THE POLLUTION LIABILITY REINSURANCE CORPORATION

M.G.L. pt. Part I, tit. Title XXII, ch. c. 175G

in effect

M.G.L. c. 175G, § 1 Definitions

c. 175G, § 1. Definitions Section 1. As used in this chapter, the following words, unless the context otherwise requires, shall have the following meanings:— ''Cede'', to contractually transfer, pursuant to the provisions of this chapter, all or part of the financial responsibility for pollution liability claims from an entity providing insurance or reinsurance to another reinsuring entity. ''Ceding entity'' or ''entity obtaining reinsurance'', an entity issuing pollution liability insurance policies for which the Pollution Liability Reinsurance Corporation established herein provides reinsurance. Such entity shall be a reciprocal insurance exchange as licensed under sections ninety-four A to ninety-four M, inclusive, of chapter one hundred and seventy-five. ''Commissioner'', the commissioner of insurance. ''Corporation'' or ''Reinsurance Corporation'', the Pollution Liability Reinsurance Corporation established herein. ''Pollution liability'', liability for any claim made against an insured which arises out of, relates to, or is based upon the dispersal, discharge, escape, or release of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids, gases, wastes including materials to be recycled, reconditioned or reclaimed, or any other material, irritant, contaminant or pollutant in or into the atmosphere or on, onto, upon, in or into surface or subsurface: (i) soil or land, (ii) water, waterway or watercourse, (iii) objects, (iv) tangible or intangible matter. ''Pollution liability insurance policies acceptable for reinsurance under this chapter'', those policies of pollution liability insurance providing coverage for bodily injury and property damage to third parties caused by either unintended and unanticipated releases or by releases whose consequences were unintended and unanticipated, but shall not include first party clean-up costs, or the clean-up of any waste facility whether owned or operated by the insured or by a third party, even if ordered by a governmental agency, except as part of property damage liability to a third party; provided, however, that policies accepted for reinsurance by the Corporation shall contain a prevention of loss provision substantially equivalent to the following: In the event the insured becomes aware of incidents or conditions which may result in a claim covered by this policy, it shall undertake such operations as are necessary to alleviate such incidents or conditions and shall notify the insurer within forty-eight hours of commencing such operations. If the insured fails to undertake such operations, this policy shall not afford coverage for such claim. The insurer shall have no liability for or duty to reimburse the insured for the costs of such operations undertaken to prevent a claim covered by this policy. In the discretion of the Corporation, pollution liability insurance policies acceptable for reinsurance under this chapter may include policies providing completed operations liability coverage for pollution clean-up contractors licensed by the department of environmental protection; provided that such policies shall be issued only on a job-by-job site-specific basis subject to strict underwriting standards and inspections of completed work. Pollution liability insurance policies acceptable for reinsurance under this chapter shall be limited to policies covering only claims against the insured arising within the commonwealth resulting from disposal, discharge, release or escape of materials from an insured site of an approved waste facility in the commonwealth. Claims for injuries or damage to persons or property outside the commonwealth resulting from release or escape of materials within the commonwealth will be deemed claims arising within the commonwealth. Claims for injuries or damage arising out of wastes originating within the commonwealth but shipped by, or on behalf of, an insured within the commonwealth to an approved waste facility outside the commonwealth will be deemed claims arising within the commonwealth; but in any claim seeking to recover against such an insured and others under joint and several liability, the reinsurance shall extend only to that portion of the claim bearing the same proportion to the entire claim against the insured and others claimed against that the amount of insured's waste in the site, originating in the commonwealth and causing the injury or damage complained of, bears to the total amount of waste causing the injury or damage complained of. Said policies shall exclude coverage related to radioactive waste facilities. Said policies shall also contain a nuclear exclusion similar to that approved by the commissioner of insurance for use by the insurance services office in commercial general liability insurance policies. The Pollution Liability Reinsurance Corporation established herein shall, consistent with its plan of operation and any applicable regulations of the commissioner of insurance, determine the acceptability of pollution liability policies, including the coverage definitions and terms of such policies, for purposes of providing reinsurance pursuant to this chapter. ''Reinsure'' or ''provide reinsurance'' or ''assume reinsurance'', to contractually accept all or part of the financial responsibility for pollution liability claims, in exchange for the allocable premium charges, subject to the provisions of this chapter. ''Reinsurance fund'', the fund established pursuant to section two. ''Waste facility'', any facility operated by any person or organization for the storage, treatment, processing or disposal of waste materials. The Corporation shall require that pollution liability policies acceptable for reinsurance under this chapter shall exclude all coverage for claims arising out of or in connection with a waste facility unless such waste facility is on an approved list established by the Corporation.

