of the board



members must be residents of the commu-nity.

(b) Contract with health care providersthat offer health care services in the com-munity to provide services to enrollees in theprogram.

(c) Recruit qualified employers to enrollin the program.

(d) Establish an operational structure for:(A) Assisting employees of qualified em-

ployers or their dependents to enroll in statemedical assistance programs if appropriate;

(B) Enrolling qualified employees andtheir dependents in the community-basedhealth care improvement program;

(C) Billing and collecting dues fromqualified employers and qualified employees;and

(D) Reimbursing participating health careproviders for services to enrollees.

(e) Establish a set of health care servicesthat are covered in the community-basedhealth care improvement program, cost-sharing requirements and incentives to en-courage the utilization of primary care,wellness and chronic disease managementservices.

(f) Maintain a liquid reserve account inan amount sufficient to pay all claims thathave been incurred but not yet charged fora period of at least two months.

(g) Provide to each qualified employeeenrolled in the program a clear and concisewritten statement that describes thecommunity-based health care improvementprogram and that includes:

(A) The health care services that arecovered;

(B) Any exclusions or limitations on cov-erage of health care services, including anyrequirements for prior authorization;

(C) Copayments, coinsurance, deductiblesand any other cost-sharing requirements;

(D) A list of participating health careproviders;

(E) The complaint process described insubsection (3)(b) of this section; and

(F) The conditions under which the pro-gram or coverage through the program maybe terminated.

(h) Comply with the requirements of ORS735.725 and 735.727.

(3) An approved community-based healthcare improvement program shall:

(a) Reimburse the cost of the set ofhealth care services established by the initi-ative and provided in the community toqualified employers, qualified employees andtheir dependents.

(b) Include an enrollee complaint processthat ensures the resolution of complaintswithin 45 days.

(4) An individual who is a qualified em-ployee and whose employment with a quali-fied employer terminates may elect tocontinue enrollment of the individual and theindividual’s dependents in an approvedcommunity-based health care improvementprogram for no more than 18 months by pay-ing the required dues. The dues may not begreater than the amount that would becharged if the individual remained a qualifiedemployee. An approved community-basedhealth care initiative must notify an em-ployee of the opportunity to continue cover-age upon the individual’s termination ofcoverage under the qualified employer’s pro-gram. [2009 c.470 §2; 2013 c.69 §2]

Note: See note under 735.721.735.724 [Formerly 653.810; 2003 c.128 §2; 2003 c.683

§1; 2005 c.238 §7; 2005 c.262 §7; 2005 c.727 §7; 2005 c.744§25; renumbered 414.844 in 2009]

735.725 Enrollment requirements. (1)A community-based health care initiativemay limit enrollment in a community-basedhealth care improvement program. If enroll-ment is limited, the initiative must establisha waiting list.

(2) Except as provided in this section, aninitiative may not restrict or deny enroll-ment in the program except for nonpaymentof dues, fraud or misrepresentation.

(3) As a condition for enrolling a quali-fied employer and maintaining the employer’senrollment in the program, an initiative mayrequire a minimum percentage of partic-ipation by qualified employees of an em-ployer. [2009 c.470 §3]

Note: See note under 735.721.735.726 [Formerly 653.815; 2005 c.744 §26; renum-

bered 414.846 in 2009]

735.727 Annual report to LegislativeAssembly. A community-based health careinitiative approved by the Administrator ofthe Office for Oregon Health Policy and Re-search must report to the Legislative Assem-bly no later than October 1 of each year. Thereport must contain at a minimum the fol-lowing information:

(1) The financial status of thecommunity-based health care improvementprogram, including the dues, the costs perenrollee per month, the total amount ofclaims paid, the total amount of dues col-lected and the administrative expenses;

(2) A description of the set of health careservices covered by the program and ananalysis of service utilization;

(3) The number of qualified employers,qualified employees and dependents enrolled;


735.727 INSURANCE

(4) The number and scope of practice ofparticipating health care providers;

(5) Recommendations for improving theprogram and establishing programs in othergeographical regions of the state; and

(6) Any other information requested bythe administrator or the Legislative Assem-bly. [2009 c.470 §4]


OREGON REINSURANCE PROGRAMNote: Sections 1, 2, 4, 4a and 42 (2), chapter 698,

Oregon Laws 2013, provide:Sec. 1. The Oregon Reinsurance Program is estab-

lished in the Oregon Health Authority. The programshall be administered by the Oregon Medical InsurancePool Board, created in ORS 735.610, for the purposes ofstabilizing the rates and premiums for individual healthbenefit plans and providing greater financial certaintyto consumers of health insurance in this state by pro-viding state reinsurance payments to insurers from as-sessments described in section 2 of this 2013 Act. [2013c.698 §1]

Sec. 2. (1) As used in this section, section 1, chap-ter 698, Oregon Laws 2013, and ORS 735.610:

(a) “Health benefit plan” has the meaning giventhat term in ORS 743.730.

