GOVERNMENTAL UNITS POOLED INSURANCE

M.G.L. pt. Part I, tit. Title VII, ch. c. 40M

in effect

M.G.L. c. 40M, § 1 Public employer self-insurance groups

c. 40M, § 1. Public employer self-insurance groups Section 1. Five or more public entities may participate in an organization in which the governmental units are members, and agree to effect such property and casualty insurance coverage as the governmental unit may otherwise purchase by itself. A self-insurance group that is issued a certificate of approval by the commissioner shall not be deemed to be insurers or insurance companies and shall not be subject to the provisions of the insurance laws and regulations of this commonwealth except as otherwise provided herein. The provision of this chapter shall not be construed to prohibit municipal electric departments from participating in a municipal electric department self-insurance trust fund establishing pursuant to chapter one hundred and sixty-four.

M.G.L. c. 40M, § 2 Definitions

c. 40M, § 2. Definitions Section 2. ''Administrator'', an individual, partnership, corporation, or unincorporated association engaged by a public employer self-insurance group's board of trustees and to provide day to day management of the group. ''Commissioner'', the commissioner of insurance. ''Insolvent'' or ''Insolvency'', the inability of a public employer self-insurance group to pay its outstanding lawful obligations as they mature in the regular course of business, as may be shown either by an excess of its required reserves and other liabilities over its assets or by its not having sufficient assets to reinsure all of its outstanding liabilities after paying all accrued claims owed by it. ''Public employers self-insurance group'' or ''group'', a not-for-profit association consisting of five or more employers, all of whom are public entities, who enter into agreements to pool their liabilities for property and casualty benefits. For purposes of this chapter, a municipal electric department self-insurance trust fund established pursuant to sections one hundred and twenty-nine to one hundred and thirty-two, inclusive, of chapter one hundred and sixty-four shall not be a ''public employers self-insurance group'' or ''group''.

M.G.L. c. 40M, § 3 Certificate of approval required

c. 40M, § 3. Certificate of approval required Section 3. No person, association or other entity shall act as a public employer self-insurance group unless it has been issued a certificate of approval by the commissioner.

M.G.L. c. 40M, § 4 Certificate of approval; application; requirements; refusal; service of legal process

c. 40M, § 4. Certificate of approval; application; requirements; refusal; service of legal process Section 4. (A) A proposed public employer self-insurance group shall file with the commissioner its application for a certificate of approval accompanied by a nonrefundable filing fee in the amount of one hundred dollars. The application shall include the group's name, location of its principal office, date of organization, name and address of each member, and such other information as the commissioner may reasonably require, together with the following: (1) A copy of the articles of association, if any; (2) A copy of the by-laws of the proposed group; (3) A copy of the agreement between the group and each member securing the payment of benefits, which shall include provision for payment of assessments as provided for in section fourteen; (4) Designation of the initial board of trustees and administrator; (5) The address in this state where the books and records of the group will be maintained at all times; (6) A pro forma financial statement on a form acceptable to the commissioner showing the financial ability of the group to pay the obligations of its members; (7) A documented agreement by each member to the group that at least thirty-three per cent of that member's estimated annual net premium is payable the initial day of coverage afforded by the group; (8) A confirmation of any required reinsurance by a recognized carrier in an amount acceptable to the commissioner of insurance; (B) To obtain and to maintain its certificate of approval a public employer self-insurance group shall comply with the following requirements as well as any other requirements established by law or regulation:— (1) Specific and aggregate excess insurance in a form, in an amount, and by an insurance company acceptable to the commissioner. Each group shall maintain aggregate excess insurance in a minimum amount equal to two million dollars. The commissioner may establish higher minimum requirements for the amount of specific and aggregate excess insurance based on differences among groups in their size, types of local government services provided by members of the group, years in existence and other relevant factors. (2) An estimated annual standard premium of at least two hundred and fifty thousand dollars during a group's first year of operation. (3) A fidelity bond for the administrator in a form and amount prescribed by the commissioner of insurance. (C) A group shall notify the commissioner of any change in the information required to be filed under subsection (A) or in the manner of its compliance with subsection (B) no later than thirty days after such change. (D) The commissioner shall act upon a completed application for a certificate of approval within ninety days. (E) The commissioner shall issue to the group a certificate of approval upon finding that the proposed group has met all requirements or the commissioner shall issue an order refusing such certificate setting forth reasons for such refusal upon finding that the proposed group does not meet all requirements. Upon refusal, the commissioner shall hold a hearing within thirty days after said refusal, upon notice requesting such hearing by applicant within ten days of said refusal. (F) Each public employer self-insurance group shall be deemed to have appointed the commissioner as its attorney to receive service of legal process issued against it in this state. The appointment shall be irrevocable, shall bind any successor in interest, and shall remain in effect as long as there is in this commonwealth any obligation or liability of the group for benefits.

