CHAPTER 162 SENATE BILL No. 3 (Amends Chapter 128) An  Act relating to insurance; concerning the regulation thereof; amending K.S.A. 8-173
and K.S.A. 1998 Supp. 40-2,103, as amended by section 5 of 1999 Senate Bill 108, 40-
19c09, as amended by section 6 of 1999 Senate Bill 108, 40-3104 and 40-3118 and
repealing the existing sections; also repealing K.S.A. 1998 Supp. 40-1909.
Be it enacted by the Legislature of the State of Kansas:

      New Section  1. (a) Any individual or group health insurance policy,
medical service plan, contract, hospital service corporation contract, hos-
pital and medical service corporation contract, fraternal benefit society
or health maintenance organization which provides coverage for accident
and health services and which is delivered, issued for delivery, amended
or renewed on or after July 1, 1999, also, shall provide coverage for the
administration of general anesthesia and medical care facility charges for
dental care provided to the following covered persons:

      (1) A child five years of age and under; or

      (2) a person who is severely disabled; or

      (3) a person has a medical or behavioral condition which requires
hospitalization or general anesthesia when dental care is provided.

      (b) A policy, provision, contract, plan or agreement may:

      (1) Apply to the covered procedures under this section the same de-
ductibles, coinsurance, network requirements and other limitations, in-
cluding but not limited to medical necessity determinations, as apply to
other covered services;

      (2) require prior authorization for hospitalization for the covered pro-
cedures under this section in the same manner that prior authorization
is required for hospitalization for other covered diseases or conditions.

      (c) The provisions of this section shall not apply to any policy or cer-
tificate providing coverage for any specified disease, specified accident or
accident-only coverage, credit, dental, disability income, hospital indem-
nity, long-term care, as defined by K.S.A. 40-2227, and amendments
thereto, medicare supplement, as defined by the commissioner of insur-
ance by rules and regulations, vision care or other limited-benefit sup-
plemental insurance, nor any coverage issued as a supplement to liability
insurance, workers' compensation or similar insurance, automobile med-
ical-payment insurance, or any insurance under which benefits are pay-
able with or without regard to fault, whether written on a group, blanket
or individual basis.

      (d) Nothing herein shall be construed to require any individual or
group health insurance policy, medical service plan, contract, hospital
service corporation contract, fraternal benefit society or health mainte-
nance organization to provide benefits for any dental procedures.

      (e) The provisions of this section shall apply to the state health care
benefits program and municipal self-funded pools.

      (f) As used in this section ``medical care facility'' shall have the mean-
ing ascribed to the term in K.S.A. 65-425, and amendments thereto.

      New Sec.  2. (a) Any individual or group health insurance policy,
medical service plan, contract, hospital service corporation contract, hos-
pital and medical service corporation contract, fraternal benefit society
or health maintenance organization which provides coverage for accident
and health services and which is delivered, issued for delivery, amended
or renewed on or after July 1, 1999, and which provides medical and
surgical benefits with respect to a mastectomy shall provide, in a case of
a participant or beneficiary who is receiving benefits in connection with
a mastectomy and who elects breast reconstruction in connection with
such mastectomy, coverage for:

      (1) Reconstruction of the breast on which the mastectomy has been
performed;

      (2) surgery and reconstruction of the other breast to produce a sym-
metrical appearance; and

      (3) prostheses and physical complications in all stages of mastectomy,
including lymphedemas.

      Such coverage shall be provided in a manner determined in consulta-
tion with the attending physician and the patient. Such coverage may be
subject to annual deductibles and coinsurance provisions as may be
deemed appropriate and as are consistent with those established for other
benefits under the plan or coverage.

      (b) Each individual or group health insurance policy, medical service
plan, contract, hospital service corporation contract, hospital and medical
service corporation contract, fraternal benefit society or health mainte-
nance organization which provides coverage for accident and health serv-
ices which provides medical and surgical benefits with respect to a mas-
tectomy shall provide written notice, as currently required, to all
enrollees, insureds or subscribers regarding the coverage required by this
section.

      (c) No individual or group health insurance policy, medical service
plan, contract, hospital service corporation contract, hospital and medical
service corporation contract, fraternal benefit society or health mainte-
nance organization which provides coverage for accident and health serv-
ices which provides medical and surgical benefits with respect to a mas-
tectomy shall:

      (1) Deny to a patient eligibility, or continued eligibility, to enroll or
to renew coverage under the terms of the plan, solely for the purpose of
avoiding the requirements of this section; and

      (2) penalize or otherwise reduce or limit the reimbursement of an
attending provider, or provide incentives (monetary or otherwise) to an
attending provider, to induce such provider to provide care to an individ-
ual participant or beneficiary in a manner inconsistent with this section.