M.G.L. c. 175G, § 2 Pollution Liability Reinsurance Corporation; creation; board of directors; board duties; reports and audits

c. 175G, § 2. Pollution Liability Reinsurance Corporation; creation; board of directors; board duties; reports and audits Section 2. For the purpose of assuming or ceding reinsurance of pollution liability insurance policies subject to the provisions of this chapter, there is hereby created a body politic and corporate to be known as the Pollution Liability Reinsurance Corporation. The Corporation is hereby constituted a public instrumentality of the commonwealth and the exercise by the Corporation of the powers conferred in this chapter shall be deemed and held to be the performance of an important public function. The Corporation is hereby placed under the commissioner of insurance but shall not be subject to the supervision or control of said commissioner or any board, bureau, department or other agency of the commonwealth except as specifically provided in this chapter. The Corporation shall be governed and its corporate powers exercised by a board of directors consisting of the commissioner of insurance or his designee and the commissioner of the department of environmental protection or his designee who shall serve as ex officio non-voting members of the board and nine persons to be appointed by the governor, one of whom shall be a member representing consumer or environmental interests and five of whom shall be members representing employers, including two from nominees of the Associated Industries of Massachusetts. Directors shall serve for a term of three years; provided, however, that in making the initial appointments the governor shall designate initial terms of one, two, and three years, respectively, so that as nearly as possible the terms of one-third of the members shall expire each year. Any member may be removed from the board of directors by the governor only for cause. The members shall annually elect a member of the board of directors to serve as chairman. Five members of the board shall constitute a quorum and the affirmative votes of five members shall be necessary for any action to be taken by the board of directors. Members of the board shall not be compensated but shall be reimbursed by the Corporation for reasonable expenses incurred by them in carrying out their duties as members of the board of directors. The board shall appoint a qualified executive director and establish his salary. The executive director shall be the chief executive, administrative and operational officer of the Corporation and shall direct and supervise the administrative affairs and general management of the Corporation. The executive director shall attend meetings of the board and may, subject to the approval of the board, employ other employees, consultants, and agents, including legal counsel and advisors. The board shall contract with one or more qualified persons or entities for services necessary for the operation and management of the Corporation. Such services shall be performed under the supervision of the executive director. At least annually, such contractor shall report to the board of directors regarding activities on behalf of the Corporation. The following shall be ineligible to contract for such services: (i) any entity obtaining reinsurance of pollution liability policies from the Corporation; (ii) any insurance company licensed or approved to provide, and actually writing, pollution liability coverage within the commonwealth; and (iii) any company or entity whose engagement by the Corporation would, in the judgment of the board, pose the appearance or reality of a conflict of interest. The directors shall annually elect a secretary and treasurer, and may elect or appoint such other officers as they deem necessary, none of whom, except for the chairman, need be members of the board. The secretary shall keep a record of the proceedings of the Corporation and shall be custodian of all books, documents, and papers filed with the Corporation and its official seal. The secretary shall cause copies to be made of all minutes and other records and documents of the Corporation and shall certify that such copies are true copies and all persons dealing with the Corporation may rely on such certification. The treasurer shall be the chief financial and accounting officer of the Corporation and shall be in charge of its funds, books of account and accounting records. Directors and officers who are not regular, compensated employees of the Corporation shall, except for acts of willful dishonesty or intentional violation of the law, not be liable to the commonwealth, to the Corporation or to any other person as a result of their activities, whether ministerial or discretionary, as such directors or officers. The board of directors of the Corporation may purchase liability insurance for directors, officers, employees and agents of the Corporation and may, except in cases of willful dishonesty, indemnify said persons against the claims of others. All directors, officers, employees and agents of the Corporation having access to cash or negotiable securities shall give bond to the Corporation at its expense, in such amount and with such surety as the board may prescribe. The persons required to give bond may be included in one or more blanket or scheduled bonds. The board shall annually approve appropriate compensation payable to its officers if such compensation is deemed necessary. The Pollution Liability Reinsurance Corporation shall establish and maintain a fund, which shall be known as the Pollution Liability Reinsurance Fund. Revenues collected by the Pollution Liability Reinsurance Corporation shall be deposited in the reinsurance fund and shall be available for use by the Corporation for its ordinary and necessary operating expenses; for the payment of obligations arising under reinsurance contracts issued by the Corporation pursuant to this chapter; and for any other purpose authorized by this chapter. The Corporation shall annually submit a complete and detailed report of its activities within ninety days after the end of the calendar year to the clerk of the house of representatives, to the clerk of the senate, to the governor, and to the commissioner. The books and records of the Corporation shall be subject to an audit by the state auditor, in accordance with generally accepted government auditing standards, as often as the state auditor determines is necessary and to periodic examination at not less than three-year intervals by the commissioner of insurance. The costs of such audits and examinations shall be paid by the Corporation. The findings of the annual audit shall be submitted to the clerk of the house of representatives, to the clerk of the senate, to the governor, and to the commissioner. The Corporation shall be exempt from payment of all fees, premium taxes and all other taxes levied by the commonwealth or any of its subdivisions except taxes levied on real property. The books and records of the Corporation shall be subject to an annual audit by the auditor of the commonwealth and to periodic examination at not less than three-year intervals by the commissioner of insurance. The costs of such audits and examinations shall be paid by the Corporation. The findings of the annual audit shall be submitted to the clerk of the house of representatives, to the clerk of the senate, to the governor, and to the commissioner.

