CHAPTER 58 HOUSE BILL No. 2879 An  Act concerning insurance; relating to cancellation of automobile insurance policies; amending K.S.A. 40-276a and repealing the existing section. Be it enacted by the Legislature of the State of Kansas:

      Section  1. K.S.A. 40-276a is hereby amended to read as follows: 40-
276a. (a) Any insurance company that denies renewal of an automobile
liability insurance policy in this state shall give at least thirty (30) 30 days
written notice to the named insured, at his last known address, or cause
such notice to be given by a licensed agent of its intention not to renew
such policy: Provided, however, That. No insurance company shall deny
the renewal of an automobile liability insurance policy except in one or
more of the following circumstances or as permitted in subsection (b):

      (a) (1) When such insurance company is required or has been per-
mitted by the commissioner of insurance, in writing, to reduce its pre-
mium volume in order to preserve the financial integrity of such insurer;

      (b) (2) when such insurance company ceases to transact such business
in this state;

      (c) (3) when such insurance company is able to show competent med-
ical evidence that the insured has a physical or mental disablement that
impairs his ability to drive in a safe and reasonable manner;

      (d) (4) when unfavorable underwriting factors, pertinent to the risk,
are existent, and of a substantial nature, which could not have reasonably
been ascertained by the company at the initial issuance of the policy or
the last renewal thereof;

      (e) (5) when the policy has been continuously in effect for a period
of five (5) years: Provided, That such five-year period shall begin at the
first policy anniversary date following the effective date of this act: Pro-
vided further, That. Such five-year period shall begin at the first policy
anniversary date following the effective date of the policy, except that if
such policy is renewed or continued in force after the expiration of such
period or any subsequent five-year period, the provisions of this subsec-
tion shall apply in any such subsequent period; or

      (f) (6) when any of the reasons specified as reasons for cancellation
in K.S.A. 40-277 are existent: Provided, That (1), except that (A) when
failure to renew is based upon termination of agency contract, obligation
to renew will be satisfied if the insurer has manifested its willingness to
renew, and (2) (B) obligation to renew is terminated on the effective date
of any other automobile liability insurance procured by the named insured
with respect to any automobile designated in both policies: Provided fur-
ther, That.

      Renewal of a policy shall not constitute a waiver or estoppel with re-
spect to grounds for cancellation which existed before the effective date
of such renewal: Provided further, That. Nothing in this section shall
require an insurance company to renew an automobile liability insurance
policy if such renewal would be contrary to restrictions of membership
in the company which are contained in the articles of incorporation or
the bylaws of such company.

      (b)  (1) No insurance company shall refuse to renew a policy until
after June 30, 2002, based on an insured's failure to maintain membership
in a bona fide association, until both the insurance company and bona
fide association have complied with the requirements of this subsection.
No insurance company shall refuse to renew any coverage continuously
in effect before July 1, 2002, unless:

      (A) The application for insurance and the insurance policy shall
clearly disclose that both the payment of dues and current membership
in the bona fide association are prerequisites to obtaining or renewing the
insurance;

      (B) the bona fide association has filed a certification with the com-
missioner of insurance verifying the eligibility of the insurance company
to refuse to renew an insurance policy based on the membership in the
bona fide association; and

      (C) any money paid to the bona fide association as a membership fee:

      (i) Shall not be used by the insurance company directly or indirectly
to defray any costs or expenses in connection with the sale or purchase of
the insurance; and

      (ii) shall be set independently of any factor used by the insurance
company to make any judgment or determination about the eligibility of
any individual to purchase or renew such insurance. For the purposes of
this provision, the individual may be a member of the bona fide organi-
zation or an employee or dependent of such a member.

      (2)  (A) Upon request the bona fide association shall file a statement
with the commissioner of insurance verifying that the bona fide associa-
tion meets the requirements of this paragraph.

      (B) For the purposes of this subsection, ``bona fide association'' means
an association which:

      (i) Has been in active existence for at least five consecutive years im-
mediately preceding the date the statement is filed;

      (ii) has been formed and maintained in good faith for purposes other
than obtaining or providing insurance and does not condition member-
ship in the association on the purchase of insurance;

      (iii) has articles of incorporation and bylaws or other similar govern-
ing documents;

      (iv) has a relationship with one or more specific insurance companies
and identifies each such insurance company; and

      (v) and does not condition membership in the association or set mem-
bership fees on the eligibility of any individual to purchase or renew the
insurance or on any factor that the insurance company could not lawfully
consider when setting rates. For the purposes of this provision, the indi-
vidual may be a member of the bona fide organization or an employee or
dependent of such a member.

      (3) Membership fees collected by the bona fide association shall not
be deemed to be premiums of the insurance company that issued the
coverage unless the bona fide association:

      (A) Uses any portion of such membership fees directly or indirectly
to defray any costs or expenses in connection with the sale or purchase of
the insurance; or

      (B) sets or adjusts membership fees for any member of the bona fide
association based on any factor used by the insurance company that issues
the insurance to make any judgment or determination about the eligibility
of any individual to purchase or renew the insurance. For the purposes
of this provision, the individual may be a member of the bona fide organ-
ization or an employee or dependent of such a member.

      (4) If the membership fees are determined to constitute premiums
pursuant to paragraph (3) of this subsection, the insurance company shall
not refuse to renew a policy as otherwise permitted by this subsection.

      Sec.  2. K.S.A. 40-276a is hereby repealed.

      Sec.  3. This act shall take effect and be in force from and after its
publication in the statute book.

Approved April 9, 2002.
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