M.G.L. c. 40M, § 5 Certificate of approval; duration; termination; merger of groups

c. 40M, § 5. Certificate of approval; duration; termination; merger of groups Section 5. (A) The certificate of approval issued by the commissioner to a public employer self-insurance group authorizes the group to provide insurance coverage. The certificate of approval remains in effect until terminated at the request of the group or revoked by the commissioner pursuant to provisions of section sixteen. (B) The commissioner shall not grant the request of any group to terminate its certificate of approval unless the group has insured or reinsured all incurred obligations with an authorized insurer under an agreement filed with and approved in writing by the commissioner. Such obligation shall include both known claims and expenses associated therewith and claims incurred but not reported and expenses associated therewith. Subject to the approval of the commissioner, a group may merge with another public employer self-insurance group only if the resulting group assumes in full all obligations of the merging groups. The commissioner may hold a hearing on the merger and shall do so if any party, including a member of either group, so requests.

M.G.L. c. 40M, § 6 Examination of records; confidentiality and privilege

c. 40M, § 6. Examination of records; confidentiality and privilege Section 6. The commissioner may examine the affairs, transactions, accounts, records and assets of each group as often as the commissioner deems advisable. Notwithstanding any other provision of the General Laws, including clause Twenty-sixth of section 7 of chapter 4 and chapter 66, documents, materials or other information, including but not limited to, all working papers and copies thereof created, produced or obtained by or disclosed to the commissioner or any other person in the course of an examination made pursuant to this section or in the course of analysis by the commissioner of the financial condition or market conduct of a group shall be confidential by law and privileged, shall not be a public record under said clause Twenty-sixth, shall not be subject to subpoena and shall not be subject to discovery or admissible in evidence in any private civil action. The commissioner may use the documents, materials or other information in the furtherance of any regulatory or legal action brought as part of the commissioner's official duties. Documents, materials or other information, including but not limited to, all working papers and copies thereof in the possession or control of the National Association of Insurance Commissioners and its affiliates and subsidiaries shall be confidential by law and privileged, shall not be subject to subpoena and shall not be subject to discovery or admissible in evidence in any private civil action if they are: (i) created, produced, obtained by or disclosed to the National Association of Insurance Commissioners and its affiliates and subsidiaries in the course of the National Association of Insurance Commissioners and its affiliates and subsidiaries assisting an examination made pursuant to this section or assisting the commissioner in the analysis of the financial condition or market conduct of a group; or (ii) disclosed to the National Association of Insurance Commissioners and its affiliates and subsidiaries pursuant to this section by any member of the National Association of Insurance Commissioners. Neither the commissioner nor any person who received the documents, material or other information while acting under the authority of the commissioner, including the National Association of Insurance Commissioners and its affiliates and subsidiaries, shall be permitted to testify in any private civil action concerning any confidential documents, materials or information subject to this section. In order to assist in the performance of the commissioner's duties, the commissioner: (i) may share documents, materials or other information, including the confidential and privileged documents, materials or information subject to this section, with other state, federal and international regulatory agencies, the National Association of Insurance Commissioners and its affiliates and subsidiaries and state, federal and international law enforcement authorities provided that the recipient agrees to maintain the confidentiality and privileged status of the document, material, communication or other information; (ii) may receive documents, materials, communications or information, including otherwise confidential and privileged documents, materials or information, from the National Association of Insurance Commissioners and its affiliates and subsidiaries and regulatory and law enforcement officials of other foreign or domestic jurisdictions and shall maintain as confidential or privileged any document, material or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material or information; and (iii) may enter into agreements governing sharing and use of information consistent with this section. No waiver of any applicable privilege or claim of confidentiality in the documents, materials or information shall occur as a result of disclosure to the commissioner pursuant to this section or as a result of sharing as authorized in this section. A privilege established under the law of any state or jurisdiction that is substantially similar to the privilege established under this section shall be available and enforced in any proceeding in and in any court of the commonwealth.

