AN ACT to create and enact two new sections to chapter 26.1-30, two new sections to chapter 26.1-39, a new section to chapter 26.1-44, and a new subsection to section 26.1-46-03 of the North Dakota Century Code, relating to mandatory arbitration endorsements for property insurance, managed repair programs, civil remedy actions against property insurers, notice of property insurance claims, and surplus lines insurance policies; to amend and reenact sections 26.1-02-05, 26.1-25-02.1, 26.1-25-16, 26.1-26-04.1, 26.1-44-03, 26.1-46-01, 26.1-46-08, and 26.1-46-08.1 of the North Dakota Century Code, relating to exceptions to unauthorized insurance transactions, exceptions for large commercial risks in fire, property, and casualty insurance rates, surplus lines insurance, risk retention groups and purchasing groups, restrictions on insurance purchased by purchasing groups, and purchasing group taxation and fees; to repeal section 26.1-44-03.3 of the North Dakota Century Code, relating to an exemption from search requirements for licensed surplus line producers; to provide for a legislative management report; and to provide a penalty.
SB 2374 makes a broad set of changes to North Dakota insurance law, with the largest changes focused on property insurance and surplus lines coverage. It authorizes property insurance policies to include mandatory binding arbitration endorsements if the insured signs a separate written acceptance that clearly waives the right to court and jury trial in exchange for a premium discount. The bill also permits managed repair programs that limit an insured’s choice of repair vendors, but requires prominent disclosure of those restrictions and any premium incentives.
The bill further restricts property-insurance bad faith litigation by requiring a final court judgment that the insurer breached the contract before a named insured may proceed with a civil remedy action. It also imposes notice deadlines for reopened and supplemental property claims, generally requiring notice within one year of loss or within 12 months of the last payment for that element of loss, with a tolling provision for deployed service members. In addition, it revises surplus lines insurance rules, clarifies when surplus lines policies may be placed, bars surplus lines policies from being used to satisfy laws requiring coverage by a licensed insurer, and updates provisions governing risk retention groups and purchasing groups.
The bill also modernizes several producer compensation and rating provisions. It expands the list of permitted gifts and promotional items that producers may offer, creates exceptions for certain value-added products and services, and allows fees for services in commercial lines with disclosure requirements, while exempting large commercial risks from some of those disclosure rules. It also updates definitions and tax/fee rules for purchasing groups and repeals an existing surplus lines search exemption.
Overall, the bill’s impact is to give insurers more flexibility in product design and claims handling while adding disclosure and consumer-notice requirements in several areas. It affects property insurers, insurance producers, surplus lines producers, purchasing groups, risk retention groups, and insureds who buy property coverage or use managed repair arrangements. It also directs the insurance commissioner to study towing and recovery coverage for liability-only vehicles and report recommendations to legislative management.
The bill appears to have received generally favorable support, passing both chambers by wide margins, though not unanimously. The voting history suggests broad agreement on the overall package, but the nontrivial number of negative votes indicates some concern about the arbitration provisions, limits on bad faith actions, and the broader insurer-friendly changes. No committee transcript was provided, so specific floor or committee arguments are not available.
SB 2374 amends multiple chapters of the North Dakota Century Code governing insurance regulation, including unauthorized insurance transactions, commercial risk rating, producer compensation, property insurance claims handling, surplus lines insurance, and risk retention/purchasing group rules. It creates new statutory sections allowing mandatory arbitration endorsements and managed repair programs for property insurance, establishes new notice deadlines for reopened and supplemental claims, restricts civil remedy actions against property insurers, and revises disclosure and taxation rules for purchasing groups. It also repeals an existing surplus lines search-related exemption and requires a legislative management report on towing and recovery coverage for liability-only insurance.
The bill’s overall sentiment appears generally positive and pragmatic, with strong bipartisan support reflected in the large majority votes in both chambers. The support suggests lawmakers were receptive to the bill’s mix of consumer disclosures, insurer flexibility, and technical insurance-market updates. At the same time, the presence of a meaningful minority of no votes indicates some unease with provisions that favor insurers, especially arbitration, managed repair restrictions, and the limitation on bad faith claims.
The main points of contention are likely the mandatory binding arbitration endorsement for property insurance, the managed repair program provisions that limit an insured’s choice of contractors, and the requirement that a bad faith claim against a property insurer follow a final judgment that the insurer breached the contract. These provisions may be viewed by consumer advocates as reducing policyholder remedies and leverage in disputes, while insurers may view them as tools to control costs and claims litigation. Additional friction may arise from the shortened claim-notice deadlines for reopened and supplemental claims and from the expanded flexibility for surplus lines and producer compensation rules, which could be seen as reducing consumer protections even as the bill adds disclosure requirements.