M.G.L. c. 175G, § 3 Powers of corporation

c. 175G, § 3. Powers of corporation Section 3. The Corporation shall have the following powers to: establish and amend a plan of operation subject to the approval of the commissioner; make, amend, and repeal by-laws, subject to the approval of the commissioner, for the management of its affairs; adopt an official seal; assume, or cede to another approved reinsurer, one hundred per cent reinsurance or a lesser percentage on any pollution liability insurance policies acceptable for reinsurance under the provisions of this chapter; provide separate accounts for categories and subcategories of insureds reinsured by the Corporation; maintain relevant loss, expense and premium data relative to all risks reinsured by the Corporation and to require each entity obtaining reinsurance to furnish statistics in connection with insurance ceded to the association at such times and in such form and detail as may be deemed necessary; receive and distribute all sums required by the operation of the Corporation; establish procedures for reviewing underwriting and claims procedures and practices of entities obtaining reinsurance and in the event that such underwriting or claims procedures or practices of any such entity are considered inadequate to properly service the risks ceded by it to the Corporation, the Corporation may establish an underwriting or claims program that will undertake to assist the entity in underwriting or claims adjustment procedures or practices, and in such event shall charge such entity a reasonable fee for establishing and operating such claim program; audit the operations of entities obtaining reinsurance to such extent as the board of directors determines to be necessary to assure compliance with this act, in a reasonable manner and at such reasonable time or times prescribed by the board of directors; sue and be sued, in its own name; make contracts and execute all instruments necessary or convenient for the carrying on of its business; acquire, own, hold, dispose of and encumber personal property of any nature or any interest therein; enter into agreements or transactions with any federal, state or municipal agency or other institutions; appear in its own behalf before boards, commissions, departments or other agencies of federal, state or municipal government; appoint employees, consultants, agents and advisors and prescribe their duties and fix their compensation; procure insurance against any losses in connection with its property and its directors and officers in such amounts, and from such insurers, as may be necessary or desirable; accept any and all donations, grants, appropriations, bequests, and devises, conditional or otherwise, of money, property, service, or other things of value which may be received from the commonwealth, the United States or any agency thereof, any other governmental agency, any institution, person, firm or corporation, public and private, to be held, used or applied for any or all the purposes specified in this act, in accordance with the terms and conditions of any such grant. Receipt of each such donation or grant shall be detailed in the annual report of the Corporation. Such report shall include the identity of the donor, the nature of the transaction and any conditions attaching thereto; impose and collect surcharges on reinsurance premiums as provided in this chapter; borrow funds necessary to carry out the purposes of this chapter in accordance with the plan of operation, including the loan of funds by the state treasurer as provided in section six; invest all funds held by the Corporation in accordance with the investment policies established by the board of directors, in a manner consistent with the laws specifying legal investments for insurance companies, and to exercise all of the rights of an owner with respect to such investment, including the right to vote upon all securities; exercise powers of a Corporation organized under chapter one hundred and fifty-six B that are necessary for operation of the reinsurance facility herein created, insofar as the possession and exercise of said powers remain consistent with this chapter.