      (d) The provisions of this section shall not apply to any policy or
certificate which provides coverage for any specified disease, specified
accident or accident only coverage, credit, dental, disability income, hos-
pital indemnity, long-term care insurance as defined by K.S.A. 40-2227
and amendments thereto, vision care or any other limited supplemental
benefit nor to any medicare supplement policy of insurance as defined
by the commissioner of insurance by rule and regulation, any coverage
issued as a supplement to liability insurance, workers' compensation or
similar insurance, automobile medical-payment insurance or any insur-
ance under which benefits are payable with or without regard to fault,
whether written on a group, blanket or individual basis.

      Sec.  3. K.S.A. 1998 Supp. 40-2,103, as amended by section 5 of 1999
Senate Bill 108, is hereby amended to read as follows: 40-2,103. The
requirements of K.S.A. 40-2,100, 40-2,101, 40-2,102, 40-2,104, 40-2,105,
40-2,114 and 40-2250, and amendments thereto and K.S.A. 1998 Supp.
40-2,160 and sections 1 through 4 of 1999 Senate Bill 108, and section 1
and section 2 of this act, and amendments thereto, shall apply to all in-
surance policies, subscriber contracts or certificates of insurance deliv-
ered, renewed or issued for delivery within or outside of this state or used
within this state by or for an individual who resides or is employed in this
state.

      Sec.  4. K.S.A. 1998 Supp. 40-19c09, as amended by section 6 of 1999
Senate Bill 108, is hereby amended to read as follows: 40-19c09. (a) Cor-
porations organized under the nonprofit medical and hospital service cor-
poration act shall be subject to the provisions of the Kansas general cor-
poration code, articles 60 to 74, inclusive, of chapter 17 of the Kansas
Statutes Annotated, applicable to nonprofit corporations, to the provisions
of K.S.A. 40-214, 40-215, 40-216, 40-218, 40-219, 40-222, 40-223, 40-
224, 40-225, 40-226, 40-229, 40-230, 40-231, 40-235, 40-236, 40-237, 40-
247, 40-248, 40-249, 40-250, 40-251, 40-252, 40-254, 40-2,100, 40-2,101,
40-2,102, 40-2,103, 40-2,104, 40-2,105, 40-2,116, 40-2,117, 40-2a01 et
seq., 40-2111 to 40-2116, inclusive, 40-2215 to 40-2220, inclusive, 40-
2221a, 40-2221b, 40-2229, 40-2230, 40-2250, 40-2251, 40-2253, 40-2254,
40-2401 to 40-2421, inclusive, and 40-3301 to 40-3313, inclusive, K.S.A.
1998 Supp. 40-2,153, 40-2,154, 40-2,160, 40-2,161, 40-2,163 and, 40-
2,164 and sections 1 through 4 of 1999 Senate Bill 108, and section 1 and
section 2 of this act, and amendments thereto, except as the context oth-
erwise requires, and shall not be subject to any other provisions of the
insurance code except as expressly provided in this act.

      (b) No policy, agreement, contract or certificate issued by a corpo-
ration to which this section applies shall contain a provision which ex-
cludes, limits or otherwise restricts coverage because medicaid benefits
as permitted by title XIX of the social security act of 1965 are or may be
available for the same accident or illness.

      (c) Violation of subsection (b) shall be subject to the penalties pre-
scribed by K.S.A. 40-2407 and 40-2411, and amendments thereto.

      New Sec.  5. (a) After July 1, 1999, in addition to the requirements
of K.S.A. 40-2248 and 40-2249, and amendments thereto, any new man-
dated health insurance coverage for specific health services, specific dis-
eases or for certain providers of health care services approved by the
legislature shall apply only to the state health care benefits program,
K.S.A. 75-6501, et seq., and amendments thereto, for a period of at least
one year beginning with the first anniversary date of the state health care
benefits program subsequent to approval of the mandate by the legisla-
ture. On or before March 1, after the one year period for which the
mandate has been applied, the Kansas state employees health care com-
mission shall submit to the president of the senate and to the speaker of
the house of representatives, a report indicating the impact such man-
dated coverage has had on the state health care benefits program, in-
cluding data on the utilization and costs of such mandated coverage. Such
report shall also include a recommendation whether such mandated cov-
erage should continue for the state health care benefits program or
whether additional utilization and cost data is required.

      (b) The legislature shall periodically review all health insurance cov-
erages mandated by state law.

      New Sec.  6. On and after January 1, 2000, for the purposes of sec-
tions 6 through 9 and amendments thereto:

      (a) ``Adverse decision'' means a utilization review determination by a
third-party administrator, a health insurance plan, an insurer or a health
care provider acting on behalf of an insured that a proposed or delivered
health care service which would otherwise be covered under an insured's
contract is not or was not medically necessary or the health care treatment
has been determined to be experimental or investigational and, (1) if the
requested service is provided in a manner that leaves the insured with a
financial obligation to the provider or providers of such services, or (2)
the adverse decision is the reason for the insured not receiving the re-
quested services.