(b) “Insurer” means an insurer described in ORS735.605 (4)(a), (b) and (d).

(c) “Program” means the Oregon Reinsurance Pro-gram established in section 1, chapter 698, Oregon Laws2013.

(d) “Reinsurance eligible health benefit plan”means a health benefit plan providing individual cover-age that:

(A) Is delivered or issued for delivery in this state;(B) Is not a grandfathered health plan as defined

in ORS 743.730; and(C) Meets the criteria prescribed by the Oregon

Medical Insurance Pool Board under subsection (2) ofthis section.

(e) “Reinsurance eligible individual” means an in-dividual who is insured on or before April 1, 2014, undera reinsurance eligible health benefit plan and who was:

(A) On December 31, 2013, enrolled in the OregonMedical Insurance Pool created in ORS 735.610;

(B) On June 30, 2013, enrolled in the TemporaryHigh Risk Pool Program established in section 1, chap-ter 47, Oregon Laws 2010;

(C) On December 31, 2013, insured under a porta-bility health benefit plan as defined in ORS 743.760; or

(D) On December 31, 2013, reinsured under the re-insurance program for children’s coverage described inORS 735.614 (1)(b).

(2) The board shall prescribe by rule the criteriafor a health benefit plan to qualify for reinsurancepayments under the program. The criteria must be con-sistent with requirements for:

(a) Premium rates under 42 U.S.C. 300gg;(b) Guaranteed availability under 42 U.S.C. 300gg-1;(c) Guaranteed renewability under 42 U.S.C.

300gg-2;(d) Coverage of essential health benefits under 42

U.S.C. 18022; and(e) Using a single risk pool under 42 U.S.C.

18032(c).

(3) An issuer of a reinsurance eligible health bene-fit plan becomes eligible for a reinsurance paymentwhen the claims costs for a reinsurance eligibleindividual’s covered benefits in a calendar year exceedthe attachment point. The amount of the payment shallbe the product of the coinsurance rate and the issuer’sclaims costs for the reinsurance eligible individual’sclaims costs that exceed the attachment point, up to thereinsurance cap, as follows:

(a) For 2014:(A) The attachment point is $30,000.(B) The reinsurance cap is $300,000.(C) Except as provided in paragraph (b) of this

subsection, the coinsurance rate is:(i) Ten percent for claims costs above $60,000 and

up to and including $250,000; and(ii) Ninety percent for claims costs from $30,000 and

up to and including $60,000 and above $250,000.(b) The board may lower the coinsurance rate if the

reinsurance claims incurred exceed the total amount ofthe assessments collected under subsection (4) of thissection.

(c) The board shall adopt by rule an attachmentpoint, reinsurance cap and coinsurance rate for calen-dar years 2015 and 2016 that complement the federalreinsurance program requirements, so that the reinsur-ance claims do not exceed the total amount of the as-sessments collected under subsection (4) of this section.After the rules required under this paragraph areadopted for a calendar year, the board may not:

(A) Change the attachment point or the reinsurancecap adopted for that calendar year; or

(B) Increase the coinsurance rate adopted for thatcalendar year.

(4) The board shall impose an assessment on allinsurers at a rate that is expected to produce an amountof funds sufficient to pay administrative expenses andto make reinsurance payments that are due to issuersof reinsurance eligible health benefit plans in a calen-dar year, but not greater than the rate that would beexpected to produce funds totaling the lesser of:

(a) An amount per month multiplied by the numberof insureds and certificate holders in this state who areinsured or reinsured; or

(b) The total assessment set forth in subsection (5)of this section.

(5) The amount per month and total assessment onall insurers are as follows:

(a) For calendar year 2014, the amount per monthis $4 and the total assessment is $72 million.

(b) For calendar year 2015, the amount per monthis $3.50 and the total assessment is $63 million.

(c) For calendar year 2016, the amount per monthis $2.20 and the total assessment is $40 million.