M.G.L. c. 40M, § 7 Board of trustees; powers and duties

c. 40M, § 7. Board of trustees; powers and duties Section 7. Each public employer self-insurance group shall be operated by a board of trustees which shall consist of not less than three persons who are elected officials or employees of public entities within this commonwealth. The board of trustees of each group shall ensure that all claims are paid promptly and take all necessary precautions to safeguard the assets of the group, including all of the following: (A) The board of trustees shall: (1) Maintain responsibility for all monies collected or disbursed from the group and segregate all monies in a claims fund account and an administrative fund account. Net premiums shall be placed into a designated depository for the sole purpose of paying claims, allocated claims expenses, reinsurance or excess insurance, and special fund contributions. This shall be called the claims fund account. The remaining net premium after any payments for reinsurance or excess insurance shall be placed in a designated depository for the payment of taxes, general regulatory fees and assessments and administrative costs. This shall be called the administrative fund account. (2) Maintain minutes of its meetings and make such minutes available to the commissioner. (3) Designate an administrator to carry out the policies established by the board of trustees and to provide day to day management of the group and delineate in the written minutes of its meetings the areas of authority it delegates to the administrator. (4) Funds not needed for current obligations may be invested by the board of trustees in accordance with section fifty-four of chapter forty-four. (5) Retain an independent certified public accountant to prepare the statement of financial conditions required by subsection (A) of section ten. (B) The board of trustees shall not borrow any monies from the group or in the name of the group except in the ordinary course of business, without first advising the commissioner of the nature and purpose of the loan and obtaining prior approval from the commissioner.

M.G.L. c. 40M, § 8 Membership in group

c. 40M, § 8. Membership in group Section 8. (A) A public employer joining a public employer's self-insurance group after the group has been issued a certificate of approval shall submit an application for membership to the board of trustees or its administrator. Membership takes effect no earlier than each member's date of approval. The application for membership and its approval shall be maintained as permanent records of the board of trustees. (B) Individual members of a group shall be subject to cancellation by the group pursuant to the by-laws of the group. In addition, individual members may elect to terminate their participation in the group. A voluntary termination may not be tendered prior to the members participation in the group for a period of less than one year. The group shall notify the commissioner of the termination or cancellation of a member within ten days and shall maintain coverage of each cancelled or terminated member for thirty days after such notice, at the terminating member's expense, unless the group is notified sooner by the insurance department that the cancelled or terminated member has insurance, has become a self-insurer, or has become a member of another public employer self-insurance group. (C) The agreement between the group and the member shall specify the terms and conditions of payment of benefits for each member's incurred liabilities during its period of membership. (D) A group member is not relieved of its liabilities incurred during its period of membership except through payment by the group or the member or a combination thereof. Payment of benefits by the group to the member shall be limited to the terms specified in the agreement between the group and the member. (E) There shall be a minimum period of at least one year for which a member shall contract to participate in the group.

M.G.L. c. 40M, § 9 Solicitation of memberships

c. 40M, § 9. Solicitation of memberships Section 9. Except for trustees, officers, directors or salaried employees of a group or its administrator, any person soliciting membership in a property and casualty self-insurance group must be a licensed agent as provided by section sixty-three of chapter one hundred and seventy-five.

M.G.L. c. 40M, § 10 Reports

c. 40M, § 10. Reports Section 10. (A) Each group shall submit to the commissioner of insurance thirty days before the end of its policy year a performance report estimating total outstanding liability, including incurred but not reported claims, for that policy year. (B) Each group shall submit to the commissioner a statement of financial condition audited by an independent certified public accountant on or before the last day of the sixth month following the end of the group's fiscal year. The financial statement shall be on a form prescribed by the commissioner and shall include, but not be limited to, actuarially appropriate reserves for (1) known claims and expenses associated therewith, (2) claims incurred but not reported and expenses associated therewith, (3) unearned premiums and (4) bad debts, which reserves shall be shown as liabilities. (C) The commissioner may prescribe a uniform financial reporting system for all public employer self-insurance groups to ensure the accurate and complete reporting of groups' financial information. (D) The commissioner may prescribe the format and frequency of other reports which may include, but shall not be limited to, payroll audit reports, summary loss reports, and quarterly financial statements.

M.G.L. c. 40M, § 11 Rating plan; annual audit

c. 40M, § 11. Rating plan; annual audit Section 11. (A) A group shall file with the commissioner its rating plan. (B) Each group shall be audited at least annually by an auditor acceptable to the commissioner to verify proper rating. A report of the audit shall be filed with the commissioner in a form prescribed by the commissioner. A group or any member thereof may request a hearing on any objections to the rating. If the commissioner determines that as a result of an improper rating a member's premium contribution is insufficient, he shall order the group to assess that member an amount equal to the deficiency. If the commissioner determines that as a result of an improper rating a member's premium is excessive, he shall order the group to refund to the member the excess collected. The audit shall be at the expense of the group.