      (b) ``Emergency medical condition'' means the sudden, and at the
time, unexpected onset of a health condition that requires immediate
medical attention, where failure to provide medical attention would result
in a serious impairment to bodily functions, serious dysfunction of a bodily
organ or part or would place a person's health in serious jeopardy.

      (c) ``External review organization'' means an entity that conducts in-
dependent external reviews of adverse decisions pursuant to a contract
with the commissioner. Such entity shall have experience serving as the
external quality review organization in health programs administered by
the state of Kansas, or be a nationally accredited external review organi-
zation which utilizes health care providers actively engaged in the practice
of their profession in the state of Kansas who are qualified and creden-
tialed with respect to the health care service review. In the event no
Kansas providers are qualified and credentialed with respect to the review
of any case, the external review organization shall have the discretion to
employ health care providers who actively engage in such health care
provider's practice outside the state of Kansas.

      (d) ``Health insurance plan'' means any hospital or medical expense
policy, health, hospital or medical service corporation contract, and a plan
provided by a municipal group-funded pool, or a health maintenance
organization contract offered by an employer or any certificate issued
under any such policies, contracts or plans.

      (e) ``Insured'' means the beneficiary of any health insurance com-
pany, fraternal benefit society, health maintenance organization, non-
profit hospital and medical service corporation, municipal group funded
pool, and the self-funded coverage established by the state of Kansas, or
any hospital or medical expense, health, hospital or medical service cor-
poration contract or a plan provided by a municipal group-funded pool.

      (f) ``Insurer'' means any health insurance company, fraternal benefit
society, health maintenance organization, nonprofit hospital and medical
service corporation, provider sponsored organizations, municipal group-
funded pool and the self-funded coverage established by the state of Kan-
sas for its employees.

      New Sec.  7. On and after January 1, 2000:

      (a) The provisions of sections 6 through 9 and amendments thereto
shall not apply to any policy or certificate which provides coverage for
any specified disease, specified accident or accident only coverage, credit,
dental, disability income, hospital indemnity, long-term care insurance as
defined by K.S.A. 40-227, and amendments thereto, vision care or any
other limited supplemental benefit nor to any medicare supplement pol-
icy of insurance as defined by the commissioner of insurance by rule and
regulation, coverage under a plan through medicare, medicaid, or the
federal employees health benefits program, any coverage issues as a sup-
plement to liability insurance, workers compensation or similar insurance,
automobile medical-payment insurance or any insurance under which
benefits are payable with or without regard to fault, whether written on
a group, blanket or individual basis.

      (b) The right to external review under sections 6 through 9, and
amendments thereto, shall not be construed to change the terms of cov-
erage under a health insurance plan or insurance policy.

      (c) The insurer or health insurance plan shall provide written notice
to the insured of a final adverse decision and the opportunity for request-
ing an external review.

      (d) The insured has the right to request an independent external re-
view of an adverse decision by a health insurance plan or insurer when:
(1) The insured has exhausted all available internal review procedures
provided by the health insurance plan or insurer, unless the insured has
an emergency medical condition, in which case an expedited procedure
is used; or (2) the insured has not received a final decision from the
insurer within 60 days of seeking the internal review, except to the extent
that the delay was requested by the insured.

      (e) Within 90 days of receipt of an adverse decision by a health in-
surance plan or an insurer, any request for external review shall be made
in writing to the commissioner from the following persons: (1) The in-
sured; (2) the treating physician or health care provider acting on behalf
on the insured with written authorization from the insured; or (3) a legally
authorized designee of the insured.

      (f) The insured shall provide all information in the possession of the
insured pertaining to the adverse decision in order for the commissioner
to make a preliminary determination for an external review. The insured
also shall provide the commissioner with an appeal form, and a fully ex-
ecuted release for the commissioner and the external review organization
to obtain any necessary medical records from the insurer or health in-
surance plan and any other relevant provider.

      (g) In responding to the commissioner, the insurer or health insur-
ance plan shall provide a copy of the adverse decision given to the insured
and all medical and other records pertaining to the insured's claim within
five business days of the request of the commissioner.

      (h) The confidentiality of any medical information submitted by the
insured, on behalf of the insured, insurer or health insurance plan, shall
be maintained pursuant to applicable state and federal laws.

      New Sec.  8. On and after January 1, 2000:

      (a) The commissioner shall:

      (1) Negotiate contracts with external review organizations which are
eligible to conduct independent review of the adverse decision by a health
insurance plan or insurer;

      (2) allow the insurer or the health insurance plan, an insured or treat-
ing physician or health care provider acting on behalf of the insured, or
legally authorized designee filing a request for external review to provide
additional written information as may be relevant for the commissioner
to make a final decision on whether the request qualified for external
review;

      (3) make a decision on a request for external review within 10 busi-
ness days after receiving all necessary information;

      (4) notify the insured and treating physician or health care provider
acting on behalf of the insured, or legally authorized designee, and insurer
or health insurance plan in writing that a request for external review will
or will not be granted; and

      (5) design and implement an expedited procedure for use in an emer-
gency medical condition for purposes of the external review organization
rendering a decision.

