Senate Bill Report — SB 5797, Fines on Authorized Insurers (January 11, 2024)

Summary

Senate Bill Report on SB 5797, as of January 11, 2024, covers an act relating to fines levied upon authorized insurers in addition to or in lieu of suspension, revocation, or refusal to renew certificate of authority. The brief summary states the bill increases the amount an authorized insurer may be fined to $25,000 per violation. The staff summary of testimony in favor (PRO) states it has been decades since the RCW was updated and calls the bill a consumer protection bill. The testimony against (CON) states that adding the per violation fine where there is no ultimate cap could become a nuclear type of penalty. Senator Patty Kuderer, Prime Sponsor, and David Forte of the Office of the Insurance Commissioner testified PRO; Kenton Brine and Kris Teft testified CON.

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Full text

                             SENATE BILL REPORT
                                   SB 5797

                                      As of January 11, 2024

Title: An act relating to fines levied upon authorized insurers in addition to or in lieu of
     suspension, revocation, or refusal to renew certificate of authority.

Brief Description: Concerning fines levied upon authorized insurers.

Sponsors: Senators Kuderer, Stanford, Dhingra, Nobles and Wellman.

Brief History:
     Committee Activity: Business, Financial Services, Gaming & Trade: 1/11/24.


                                      Brief Summary of Bill
           • Increases the amount an authorized insurer may be fined to $25,000 per
             violation.


SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES, GAMING & TRADE

     Staff: Kellee Gunn (786-7429)

     Background: The Office of the Insurance Commissioner (OIC) regulates insurance
     companies and individuals that work in the insurance industry. The OIC is responsible for
     enforcing insurance laws and rules in this state. A violation of the insurance code or
     administrative rule may result in a fine and, depending on the nature of the violation, license
     or certificate of authority suspension, revocation, nonrenewal, or other action. Some fines
     may be levied in lieu of revocation, suspension, or refusal to renew a license or certificate of
     authority. Fines vary depending on the entity, licensee, and the act committed.

     Summary of Bill: The amount OIC may fine an authorized insurer in addition to or in lieu
     of suspension, revocation, or nonrenewal of a certificate of authority is increased from $250
     to not more than $10,000, to not more than $25,000 per violation.




     This analysis was prepared by non-partisan legislative staff for the use of legislative
     members in their deliberations. This analysis is not part of the legislation nor does it
     constitute a statement of legislative intent.

Senate Bill Report                              -1-                                             SB 5797
     Appropriation: None.

     Fiscal Note: Requested on January 5, 2024.

     Creates Committee/Commission/Task Force that includes Legislative members: No.

     Effective Date: Ninety days after adjournment of session in which bill is passed.

     Staff Summary of Public Testimony: PRO: It has been decades since this RCW has been
     updated. OIC fines on a per violation basis except for this instance. An authorized insurer
     could act in egregious way, but currently the violation would be limited to $10,000. This
     bill is a consumer protection bill. There are 17 different statutes in the code that give OIC
     fine authority. This will generally affect authorized insurers. This aligns what occurs for
     surplus lines insurers. And the per violation change makes it more in alignment with all
     other types of insurance violation fines.

     CON: There are many different penalty regimes in the code now. The addition of the per
     violation where there is no ultimate cap could become a nuclear type of penalty. Intentional
     and egregious violation is fine, but with a simple clerical error this could be problematic.
     Consumers benefit from rigorous consumer protection. Insurers also benefit from this
     consumer protection. This bill changes long standing statutory fines. Currently, if a
     violation is found, it is $250 to no more than $10,000. The minimum is no longer mentioned
     in the current bill, and there is no maximum. In the event of an error of a policy form, this
     could result in thousand of violations. Most violations discovered by the OIC results in a
     negotiated settlement. Increasing the fine without a differentiated fine or a cap, will result in
     a costly penalty for what could be a simple error.

     Persons Testifying: PRO: Senator Patty Kuderer, Prime Sponsor; David Forte, Office of
     the Insurance Commissioner.

     CON: Kenton Brine, NW Insurance Council; Kris Teft, American Property Casualty
     Insurance Association (APCIA).

     Persons Signed In To Testify But Not Testifying: No one.




Senate Bill Report                              -2-                                           SB 5797


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