M.G.L. c. 175G, § 4 Proposed plan of operation for internal structure and management, and corporate procedures; contents; approval or disapproval

c. 175G, § 4. Proposed plan of operation for internal structure and management, and corporate procedures; contents; approval or disapproval Section 4. The Corporation shall submit to the commissioner of insurance for his approval a plan of operation addressing both the internal structure and management of the Corporation and the procedures by which the Corporation seeks to carry out the purposes of this chapter, including the promotion within the commonwealth of improved availability and affordability of pollution liability insurance. The plan shall include criteria and procedures for acceptance and cession of reinsurance by the Corporation; underwriting standards; procedures for determining the coverage and limits of policies for which reinsurance will be accepted or ceded; criteria for the kind and terms of reinsurance that will be accepted or ceded; procedures for the initial review and continuing examination of the operations of any entity applying for or obtaining reinsurance, including such entity's surplus and overall financial resources, its rates and risk classifications, its underwriting standards, risk management and safety incentive programs, its claim adjustment procedures and other aspects of its services and administrative operations; criteria for a statistical plan for the purpose of collecting and reporting all appropriate operating data to the commissioner; and the plan shall address all other matters deemed necessary by the commissioner to carry out the purposes of this chapter. The plan shall provide that the premium charged for reinsurance shall be the premium charged for the coverage and limits ceded, less an appropriate expense allowance to the entity obtaining reinsurance. The expense allowance shall consist of the amounts actually incurred by the ceding entity on the ceded risk subject to a maximum of the total expense allowance provided in ratemaking for the respective categories of risk in the latest rate review or experience review accepted by the commissioner for the entity obtaining reinsurance. Policies, rates for coverage, expense allowances, and membership or subscription agreements of an entity seeking reinsurance shall be subject to review and approval by the commissioner, and such entity shall also provide to the commissioner such additional information and permit examination of such records as the commissioner may request for the purpose of demonstrating its financial responsibility. The plan shall provide reasonable procedures to assure that the rates charged by such entity are adequate and that the Corporation's premium charges for reinsurance are adequate, on the basis of reasonable actuarial projections, to cover the Corporation's liability in connection with such reinsurance. The plan shall also include a requirement that prior to acceptance of any pollution liability insurance policies for reinsurance by the Corporation, the following findings shall be made concerning the entity obtaining reinsurance or the members insured by such entity: (i) that the entity or its members has had difficulty in obtaining sufficient or affordable pollution liability reinsurance from the private market; (ii) that obtaining reinsurance is necessary for the continued operation of the affected businesses; (iii) that the affected businesses have a positive impact on economic development and employment in the commonwealth; (iv) that the entity or its members have or will soon implement adequate measures to limit the risk of future adverse disposal, discharge, release or escape of hazardous waste and other pollutants; and, (v) that the entity or its members will undertake adequate recordkeeping to allow access to information by the Corporation to ensure compliance with all necessary conditions of the reinsurance contract. The plan shall provide for the assumption by the Corporation of up to one hundred per cent reinsurance on any policy or contract of insurance, or binder thereon, which the Corporation determines to be a pollution liability insurance policy acceptable for reinsurance under the provisions of this chapter; which is issued by a group self-insurance plan, group captive, or a reciprocal insurance exchange licensed or approved under applicable laws of the commonwealth; and which meets the Corporation's criteria for providing reinsurance, including underwriting and risk management standards. Within forty-five days of its submission by the board, the proposed plan shall be reviewed by the commissioner and approved or disapproved. The commissioner shall approve the plan if he finds that it fulfills the purposes of this chapter. In his review of the proposed plan the commissioner may, in his discretion, consult with the directors and any other individual or organization. If the commissioner approves the proposed plan he shall certify such approval to the directors and said plan shall take effect ten days after such certification. If the commissioner disapproves all or any part of the proposed plan of operation, he shall return it to the directors with a statement, in writing, of the reasons for his disapproval and any recommendations he may wish to make. The directors may accept the commissioner's recommendations, or may propose a new plan, which accepted recommendations or a new plan shall be submitted to the commissioner within twenty-one days after the return of a disapproved plan to the directors. The accepted recommendations or new plan shall be reviewed by the commissioner within fourteen days. Upon approval and certification, the plan will take effect ten days thereafter. If the directors do not submit a proposed plan of operation within the prescribed time, or upon disapproval of a proposed plan, accept the recommendations of the commissioner or submit a new plan in the prescribed time, the commissioner shall in a timely manner promulgate a plan of operation and certify same to the directors. Any such plan promulgated by the commissioner shall take effect ten days after certification to the directors. The directors of the Corporation may, on their own initiative, amend the plan of operation at any time, subject to approval by the commissioner. The commissioner may review the plan of operation whenever he deems expedient, and may amend said plan after consultation with the directors and upon certification to the directors of such amendment.