      (b) The external review organization as defined in subsection (c) of
section 6, and amendments thereto, shall provide that all reviews com-
pleted pursuant to sections 6 through 9, and amendments thereto, are
conducted by qualified and credentialed health care providers with re-
spect to the health care service under review and who have no conflict
of interest relating to the performance of the external review organiza-
tion's duties in sections 6 through 9, and amendments thereto.

      (c) The external review organization shall issue a written decision to
the insured and concurrently send a copy of such decision to the com-
missioner including the basis and rationale for its decision within 30 busi-
ness days. The standard of review shall be whether the health care service
denied by the insurer or health insurance plan was medically necessary
under the terms of the insured's contract. In reviews regarding experi-
mental or investigational treatment, the standard of review shall be
whether the health care service denied by the insurer or health insurance
plan was covered or excluded from coverage under the terms of the in-
sured's contract.

      (d) The external review organization shall provide expedited resolu-
tion when an emergency medical condition exists, and shall resolve all
issues within seven business days.

      (e) The external review organization shall maintain and report such
data as may be required by the commissioner in order to assess the ef-
fectiveness of the external review process.

      (f) No external review organization nor any individual working on
behalf of such organization shall be liable in damages to any insured,
health insurance plan or insurer for any opinion rendered as part of an
external review conducted pursuant to sections 6 through 9, and amend-
ments thereto.

      (g) The external review organization shall maintain confidentiality of
the medical records of the insured in accordance to state and federal law.

      New Sec.  9. On and after January 1, 2000:

      (a) The decision of the external review organization may be reviewed
directly by the district court at the request of either the insured, insurer
or health insurance plan. The review by the district court shall be de novo.
The decision of the external review organization shall not preclude the
insured, insurer or health insurance plan from exercising other available
remedies applicable under state or federal law. Seeking a review by the
district court or any other available remedies exercised by the insured,
insurer or health insurance plan after the decision of the external review
organization will not stay the external review organization's decision as to
the payment or provision of services to be rendered during the pendency
of the review by the insurer or health insurance plan. All material used
in an external review and the decision of the external review organization
as a result of the external review shall be deemed admissible in any sub-
sequent litigation.

      (b) In no event shall more than one external review be available dur-
ing the same year for any request arising out of the same set of facts. An
insured may not pursue, either concurrently or sequentially, an external
review process under both a federal and state law. In the event external
review processes are available pursuant to federal law and this act, the
insured shall have the option of designating which external review process
will be utilized.

      (c) The commissioner of insurance is hereby authorized to negotiate
and enter into contracts necessary to perform the duties required by sec-
tions 6 through 9, and amendments thereto.

      (d) The commissioner of insurance shall adopt rules and regulations
necessary to carry out the purposes of sections 6 through 9, and amend-
ments thereto. The rules and regulations shall ensure that the commis-
sioner is able to provide for an effective and efficient external review of
health care services.

      Sec.  10. On and after January 1, 2000, K.S.A. 8-173 is hereby
amended to read as follows: 8-173. (a) An application for registration of
a vehicle as provided in article 1 of chapter 8 of the Kansas Statutes
Annotated and amendments thereto, shall not be accepted unless the
person making such application shall exhibit:

      (1) A receipt showing that such person has paid all personal property
taxes levied against such person for the preceding year, including taxes
upon such vehicle, except that if such application is made before June 21
such receipt need show payment of only one-half the preceding year's
tax; or

      (2) evidence that such vehicle was assessed for taxation purposes by
a state agency, or was assessed as stock in trade of a merchant or manu-
facturer or was exempt from taxation under the laws of this state.

      (b) An application for registration of a vehicle as provided in article
1 of chapter 8 of the Kansas Statutes Annotated shall not be accepted if
the records of the county treasurer show that the applicant is delinquent
and owes personal property taxes levied against the applicant for any
preceding year.

      (c) An application for registration or renewal of registration of a mo-
tor vehicle shall not be accepted until the applicant signs a certification,
provided by the director of motor vehicles, certifying that the applicant
has and will maintain, during the period of registration, the required
insurance, self insurance or other financial security required pursuant to
K.S.A. 40-3104 and amendments thereto.

      (d) An application for registration or renewal of registration of a ve-
hicle shall not be accepted if the applicant is unable to provide proof of
the insurance, self insurance or other financial security required by article
31 of chapter 40 of the Kansas Statutes Annotated. Proof of insurance
shall be verified by examination of the insurance card issued by an in-
surance company, a certificate of self insurance issued by the commis-
sioner, a binder of insurance, a certificate of insurance, a motor carrier
identification number issued by the state corporation commission, proof
of insurance for vehicles covered under a fleet policy, a commercial policy
covering more than one vehicle or a policy of insurance required by K.S.A.
40-3104, and amendments thereto and for vehicles used as part of a driv-
ers education program, a dealership contract and a copy of a motor ve-
hicle liability insurance policy issued to a school district or accredited
nonpublic school. Examination of a photocopy of any of these documents
shall suffice for verification of mail registration or renewals.

