Esta ley enmienda varias secciones del "Insurance Code of Puerto Rico" para abordar la disponibilidad y asequibilidad del seguro de responsabilidad profesional médico-hospitalaria. Exime a las aseguradoras del impuesto sobre la renta por las primas de este tipo de seguro, modifica la fórmula para distribuir el déficit del Sindicato de Aseguradores para la Suscripción Conjunta de Seguros de Responsabilidad Profesional Médico-Hospitalaria (SIMED), permite al Comisionado de Seguros distribuir el excedente de ciertos límites entre aseguradoras autorizadas, facilita el acceso al mercado de seguros de líneas excedentes cuando la cobertura autorizada es insuficiente y permite el establecimiento de fondos de garantía comunes para profesionales de la salud.
(H. B. 3193) (Conference) (Reconsidered) (No. 284) (Approved December 19, 2002)
To amend subsection 4 of Section 7.020; Section 10.070; subsection 1 of Section 10.130; subsection 3 of Section 10.200; Section 41.030; subsection 10 of Section 41.040 and subsection 1 of Section 41.050 of Act No. 77 of June 19, 1957, as amended, known as the "Insurance Code of Puerto Rico", in order to exempt insurers from the payment of income tax on the premium generated by underwriting medical-hospital professional liability insurance; to eliminate the punitive effect of the formula used to distribute the accumulated deficit by the Insurers' Syndicate for the Joint Underwriting of Medical-Hospital Professional Liability Insurance has on insurers that underwrite this type of insurance; to empower the office of the Insurance Commissioner to distribute the surplus of the limits up to two hundred and fifty thousand $(250,000)$ dollars per incident and five hundred thousand $(500,000)$ dollars per aggregate, among insurers authorized in Puerto Rico to underwrite any type of insurance specified in Sections 4.040 and 4.090 of the "Insurance Code of Puerto Rico", only when they cannot attain the surplus of the limits with insurers authorized in Puerto Rico; to allow the insured to resort to the surplus line insurance market when the coverage offered by the authorized insurer does not meet the minimum limits required to obtain a surplus line policy; and to allow the establishment of common guarantee funds for health service professionals.
The Medical-Hospital sector in Puerto Rico has set forth that it confronts difficulties as to the availability of professional medical-hospital liability insurance in the amounts required and at affordable prices.
Recently, three insurers that underwrote the risk of professional medical-hospital malpractice ceased operation in Puerto Rico, and at present, only two local insurers limitedly underwrite this type of insurance. Said insurers have their own underwriting policies and are not compelled to underwrite this type of insurance.
Act No. 4 of December 30, 1986, created the Insurers' Syndicate for the Joint Underwriting of Medical-Hospital Professional Liability Insurance (commonly known as "SIMED," (Spanish acronym) that would be compelled to provide health service professionals and health care institutions with said insurance for the minimum coverage required.
At present, SIMED is the main local insurer available that underwrites medical-hospital professional liability insurance. Said entity has the obligation, by law, to offer coverage of one hundred thousand $(100,000)$ dollars per medical incident and up to three hundred thousand $(300,000)$ dollars for several incidents. This is the minimum coverage required to practice medicine in Puerto Rico. SIMED could offer higher coverage using its own underwriting guidelines, provided it does not affect its financial situation, but the truth is that SIMED's financial situation makes it less profitable to provide higher limits for high-risk specialties due to its condition of insurer with reduced assets.
On the other hand, the increase in the tariffs in 2000, as a preventive measure to handle the financial situation brought about by the increase in the payment of losses, has caused many health service professionals and health care institutions to express that they cannot cover the cost of medicalhospital professional liability insurance.
As a result of the abovementioned, a considerable number of health service professionals indicate that, upon the "unavailability" of medical-
hospital professional liability insurance, they would probably choose not to practice high-risk medicine or, inclusively, opt to practice it out of Puerto Rico. It is worth mentioning that this problem of unavailability of this type of insurance is not only local, but a problem that generally affects medical professionals in the United States and worldwide.