(6) In determining the number of insureds and cer-tificate holders in this state who are insured or rein-sured, the board shall exclude individuals with thefollowing types of coverage:

(a) The medical assistance program under ORSchapter 414;

(b) Medicare;(c) Disability income insurance;(d) Hospital-only insurance;(e) Dental-only insurance;(f) Vision-only insurance;(g) Accident-only insurance;(h) Automobile insurance;(i) Specific disease insurance;



(j) Medical supplemental plans;(k) TRICARE;(L) Prescription drug only plans;(m) Long term care insurance; and(n) Federal Employees Health Benefits Program.(7) If the board collects assessments that exceed the

amount necessary to pay administrative expenses andto make all of the reinsurance payments that are dueto issuers of reinsurance eligible health benefit plans incalendar years 2014, 2015 and 2016, the board shall re-fund the excess, on a pro rata basis, to insurers whoare subject to the assessment imposed by subsection (4)of this section.

(8) The board may not impose an assessment undersubsection (4) of this section for calendar years begin-ning with 2017.

(9) All moneys received or collected by the boardunder this section shall be paid into the Oregon MedicalInsurance Pool Account established in ORS 735.612.

(10) The board, in consultation with the Depart-ment of Consumer and Business Services, may adoptrules necessary to carry out the provisions of this sec-tion including, but not limited to, rules prescribing:

(a) The eligibility requirements for participation inthe program by an issuer of a reinsurance eligiblehealth benefit plan;

(b) The form and manner of issuing notices of as-sessment amounts;

(c) The amount, manner and frequency of the pay-ment and collection of assessments;

(d) The amount, manner and frequency of reinsur-ance payments; and

(e) Reporting requirements for insurers subject tothe assessment and for issuers of reinsurance eligiblehealth benefit plans. [2013 c.698 §2; 2013 c.722 §32]

Sec. 4. (1) As used in this section:(a) “Health benefit plan” has the meaning given

that term in ORS 743.730.(b) “Oregon Medical Insurance Pool Board” means

the board created in ORS 735.610.(c) “Oregon Reinsurance Program” means the pro-

gram created in section 1 of this 2013 Act.(d) “Reinsurance eligible individual” has the mean-

ing given that term in section 2 of this 2013 Act.(2) An insurer that offers a health benefit plan

must report to the Oregon Medical Insurance Pool

Board, in the form and manner prescribed by the boardby rule, information about reinsurance eligible individ-uals insured by the health benefit plan, as necessary forthe board to calculate reinsurance payments under theOregon Reinsurance Program. [2013 c.698 §4]

Sec. 4a. In a rate filing under ORS 743.018, an in-surer must identify the impact of:

(1) State reinsurance payments under section 2 ofthis 2013 Act and federal reinsurance payments onprojected claims costs and in the development of rates;and

(2) Assessments imposed under section 2 of this2013 Act on rates. [2013 c.698 §4a]

Sec. 42. (2) Sections 1, 2, 4 and 4a, chapter 698,Oregon Laws 2013, and ORS 735.600, 735.605, 735.610,735.612, 735.615, 735.616, 735.620, 735.625, 735.630, 735.635,735.645 and 735.650 are repealed July 1, 2017. [2013 c.698§42(2); 2013 c.640 §20(2)]

735.728 [Formerly 653.820; 2005 c.744 §27; renum-bered 414.848 in 2009]


735.731 [2003 c.683 §3; 2003 c.735 §12; 2005 c.744 §29;renumbered 414.852 in 2009]


735.733 [2003 c.684 §11; 2005 c.744 §31; renumbered414.856 in 2009]

735.734 [Formerly 653.835; 2005 c.744 §32; 2009 c.595§1126; renumbered 414.858 in 2009]


735.738 [Formerly 653.845; 2005 c.238 §8; 2005 c.727§8; renumbered 414.862 in 2009]

735.740 [Formerly 653.850; 2003 c.684 §9; 2005 c.744§34; 2007 c.71 §238; renumbered 414.864 in 2009]

735.750 [2003 c.684 §1; 2005 c.744 §35; renumbered414.866 in 2009]

735.752 [2003 c.684 §2; renumbered 414.868 in 2009]735.754 [2003 c.684 §3; 2005 c.744 §36; 2009 c.595

§1127; renumbered 414.870 in 2009]735.756 [2003 c.684 §4; 2009 c.595 §1128; renumbered

414.872 in 2009]735.990 [1987 c.774 §135; repealed by 1991 c.810 §29]


INSURANCE


735 - oregon state legislature · 735.105 regula tion of association as insurer; fi-nancial report...

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