      Sec.  11. On and after January 1, 2000, K.S.A. 1998 Supp. 40-3104 is
hereby amended to read as follows: 40-3104. (a) Every owner shall pro-
vide motor vehicle liability insurance coverage in accordance with the
provisions of this act for every motor vehicle owned by such person, unless
such motor vehicle: (1) Is included under an approved self-insurance plan
as provided in subsection (f); (2) is used as a driver training motor vehicle,
as defined in K.S.A. 72-5015, and amendments thereto, in an approved
driver training course by a school district or an accredited nonpublic
school under an agreement with a motor vehicle dealer, and such motor
vehicle liability insurance coverage is provided by the school district or
accredited nonpublic school; (3) is included under a qualified plan of self-
insurance approved by an agency of the state in which such motor vehicle
is registered and the form prescribed in subsection (b) of K.S.A. 40-3106,
and amendments thereto, has been filed; or (4) is expressly exempted
from the provisions of this act.

      (b) An owner of an uninsured motor vehicle shall not permit the
operation thereof upon a highway or upon property open to use by the
public, unless such motor vehicle is expressly exempted from the provi-
sions of this act.

      (c) No person shall knowingly drive an uninsured motor vehicle upon
a highway or upon property open to use by the public, unless such motor
vehicle is expressly exempted from the provisions of this act.

      (d) Any person operating a motor vehicle upon a highway or upon
property open to use by the public shall display, upon demand, evidence
of financial security to a law enforcement officer. The law enforcement
officer shall issue a citation to any person who fails to display evidence of
financial security upon such demand. The law enforcement officer shall
attach a copy of the insurance verification form prescribed by the secre-
tary of revenue to the copy of the citation forwarded to the court.

      No citation shall be issued to any person for failure to provide proof of
financial security when evidence of financial security meeting the stan-
dards of subsection (e) is displayed upon demand of a law enforcement
officer. Whenever the authenticity of such evidence is questionable, the
law enforcement officer may initiate the preparation of the insurance
verification form prescribed by the secretary of revenue by recording
information from the evidence of financial security displayed. The officer
shall immediately forward the form to the department of revenue, and
the department shall proceed with verification in the manner prescribed
in the following paragraph. Upon return of a form indicating that insur-
ance was not in force on the date indicated on the form, the department
shall immediately forward a copy of the form to the law enforcement
officer initiating preparation of the form.

      (e) Unless the insurance company subsequently submits an insurance
verification form indicating that insurance was not in force, no person
charged with violating subsections (b), (c) or (d) shall be convicted if such
person produces in court, within 10 days of the date of arrest or of issu-
ance of the citation, evidence of financial security for the motor vehicle
operated, which was valid at the time of arrest or of issuance of the ci-
tation. For the purpose of this subsection, evidence of financial security
shall be provided by a policy of motor vehicle liability insurance, an iden-
tification card or certificate of insurance issued to the policyholder by the
insurer which provides the name of the insurer, the policy number and
the effective and expiration dates of the policy, or a certificate of self-
insurance signed by the commissioner of insurance. Upon the production
in court of evidence of financial security, the court shall record the in-
formation displayed thereon on the insurance verification form prescribed
by the secretary of revenue, immediately forward such form to the de-
partment of revenue, and stay any further proceedings on the matter
pending a request from the prosecuting attorney that the matter be set
for trial. Upon receipt of such form the department shall mail the form
to the named insurance company for verification that insurance was in
force on the date indicated on the form. It shall be the duty of insurance
companies to notify the department within 30 calendar days of the receipt
of such forms of any insurance that was not in force on the date specified.
Upon return of any form to the department indicating that insurance was
not in force on such date, the department shall immediately forward a
copy of such form to the office of the prosecuting attorney or the city
clerk of the municipality in which such prosecution is pending when the
prosecuting attorney is not ascertainable. Receipt of any completed form
indicating that insurance was not in effect on the date specified shall be
prima facie evidence of failure to provide proof of financial security and
violation of this section. A request that the matter be set for trial shall be
made immediately following the receipt by the prosecuting attorney of a
copy of the form from the department of revenue indicating that insur-
ance was not in force. Any charge of violating subsection (b), (c) or (d)
shall be dismissed if no request for a trial setting has been made within
60 days of the date evidence of financial security was produced in court.