M.G.L. c. 175G, § 5 Percentage surcharge for supplemental special account, establishment and collection; maximum accumulated amount; surplus

c. 175G, § 5. Percentage surcharge for supplemental special account, establishment and collection; maximum accumulated amount; surplus Section 5. Subject to the plan of operation, the Corporation shall establish and collect a percentage surcharge of up to five per cent on ordinary reinsurance charges in order to build up a supplemental special account within the Pollution Liability Reinsurance Fund. The proceeds of this account and its related investment income shall be used to discharge the Corporation's liabilities under reinsurance contracts in the event that, for any specific reporting year, the losses and related expenses exceed the Corporation's income obtained from ordinary reinsurance premium charges and investment income thereon. When the accumulated amount in the special account, less anticipated expenditures, is expected to exceed twenty-five million dollars at the end of a calendar year, the surcharges shall be discontinued until the special account is depleted to an amount below twenty-five million dollars. Every five years, the commissioner shall determine the proper maximum accumulated amount to be kept in the special account for the next five years. This determination shall be based on, but not limited to factors including the previous experience in the operation of the special account. In the event that for any specific reporting year the claim reserves established in the Reinsurance Fund from ordinary reinsurance charges, including reasonably related investment income, are determined with reasonable actuarial certainty to be in excess of the amounts actually required to pay claims and claim expenses, the surplus amount shall be transferred to the special account. Such determination shall be made no sooner than five years after the inception date of any reporting year.