M.G.L. c. 40M, § 12 Refund of excess funds

c. 40M, § 12. Refund of excess funds Section 12. (A) Any monies for a fund year in excess of the amount necessary to fund all obligations, including reserves for claims and reserves for incurred but not reported claims for that fund year may be declared to be refundable by the board of trustees not less than six months after the end of the fund year. (B) Each member shall be given a written description of the refund plan at the time of application for membership. A refund for any fund year shall be paid only to those employers who remain participants in the group for the entire fund year.

M.G.L. c. 40M, § 13 Premium payments; loss reserves

c. 40M, § 13. Premium payments; loss reserves Section 13. (A) Each group shall establish to the satisfaction of the commissioner a premium payment plan in which at least thirty-three per cent of each members estimated net annual premium is payable at the start of the groups fund year and payment of the balance of each member's annual premium is payable within the first nine months of that fund year in monthly or quarterly installments. (B) Each group shall establish and maintain actuarially appropriate loss reserves which shall include reserves for (1) known claims and expenses associated therewith and (2) claim incurred but not reported and expenses associated therewith.

M.G.L. c. 40M, § 14 Deficiencies

c. 40M, § 14. Deficiencies Section 14. (A) If the assets of a group are at any time insufficient to enable the group to discharge its legal liabilities and other obligations and to maintain the reserves required of it under this chapter, it shall forthwith make up the deficiency or levy an assessment upon its members for the amount needed to make up the deficiency. (B) In the event of a deficiency in any fund year, such deficiency shall be made up immediately, either from (a) administrative funds, (b) assessment of the membership, if ordered by the group or, (c) such alternate method as the commissioner may approve or direct. (C) If the group fails to assess its members or to otherwise make up such deficit within ninety days the commissioner shall order it to do so. (D) If the group fails to make the required assessment of its members within ninety days after the commissioner orders it to do so, or if the deficiency is not fully made up within one hundred and twenty days after the date on which such assessment is made, or within such longer period of time as may be specified by the commissioner, the group shall be deemed to be insolvent.

M.G.L. c. 40M, § 15 Violations; cease and desist orders

c. 40M, § 15. Violations; cease and desist orders Section 15. After notice and opportunity for a hearing, the commissioner may issue an order requiring a person or public employer self-insurance group to cease and desist from engaging in an act or practice found to be in violation of any provision of this chapter or of any rules or regulations promulgated thereunder.

M.G.L. c. 40M, § 16 Revocation of certificate of approval; grounds; review

c. 40M, § 16. Revocation of certificate of approval; grounds; review Section 16. (A) After notice and opportunity for a hearing, the commissioner may revoke a public employer self-insurance group's certificate of approval if it (1) is found to be insolvent, (2) fails to pay any regulatory fee or assessment, imposed upon it, or (3) fails to comply with any of the provisions of this chapter, with any rules promulgated thereunder, or with any lawful order of the commissioner within the time prescribed. In addition, the commissioner may revoke a group's certificate of approval if, after notice and opportunity for hearing, the commissioner finds that (a) any certificate of approval that was issued to the group was obtained by fraud; (b) there was a material misrepresentation in the application for the certificate of approval; or (c) the group or its administrator has misappropriated, converted, illegally withheld, or refused to pay over upon proper demand any monies that belong to a member, an employee of a member, or a person otherwise entitled thereto and that have been entrusted to the group or its administrator in its fiduciary capacities. (B) Any ruling, order or decision of the commissioner under authority of this section shall be subject to review by appeal to the superior court department of the trial court at the instance of any party in interest, which appeal shall be on the basis of the record of the proceeding before the commissioner. Said court shall have jurisdiction to modify, amend, annul, review, or affirm such action, order, finding or decision, shall review all questions of fact and of law involved therein, and may make any other appropriate order or decree. Said court shall determine whether the filing of the appeal shall operate as a stay of any such order or decision of the commissioner.

M.G.L. c. 40M, § 17 Applicability of chapter 176V to groups governed by this chapter

c. 40M, § 17. Applicability of chapter 176V to groups governed by this chapter Section 17. Notwithstanding any general or special law to the contrary, chapter 176V shall apply to groups governed by this chapter.

Source: Massachusetts General Court (malegislature.gov)URL: https://malegislature.gov/Laws/GeneralLaws/PartI/TitleVII/Chapter40MFetched: 10/20/2026