      (f) Any person in whose name more than 25 motor vehicles are reg-
istered in Kansas may qualify as a self-insurer by obtaining a certificate
of self-insurance from the commissioner of insurance. The certificate of
self-insurance issued by the commissioner shall cover such owned vehi-
cles and those vehicles, registered in Kansas, leased to such person if the
lease agreement requires that motor vehicle liability insurance on the
vehicles be provided by the lessee. Upon application of any such person,
the commissioner of insurance may issue a certificate of self-insurance,
if the commissioner is satisfied that such person is possessed and will
continue to be possessed of ability to pay any liability imposed by law
against such person arising out of the ownership, operation, maintenance
or use of any motor vehicle described in this subsection. A self-insurer
shall provide liability coverage subject to the provisions of subsection (e)
of K.S.A. 40-3107, and amendments thereto, arising out of the ownership,
operation, maintenance or use of a self-insured motor vehicle in those
instances where the lessee or the rental driver, if not the lessee, does not
have a motor vehicle liability insurance policy or insurance coverage pur-
suant to a motor vehicle liability insurance policy or certificate of insur-
ance or such insurance policy for such leased or rented vehicle. Such
liability coverage shall be provided to any person operating a self-insured
motor vehicle with the expressed or implied consent of the self-insurer.

      Upon notice and a hearing in accordance with the provisions of the
Kansas administrative procedure act, the commissioner of insurance may
cancel a certificate of self-insurance upon reasonable grounds. Failure to
provide liability coverage or personal injury protection benefits required
by K.S.A. 40-3107 and 40-3109, and amendments thereto, or pay any
liability imposed by law arising out of the ownership, operation, mainte-
nance or use of a motor vehicle registered in such self-insurer's name, or
to otherwise comply with the requirements of this subsection shall con-
stitute reasonable grounds for the cancellation of a certificate of self-
insurance. Reasonable grounds shall not exist unless such objectionable
activity occurs with such frequency as to indicate a general business prac-
tice.

      Self-insureds shall investigate claims in a reasonably prompt manner,
handle such claims in a reasonable manner based on available information
and effectuate prompt, fair and equitable settlement of claims in which
liability has become reasonably clear.

      As used in this subsection, ``liability imposed by law'' means the stated
limits of liability as provided under subsection (e) of K.S.A. 40-3107, and
amendments thereto.

      Nothing in this subsection shall preclude a self-insurer from pursuing
all rights of subrogation against another person or persons.

      (g)  (1) Any person violating any provision of this section shall be
guilty of a class B misdemeanor and shall be subject to a fine of not less
than $200 $300 nor more than $1,000 or confinement in the county jail
for a term of not more than six months, or both such fine and confine-
ment.

      (2) Any person convicted of violating any provision of this section
within three years of any such prior conviction shall be guilty of a class A
misdemeanor and shall be subject to a fine of not less than $800 nor more
than $2,500.

      (h) In addition to any other penalties provided by this act for failure
to have or maintain financial security in effect, the director, upon receipt
of a report required by K.S.A. 8-1607 or 8-1611, and amendments
thereto, or a denial of such insurance by the insurance company listed on
the form prescribed by the secretary of revenue pursuant to subsection
(d) of this section, shall, upon notice and hearing as provided by K.S.A.
40-3118, and amendments thereto:

      (1) Suspend:

      (A) The license of each driver in any manner involved in the accident;

      (B) the license of the owner of each motor vehicle involved in such
accident, unless the vehicle was stolen at the time of the accident, proof
of which must be established by the owner of the motor vehicle. Theft
by a member of the vehicle owner's immediate family under the age of
18 years shall not constitute a stolen vehicle for the purposes of this
section;

      (C) if the driver is a nonresident, the privilege of operating a motor
vehicle within this state; or

      (D) if such owner is a nonresident, the privilege of such owner to
operate or permit the operation within this state of any motor vehicle
owned by such owner; and

      (2) revoke the registration of all vehicles owned by the owner of each
motor vehicle involved in such accident.

      (i) The suspension or revocation requirements in subsection (h) shall
not apply:

      (1) To the driver or owner if the owner had in effect at the time of
the accident an automobile liability policy as required by K.S.A. 40-3107,
and amendments thereto, with respect to the vehicle involved in the ac-
cident;

      (2) to the driver, if not the owner of the vehicle involved in the ac-
cident, if there was in effect at the time of the accident an automobile
liability policy with respect to such driver's driving of vehicles not owned
by such driver;

      (3) to any self-insurer as defined by subsection (u) of K.S.A. 40-3103,
and amendments thereto;

      (4) to the driver or owner of any vehicle involved in the accident
which was exempt from the provisions of this act pursuant to K.S.A. 40-
3105, and amendments thereto;

      (5) to the owner of a vehicle described in subsection (a)(2).

      (j) For the purposes of provisions (1) and (2) of subsection (i) of this
section, the director may require verification by an owner's or driver's
insurance company or agent thereof that there was in effect at the time
of the accident an automobile liability policy as required in this act.