In our understanding that it is extremely important for the Commonwealth of Puerto Rico to preserve the integrity of the medicalhospital services rendering system, this Legislature deems it necessary to intervene in the field of medical-hospital professional liability. Therefore, it is worth implementing a series of measures that would promote a higher availability of medical-hospital professional liability insurance in Puerto Rico and, at the same time, guarantee to every patient access to high quality medical services.
Section 1.- Subsection 4 of Section 7.020 of Act No. 77 of June 19, 1957, as amended, known as the "Insurance Code of Puerto Rico," is hereby amended to read as follows: "Section 7.020. Taxes on premiums (2) ... (4) This section does not apply to surplus line insurance underwritten pursuant to Chapter X, nor to authorized premium surcharges pursuant to Chapter XXXVIII, nor to nonprofit insurers engaged in underwriting life insurance contracts and annuities for educational institutions personnel, nor to reinsurance, nor to premiums with a medical-hospital professional liability coverage underwritten by authorized insurers."
Section 2.- A new paragraph is hereby added to Section 10.070 of Act No. 77 of June 19, 1957, as amended, known as the "Insurance Code of Puerto Rico", to read as follows: "Section 10.070 - Surplus line insurance Subsection (1) does not apply if the insurance coverage offered by an authorized insurer to cover the risk of medical-hospital professional malpractice does not constitute the minimum coverage needed to acquire a surplus line insurance in the surplus line market, in which case, the surplus line broker could reject the primary coverage offered by the authorized insurer and resort to the surplus line insurance market to obtain the coverage needed."
Section 3.- Subsection 1 of Section 10.130 of Act No. 77 of June 19, 1957, as amended, known as the "Insurance Code of Puerto Rico," is hereby amended to read as follows: "Section 10.130 - Tax on surplus lines; payment (1) There is hereby imposed upon each surplus line coverage granted in Puerto Rico, or which covers residents risks, located or to be performed in Puerto Rico wherever it was negotiated, a tax equal to nine (9) percent of the total premium collected on account thereof, excluding the tax, except for any insurance covering the risk of medical-hospital professional malpractice. The broker shall be responsible for the collection and payment of the tax. (2) ... (3) ..." Section 4.- Subsection 3 of Section 10.200 of Act No. 77 of June 19, 1957, as amended, known as the "Insurance Code of Puerto Rico," is hereby amended to read as follows: "Section 10.200 - Insurance transacted with unauthorized insurers
(3) A tax equal to fifteen percent (15%) of the total premium charged by the unauthorized insurer is levied on account of the insurance transacted through an unauthorized insurer. However, this tax does not apply to insurance covering the risk of medical-hospital professional malpractice. The insured shall withhold the amount of the tax from the premium charged for such insurance and shall send it together with the report required in subsection (1). The tax shall be paid within the period of thirty (30) days after the effective date of said insurance, through certified check payable to the Secretary of the Treasury, through the Office of the Commissioner. In addition to the tax levied, the insured that does not pay the same within the established term shall be in default and will be obliged to pay an additional surcharge, starting on the expiration date of said term, of five percent (5%) of the unpaid total, for a delay in the payment of the tax in excess of thirty (30) days and no greater than sixty (60) days from the effective date of the policy; and of ten percent ( $10 %$ ) of the unpaid total plus legal interest on said tax in the case of a delay in payment in excess of sixty (60) days in case of default, to be computed in the following manner: (1) A rate of interest equivalent to five percent (5%) over the maximum premium rate of interest established by the Board for Regulating Rates of Interest and Financing Charges created by Act No. 1 of October 15, 1973, as amended. (2) Any amendment approved by said Board for Regulating Rates of Interest and Financing Charges, that modifies the maximum rate of interest, shall be effective for the purposes of this Act, on the first day of the month following the date of approval of the new rate."