M.G.L. c. 175G, § 6 Annual review of claim experience; report of fund deficiencies and loan request; certification or denial; independent consultant

c. 175G, § 6. Annual review of claim experience; report of fund deficiencies and loan request; certification or denial; independent consultant Section 6. By July first of each year, the Corporation shall conduct a review of its claim experience for each reporting year. In the event that for any specific reporting year the reinsurance Corporation's charges for providing reinsurance on policies subject to this chapter, determined in accordance with sound rating principles as described in section four, and the reasonable investment income thereon, including amounts available from the special account pursuant to section five are expected to be insufficient to make payments required under its reinsurance contracts with respect to such policies, the Corporation shall submit to the commissioner of insurance a report documenting the extent of such deficiency for the following calendar year. If the total amount of such reporting year deficiencies exceeds one million dollars, the Corporation shall also submit for the commissioner's review an application for a loan by the treasurer of the commonwealth in an amount sufficient to permit the Corporation to make payments required under such reinsurance contracts. Provided that if the balance in the special account has reached a level in excess of five million dollars pursuant to the provisions of section five, such loan application shall be for an amount sufficient to leave a year-end balance of five million dollars in the special account. Within sixty days of receiving such report and loan request, and after examining such additional documentation as he may deem necessary to verify the extent of the Corporation's need, the commissioner shall certify all or a specified part of the Corporation's loan request or deny such certification. The commissioner shall have a responsibility to ensure that the Corporation's legitimate need for funds to comply with the provisions of this section are adequately recognized in his decision with respect to the loan certification. Upon certification of its loan request, the Corporation shall present such certified application to the treasurer of the commonwealth. The treasurer is authorized and directed to loan the certified amount to the Corporation within sixty days of receipt of the certified application. Such loan shall be repayable with interest to the commonwealth under a schedule of payments agreed to by the Corporation and the treasurer. In order to repay said loans the Corporation may use funds available from the special account described in section five. Any such loan to the Corporation shall be repaid within a term not to exceed twelve years. The aggregate amount of outstanding loans shall not exceed twenty-five million dollars. No loan shall be made under the provisions of this section after December thirty-first, two thousand and twelve unless the legislature, upon review of the study conducted pursuant to the provisions of this section, authorizes the continuation of the loan guarantees provided by this section. No later than June thirtieth, two thousand and ten, the board of directors of the Corporation, with the agreement of the commissioner, shall select a qualified independent consultant with expertise in the fields of finance and public policy to conduct an evaluation of the commonwealth-sponsored loan guarantees authorized under the provisions of this section. Said study shall consider and make recommendations on whether the continuation of such loan guarantees are (i) necessary or important for assuring the financial stability of the Corporation and (ii) in the best interest of the public of the commonwealth. Both the board of directors of the Corporation and the commissioner shall prepare comments on the report of the independent consultant, and shall prepare their own recommendations as to whether said loan guarantees should be extended. The report of the independent consultant, together with the responses and recommendations of the board of directors and the commissioner, shall be submitted to the clerk of the house of representatives, the clerk of the senate, and the governor no later than June thirtieth, two thousand and eleven.

M.G.L. c. 175G, § 7 Rules and regulations; commissioner's orders; review

c. 175G, § 7. Rules and regulations; commissioner's orders; review Section 7. The commissioner may make, and at any time, alter or amend, reasonable rules and regulations to facilitate the operation of this chapter. The commissioner may issue such orders as he finds proper, expedient or necessary to enforce and administer the provisions of this chapter and to secure compliance with any rules or regulations made thereunder. The superior court for the county of Suffolk shall have jurisdiction upon the complaints of the commissioner and upon a summary hearing, to enforce all lawful orders of the commissioner. Memoranda of all actions, orders, findings and decisions of the commissioner shall be signed by him and filed in his office as public records open to public inspection. Any person or company aggrieved by any action, order, finding or decision of the commissioner pursuant to this chapter may seek review of such action, order, finding or decision by the superior court for the county of Suffolk in accordance with section five A of chapter one hundred and seventy-five A.

Source: Massachusetts General Court (malegislature.gov)URL: https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXXII/Chapter175GFetched: 10/20/2026