      Any suspension or revocation effected hereunder shall remain in effect
until satisfactory proof of financial security has been filed with the director
as required by subsection (d) of K.S.A. 40-3118, and amendments thereto,
and such person has been released from liability or is a party to an action
to determine liability pursuant to which the court temporarily stays such
suspension pending final disposition of such action, has entered into an
agreement for the payment of damages, or has been finally adjudicated
not to be liable in respect to such accident and evidence of any such fact
has been filed with the director and has paid the reinstatement fee herein
prescribed. Such reinstatement fee shall be $25 $100 except that if the
registration of a motor vehicle of any owner is revoked within one year
following a prior revocation of the registration of a motor vehicle of such
owner under the provisions of this act such fee shall be $75 $300.

      (k) The provisions of this section shall not apply to motor carriers of
property or passengers regulated by the corporation commission of the
state of Kansas.

      (l) The provisions of subsection (d) shall not apply to vehicle dealers,
as defined in K.S.A. 8-2401, and amendments thereto, for vehicles being
offered for sale by such dealers.

      Sec.  12. On and after January 1, 2000, K.S.A. 1998 Supp. 40-3118 is
hereby amended to read as follows: 40-3118. (a) No motor vehicle shall
be registered or reregistered in this state unless the owner, at the time
of registration, has in effect a policy of motor vehicle liability insurance
covering such motor vehicle, as provided in this act, or is a self-insurer
thereof, or the motor vehicle is used as a driver training motor vehicle,
as defined in K.S.A. 72-5015, and amendments thereto, in an approved
driver training course by a school district or an accredited nonpublic
school under an agreement with a motor vehicle dealer, and such policy
of motor vehicle liability insurance is provided by the school district or
accredited nonpublic school. As used in this section, the term ``financial
security'' means such policy or self-insurance. The director shall require
that the owner certify and provide verification of financial security, in the
manner prescribed by K.S.A. 8-173, and amendments thereto, that the
owner has such financial security, and the owner of each motor vehicle
registered in this state shall maintain financial security continuously
throughout the period of registration. In addition, when an owner certi-
fies that such financial security is a motor vehicle liability insurance policy
meeting the requirements of this act, the director may require that the
owner or owner's insurance company produce records to prove the fact
that such insurance was in effect at the time the vehicle was registered
and has been maintained continuously from that date. Failure to produce
such records shall be prima facie evidence that no financial security exists
with regard to the vehicle concerned. It shall be the duty of insurance
companies, upon the request of the director, to notify the director within
30 calendar days of the date of the receipt of such request by the director
of any insurance that was not in effect on the date of registration and
maintained continuously from that date.

      (b) Except as otherwise provided in K.S.A. 40-276, 40-276a and 40-
277, and amendments thereto, and except for termination of insurance
resulting from nonpayment of premium or upon the request for cancel-
lation by the insured, no motor vehicle liability insurance policy, or any
renewal thereof, shall be terminated by cancellation or failure to renew
by the insurer until at least 30 days after mailing a notice of termination,
by certified or registered mail or United States post office certificate of
mailing, to the named insured at the latest address filed with the insurer
by or on behalf of the insured. Time of the effective date and hour of
termination stated in the notice shall become the end of the policy period.
Every such notice of termination sent to the insured for any cause what-
soever shall include on the face of the notice a statement that financial
security for every motor vehicle covered by the policy is required to be
maintained continuously throughout the registration period, that the op-
eration of any such motor vehicle without maintaining continuous finan-
cial security therefor is a class B misdemeanor and shall be subject to a
fine of not less than $300 and not more than $1,000 and that the regis-
tration for any such motor vehicle for which continuous financial security
is not provided is subject to suspension and the driver's license of the
owner thereof is subject to suspension.

      (c) The director of vehicles shall verify a sufficient number of insur-
ance certifications each calendar year as the director deems necessary to
insure compliance with the provisions of this act. The owner or owner's
insurance company shall verify the accuracy of any owner's certification
upon request, as provided in subsection (a).

      (d) In addition to any other requirements of this act, the director shall
require a person to acquire insurance and for such person's insurance
company to maintain on file with the division evidence of such insurance
for a period of one year when a person has been convicted in this or
another state of any of the violations enumerated in K.S.A. 8-285, and
amendments thereto.

      The director shall also require any driver whose driving privileges have
been suspended pursuant to this section to maintain such evidence of
insurance as required above.

      The company of the insured shall immediately mail notice to the di-
rector whenever any policy required by this subsection to be on file with
the division is terminated by the insured or the insurer for any reason.
The receipt by the director of such termination shall be prima facie evi-
dence that no financial security exists with regard to the person con-
cerned.

      No cancellation notice shall be sent to the director if the insured adds
or deletes a vehicle, adds or deletes a driver, renews a policy or is issued
a new policy by the same company. No cancellation notice shall be sent
to the director prior to the date the policy is terminated if the company
allows a grace period for payment until such grace period has expired and
the policy is actually terminated.