Section 5.- Section 41.030 of Act No. 77 of June 19, 1957, as amended, known as the "Insurance Code of Puerto Rico," is hereby amended to read as follows: "The Commissioner, through regulation to that effect, and when deemed justifiable, shall distribute in equal amounts among insurers authorized in Puerto Rico to underwrite any type of insurance specified in the preceding paragraph, those policies exceeding the financial responsibility required by Section 41.050 of this Chapter, whenever said persons could not find said coverage with authorized insurers in Puerto Rico, provided that the total policy shall not exceed two hundred and fifty thousand $(250,000)$ dollars per incident and five hundred thousand $(500,000)$ dollars per aggregate, and subject to reasonability, adequacy and market experience criteria, as established in Section 12.040."
Section 6.- Subsection 1 and paragraphs
(a) and
(b) of subsection 10 are eliminated, and a new paragraph
(a) is added; paragraphs c, d, e, f of subsection 10 are amended and renumbered as paragraphs b, c, d and e, of Section 41.040 of Act No. 77 of June 19, 1957, as amended, known as the "Insurance Code of Puerto Rico", to read as follows: "Section 41.040 - Insurers Syndicate; operating plan (1) $\ldots$ (10)
(a) All insurers who are members of the Syndicate shall share in its profits and losses in the proportion that the direct net premiums for the types of insurance specified in Section 41.030 of this Code, underwritten in Puerto Rico by each of said members during the year preceding
the year in which the profits or losses are declared, represent to the total of the direct net premiums underwritten in Puerto Rico by all of said members during the preceding year, for said types of insurance.
(b) To these purposes, the Commissioner shall certify to the Syndicate the direct net premiums underwritten during said previous year and the proportions corresponding to the various members of the Syndicate, pursuant to the formulas established in the preceding paragraph
(a) .
(c) At their option, and subject to the standards established to such effects by the Syndicate, the insurers who are members thereof may participate therein in a higher percentage than that indicated above.
(d) The criteria to participate in the Syndicate may apply to the underwriting of the types of insurance specified in Section 41.030, separately, if it is thus provided in the plan.
(e) ... ... Section 7.- Subsection 1 of Section 41.050 of Act No. 77 of June 19, 1957, as amended, known as the "Insurance Code of Puerto Rico," is hereby amended to read as follows: "Section 41.050 Financial solvency (1) Establish an escrow fund whose minimum amount in the case of a health service professional shall be at all times the amount of the aggregate limit established as provided in this Section, and in the
case of health care institutions, in the amount of one million $(1,000,000)$ dollars. In no case shall any amount be drawn therefrom without prior authorization of the Commissioner.
Health service professionals and health care institutions that choose this option shall also meet the conditions established below and any others established by the Commissioner through regulations. The Commissioner may authorize two (2) or more health service professionals or health care institutions to establish common escrow funds, provided they meet the following requirements: ... Section 8.- Effectiveness This Act shall take effect immediately after its approval.
I hereby certify to the Secretary of State that the following Act No. 284 (H.B. 3193) (Conference) (Reconsidered) of the $4^{ ext {th }}$ Session of the $14^{ ext {th }}$ Legislature of Puerto Rico:
AN ACT to amend subsection 4 of Section 7.020; Section 10.070; subsection 1 of Section 10.130; subsection 3 of Section 10.200; Section 41.030; subsection 10 of Section 41.040 and subsection 1 of Section 41.050 of Act No. 77 of June 19, 1957, as amended, known as the "Insurance Code of Puerto Rico", in order to exempt insurers from the payment of income tax on the premium generated by underwriting medical-hospital professional liability insurance; to eliminate the punitive effect of the formula used to distribute the accumulated deficit by the Insurers' Syndicate for the Joint Underwriting of MedicalHospital Professional Liability Insurance, etc. has been translated from Spanish to English and that the English version is correct.
In San Juan, Puerto Rico, today $10^{ ext {th }}$ of September of 2004.
Elba Rosa Rodríguez-Fuentes Director