R 299.9711 Financial capability requirements for transporters operating a transfer facility or group of transfer facilities.

Rule 711. (1) A transporter that operates a transfer facility or group of transfer facilities shall demonstrate financial responsibility for bodily injury and property damage to third parties caused by sudden and accidental occurrences arising from the operations of the facility or group of facilities. The transporter shall have and maintain liability coverage for sudden and accidental occurrences in an amount not less than $500,000.00 per occurrence, exclusive of legal defense costs. The requirement for liability coverage is in addition to other insurance requirements of act 218. The transporter shall comply with the liability coverage requirements of this subrule by obtaining an insurance policy in accordance with the provisions of subrule (2) of this rule or by passing the financial test specified in the provisions of subrule (3) of this rule. (2) Each insurance policy that is obtained by a transporter to fulfill the requirements of this rule must comply with all the following provisions: (a) The policy must include a provision that the insurer notify the director 30 days before either of the following: (i) Cancellation or termination of the insurance by either party for any reason. (ii) A material change to the policy for any reason. (b) The policy must be issued by an insurer that, at a minimum, is licensed to transact the business of insurance, or eligible to provide insurance as an excess or surplus line insurer, in th state. (c) The deductible written into the policy must not be more than 5% of the per occurrence limit of liability of the policy. If more than one policy is used to provide the coverage required by this rule, the total of all deductibles must not be more than 5% of the total of the per occurrence limits of the policies used. (d) The policy must be amended by attaching an endorsement on a form provided by the director. (3) A transporter may satisfy the liability coverage requirements of this rule by demonstrating that the transporter passes a financial test as specified in this rule. To pass the test, the transporter shall meet 1 of the following criteria: (a) A transporter shall comply with all the following provisions: (i) Have a net working capital and a tangible net worth that, for each, is not less than 6 times the amount of liability coverage to be demonstrated by the test. (ii) Have a tangible net worth of not less than $10,000,000.00. (iii) Have assets in the United States that amount to not less than 90% of the transporter's total assets or not less than 6 times the amount of liability coverage to be demonstrated by the test. (b) A transporter shall comply with all the following provisions: (i) Have a current rating for its senior unsecured debt of AAA, AA, A, or BBB as issued by standard and poor's or Aaa, Aa, A, or Baa as issued by Moody's. (ii) Have tangible net worth of not less than $10,000,000.00. (iii) Have a tangible net worth that is not less than 6 times the amount of liability coverage to be demonstrated by the test. (iv) Have assets in the United States that amount to not less than 90% of the transporter's total assets or not less than 6 times the amount of liability coverage to be demonstrated by the test. (4) As used in this rule, "amount of liability coverage" refers to the annual aggregate amounts for which coverage is required pursuant to the provisions of subrule (1) of this rule. (5) A transporter shall demonstrate the existence of the liability coverage required pursuant to this rule by submitting either of the following to the director: (a) All information that is necessary to meet the financial test requirements of subrule (3) of this rule, as follows: (i) A letter that is signed by the transporter's chief financial officer and is worded as specified by the director. (ii) A copy of the independent certified public accountant's report on examining the transporter's financial statements for the latest completed fiscal year. (iii) A special report from the transporter's independent certified public accountant to the transporter on comparison of the data presented in the chief financial officer's letter to the independently audited, year-end financial statements. The special report must describe the agreed-upon procedures performed and related findings, including whether or not there were any discrepancies found. (b) An endorsement provided by the director that shows that the coverage required in this rule has been obtained by the transporter. The transporter shall submit a signed duplicate original of each insurance endorsement. If requested by the director, the transporter shall provide signed duplicate originals of all insurance policies that are needed to fulfill the requirements of this rule. (6) After the initial submission of the items specified in subrule (5)(a) of this rule, the transporter shall send updated information to the director within 90 days after the close of each succeeding fiscal year. The information must consist of all the items specified in subrule (5)(a) of this rule. (7) A transporter using insurance to satisfy the liability coverage requirements of this rule shall submit to the director the endorsement required under subrule (5)(b) of this rule for the renewal or replacement policy on issuance of the renewal or replacement policy. (8) If underlying policies that are required pursuant to the provisions of subrule (2) of this rule do not provide sufficient limits of liability, then the transporter shall amend the policy by attaching an excess liability insurance endorsement on a form provided by the director. (9) If a transporter is using the financial test to demonstrate financial responsibility for liability coverage required pursuant to the provisions of this rule and no longer meets the requirements of subrule (3) of this rule, then the transporter shall send notice to the director of the intent to obtain an insurance policy as specified in this rule. The transporter shall send the notice by certified mail within 90 days after the end of the fiscal year for which yearend financial data show that the transporter no longer meets the requirements of subrule (3) of this rule. The transporter shall obtain liability insurance within 120 days after the end of the fiscal year. (10) The director may disallow the use of a financial test to meet the requirements of this rule on the basis of qualifications in the opinion expressed by the independent certified public accountant in the report upon examining the transporter's financial statements. An adverse opinion or disclaimer of opinion is cause for the disallowance of the use of a financial test to meet the requirements of subrule (1) of this rule. The director shall evaluate other qualifications on an individual basis. The transporter shall obtain an insurance policy as specified in this rule within 30 days after notification of the disallowance.