      For the purposes of this act, the term ``conviction'' includes pleading
guilty or nolo contendere, being convicted or being found guilty of any
violation enumerated in this subsection without regard to whether sen-
tence was suspended or probation granted. A forfeiture of bail, bond or
collateral deposited to secure a defendant's appearance in court, which
forfeiture has not been vacated, shall be equivalent to a conviction.

      The requirements of this subsection shall apply whether or not such
person owns a motor vehicle.

      (e) Whenever the director shall receive prima facie evidence, as pre-
scribed by this section, that continuous financial security covering any
motor vehicle registered in this state is not in effect, the director shall
notify the owner by registered or certified mail or United States post
office certificate of mailing that, at the end of 30 days after the notice is
mailed, the registration for such motor vehicle and the driving privileges
of the owner of the vehicle shall be suspended or revoked, pursuant to
such rules and regulations as the secretary of revenue shall adopt, unless
within 10 days after the notice is mailed: (1) Such owner shall demonstrate
proof of continuous financial security covering such vehicle to the satis-
faction of the director; or (2) such owner shall mail a written request
which is postmarked within 10 days after the notice is mailed requesting
a hearing with the director. Upon receipt of a timely request for a hearing,
the director shall afford such person an opportunity for hearing within
the time and in the manner provided in K.S.A. 8-255 and amendments
thereto. If, within the ten-day period or at the hearing, such owner is
unable to demonstrate proof of continuous financial security covering the
motor vehicle in question, the director shall revoke the registration of
such motor vehicle and suspend the driving privileges of the owner of
the vehicle.

      (f) Whenever the registration of a motor vehicle or the driving priv-
ileges of the owner of the vehicle are suspended or revoked for failure of
the owner to maintain continuous financial security, such suspension or
revocation shall remain in effect until satisfactory proof of insurance has
been filed with the director as required by subsection (d) and a reinstate-
ment fee in the amount herein prescribed is paid to the division of ve-
hicles. Such reinstatement fee shall be in the amount of $25 $100 except
that if the registration of a motor vehicle of any owner is revoked within
one year following a prior revocation of the registration of a motor vehicle
of such owner under the provisions of this act such fee shall be in the
amount of $75 $300. The division of vehicles shall, at least monthly, de-
posit such fees with the state treasurer, who shall credit such moneys to
the state highway fund.

      (g) In no case shall any motor vehicle, the registration of which has
been revoked for failure to have continuous financial security, be rere-
gistered in the name of the owner thereof, the owner's spouse, parent or
child or any member of the same household, until the owner complies
with subsection (f). In the event the registration plate has expired, no new
plate shall be issued until the motor vehicle owner complies with the
reinstatement requirements as required by this act.

      (h) Evidence that an owner of a motor vehicle, registered or required
to be registered in this state, has operated or permitted such motor ve-
hicle to be operated in this state without having in force and effect the
financial security required by this act for such vehicle, together with proof
of records of the division of vehicles indicating that the owner did not
have such financial security, shall be prima facie evidence that the owner
did at the time and place alleged, operate or permit such motor vehicle
to be operated without having in full force and effect financial security
required by the provisions of this act.

      (i) Any owner of a motor vehicle registered or required to be regis-
tered in this state who shall make a false certification concerning financial
security for the operation of such motor vehicle as required by this act,
shall be guilty of a class A misdemeanor. Any person, firm or corporation
giving false information to the director concerning another's financial se-
curity for the operation of a motor vehicle registered or required to be
registered in this state, knowing or having reason to believe that such
information is false, shall be guilty of a class A misdemeanor.

      (j) The director shall administer and enforce the provisions of this act
relating to the registration of motor vehicles, and the secretary of revenue
shall adopt such rules and regulations as may be necessary for its admin-
istration.

      (k) Whenever any person has made application for insurance cover-
age and such applicant has submitted payment or partial payment with
such application, the insurance company, if payment accompanied the
application and if insurance coverage is denied, shall refund the unearned
portion of the payment to the applicant or agent with the notice of denial
of coverage. If payment did not accompany the application to the insur-
ance company but was made to the agent, the agent shall refund the
unearned portion of the payment to the applicant upon receipt of the
company's notice of denial.

      (l) For the purpose of this act, ``declination of insurance coverage''
means a final denial, in whole or in part, by an insurance company or
agent of requested insurance coverage.

 Sec.  13. K.S.A. 1998 Supp. 40-2,103, as amended by section 5 of
1999 Senate Bill 108, 40-1909 and 40-19c09, as amended by section 6 of
1999 Senate Bill 108, are hereby repealed.

      Sec.  14. On and after January 1, 2000, K.S.A. 8-173 and K.S.A. 1998
Supp. 40-3104 and 40-3118 are hereby repealed.

 Sec.  15. This act shall take effect and be in force from and after its
publication in the statute book.

Approved May 13, 1999.
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