PANEL TO STUDY RULES ON LIABILITY COMPANIES

SIKESTON - As chairman of the House Insurance Committee, Rep. Dennis Ziegenhorn, D-Sikeston, helped kill a bill during the last legislative session that would have placed associations, formed to provide liability insurance coverage, under the same regulations as other insurance companies.

But in killing the bill, Ziegenhorn agreed that an interim committee should be formed to study the issue further. Last week he was appointed to serve as chairman of that panel.

"I have not had anyone tell me there is a problem; they just tell me there is going to be one," said Ziegenhorn. "I'm telling those who supported this bill to show me there is a need for this. I'm certainly willing to listen."

In 1975, the Missouri General Assembly passed legislation allowing designated professionals to form an association to insure themselves because of problems at the time trying to acquire malpractice insurance. These associations differ from regular companies in that they do not pay premium taxes and are not required to meet minimum capital and surplus standards.

A recent court decision in Cole County found that the Department of Insurance does not have the power to financially examine a malpractice insurance association.

Because the statute providing for the formation of the associations is number 383, the companies are known as "383 companies."

"To this day I have asked and asked and asked the Department of Insurance and many people to tell me where there is a problem with 383 companies," explained Ziegenhorn. "All they have been able to tell me is an earthquake type scare that there will be a problem some day because we don't know where they are in the field of insurance."

Senate Insurance Committee Chairman Edwin Dirck, D-St. Ann, supported regulation of 383 companies and moved the bill through his committee and the full Senate this year. Dirck contends the 383 companies are nothing more than insurance companies getting special benefits.

"I'm not disagreeing that they are insurance companies," said Ziegenhorn. "My contention is, let somebody tell me what we need to do. I don't want to disrupt something that is working because insurance companies are back in the state asking why we allow this to happen."

Ziegenhorn said that 383 companies were only formed when the regular companies refused to write malpractice insurance. Now, they are back claiming unfair advantages are being given the 383s.

"Maybe they ought to lower their premiums so they can get competitive with 383 companies rather than trying to raise the 383 premiums so they will be competitive with them," suggested Ziegenhorn.

Ray Call of the state department of insurance said the department supports the legislation. "We would again support legislation giving us some authority over those 383 companies," said Call.

He said that about four or five of the associations became mutual companies in the last few years, and there are only two active associations left.

One of those is through the Missouri Hospital Association and the other is based in Springfield. Both insure against medical malpractice.

Call said none of the associations has been formed lately; however, the law would allow new ones to be formed. He suggested that one reason for the decline in 383 companies is that regular insurance companies have become more competitive in malpractice insurance premiums.

The difference between 383 companies and regular companies, Call said, "is they don't have to meet certain requirements like other companies; they are exempt from the state premium tax and Unfair Claims Settlement Practices Act.

In an effort to get a bill passed last year, Call said advocates of the legislation agreed to withdraw the premium tax provision from the bill, but opponents would not concede.

Call said by dropping the premium tax the costs to 383 companies of doing business would not have increased that much. "We basically would have had the authority to make sure the companies are solvent, paid claims on time, treat policyholders fairly, and cooperate with the Department of Insurance," said Call.

Ziegenhorn will hold all hearings of his interim committee in Jefferson City later this year.

"There is a lot of lobbying to put 383s under the Department of Insurance. I'm not saying some regulations should not be imposed, but to put them under as though they are insurance companies and make them raise premiums and put them on a keel with other insurance companies is not something I'm wanting to do."

"I'm going into the hearing with an open mind," said Ziegenhorn. "But somebody is going to have to prove to me these have to be put under control of the insurance department .... I'm cool to the idea until somebody shows me the need."