In this subtitle the following words have the meanings indicated. “Health care facility” has the meaning stated in § 19–114 of the Health – General Article. “Health care provider” means a person licensed or authorized to practice a health occupation. “Physician” means an individual who: is licensed to practice medicine in the State; or lawfully practices medicine without a license under § 14–302 (a)(1) through (4) of the Health Occupations Article. “Practice medicine” has the meaning stated in § 14–101 of the Health Occupations Article. “Society” means the Medical Mutual Liability Insurance Society of Maryland. “Surplus” does not include debt of the Society incurred in accordance with § 3–116(a)(1) of this article to enable it to comply with a surplus requirement.

Subject to the limitations and immunities of this subtitle, the purpose of this subtitle is to provide: for the payment of indemnities to persons that suffer injuries arising out of the rendering of or failure to render professional services by physicians or other health care providers; a means for physicians or other health care providers to obtain insurance against liability for injuries arising out of the rendering of or failure to render professional services; and property insurance and casualty insurance related to the provision of health care or to health care facilities used by physicians or other health care providers.

There is a Medical Mutual Liability Insurance Society of Maryland. The Society is a nonstock corporation. Except as otherwise provided in this subtitle, the Society has the powers, privileges, and immunities granted by and is subject to the provisions imposed on mutual insurers by this article and by the applicable provisions of the Corporations and Associations Article. The Society is a member of the Joint Insurance Association and the Property and Casualty Insurance Guaranty Corporation. The Society is not and may not be deemed a department, unit, agency, or instrumentality of the State for any purpose. All debts, claims, obligations, and liabilities of the Society, whenever incurred, shall be the debts, claims, obligations, and liabilities of the Society only and not of the State or the State’s agencies, instrumentalities, officers, or employees. The money of the Society is not part of the General Fund of the State. The State may not budget for or provide General Fund appropriations to the Society. The debts, claims, obligations, and liabilities of the Society are not a debt of the State or a pledge of the credit of the State.

There is a Board of Directors of the Society. There shall be at least 11 directors on the Board. The directors shall be elected by the members of the Society in accordance with the articles of incorporation and bylaws of the Society. The bylaws of the Society shall provide that: not more than five directors may be licensed physicians; at least two directors must have had substantial experience as an officer or employee of an insurer; at least two directors must be officers and employees of the Society who are responsible for the daily management of the Society; and the Board of Directors must consist of individuals who live in different geographical areas of the State. The Board of Directors governs the Society and exercises the corporate powers of the Society.

If the Board of Directors determines that the affairs of the Society may be administered suitably and efficiently, the Society may enter into a contract with a licensed insurer or licensed nonprofit health service plan to administer the affairs of the Society, subject to the continuing direction of the Board of Directors specified in the articles of incorporation and bylaws of the Society and the contract. A contract may not exceed 5 years. On execution of the contract, the Society promptly shall file a true copy of the contract with the Commissioner. The contract is effective 30 days after the date of filing unless, before the effective date, the Commissioner disapproves the contract as contrary to law or public policy or as unduly onerous and states the reasons for the disapproval.

On approval of the application for a certificate of authority, the Commissioner shall issue to the Society a certificate of authority that authorizes the Society to issue: the following policies of casualty insurance: insurance against the liability of physicians or other health care providers for injury arising out of the rendering of or failure to render professional services by the insured; insurance against the liability of a person for whose acts or omissions a physician or other health care provider is responsible under item (i) of this item or with whom the physician or other health care provider is associated, including partners, employees, employers, associates, consultants, or a professional service corporation whose stock the insured owns; and insurance against other liability for injury by persons employed in, by property used in, or by activities incidental to, practicing medicine or practicing another health occupation by the named insured, when issued as incidental coverage with or supplemental to insurance specified in item (i) of this item; and policies of property insurance and casualty insurance that are related to the provision of health care or to health care facilities that physicians or other health care providers use where health care is practiced on a regular basis.

Each policyholder is subject to assessment as provided in §§ 3-110, 3-111, and 3-112 of this article. Notwithstanding subsection (a) of this section, if the Society meets all applicable requirements of this article about the sale of nonassessable policies, including the requirements of §§ 4-104, 4-105, and 4-106 of this article, the Society may issue nonassessable policies subject to: § 3-113 of this article; all other applicable provisions of this article; and the Corporations and Associations Article.

The directors of the Society may establish membership fees in amounts they consider reasonable, to be paid by the members of the Society. Each physician who paid the special one-time tax imposed by former Article 48A, § 552(b) of the Code shall be credited with the amount of the tax paid against the liability of the physician for the membership fee. On payment of the membership fee, a physician or other health care provider may be insured by the Society for any and all hazards customarily insured by the Society, subject to any coverage limitations specified by the Society in accordance with policy limitations, exclusions, conditions, deductibles, and loss-sharing requirements.

Policies that the Society issues to each class of physicians and other health care providers shall be essentially uniform in terms and conditions of coverage. Notwithstanding subsection (a) of this section, the Society may: establish reasonable classifications of physicians and other health care providers, insured activities, and exposures based on a good faith determination of relative exposures and hazards among classifications; vary the limits, coverages, exclusions, conditions, and loss-sharing provisions among classifications; and establish, for an individual physician or other health care provider within a classification, reasonable variations in the terms of coverage, including deductibles and loss-sharing provisions, based on the insured’s prior loss experience and current professional training and capability. In this subsection, “nursing facility” has the meaning stated in § 19-301 of the Health - General Article. The Society may not deny, cancel, or refuse to renew medical professional liability insurance coverage for a physician, based solely on the physician’s: employment by, or provision of health care services at, an assisted living or nursing facility; provision of mammography services; or provision of services in an emergency room.

Notwithstanding any other provision of this subtitle, the Society may establish, own, or control a subsidiary for any business purpose. A subsidiary that is established, owned, or controlled by the Society is not subject to this subtitle. A subsidiary of the Society is not and may not be deemed a department, unit, agency, or instrumentality of the State for any purpose. The State may not be held in any way liable or responsible for any of the debts, claims, obligations, or liabilities of a subsidiary of the Society or the Society. Without the prior approval of the Board of Directors, including at least 80% of the physician members of the Board of Directors, the Society may not directly or indirectly capitalize, transfer moneys to, or purchase stock in an insurance subsidiary beyond the $3,250,000 used by the Society before December 31, 1989, to capitalize the insurance subsidiaries.

Not later than June 30 of each year, the Society shall report to the Commissioner and to the General Assembly: salaries and other compensation paid to officers, executives, and directors for the preceding calendar year; a summary and detailed financial statement for the four preceding calendar years indicating amounts for and changes in: insurance reserves and losses; assets and liabilities; income and expenses; and return on invested surplus; and management’s evaluation of the financial position of the Society. The evaluation under paragraph (1)(iii) of this subsection shall include an analysis indicating whether sufficient resources exist to justify providing a dividend or similar distribution to members in the current year and, if not, how the current circumstances vary from prior years in which such distributions have been made. Any rate filing by the Society shall include the information required under subsection (a) of this section. Before the Society may pay to its members a dividend or similar distribution, the Society shall provide to the Commissioner, using a methodology prescribed by the Commissioner, an analysis indicating the extent to which the distribution results from any excess of premiums collected over accumulated losses for incidents arising in any premium year during which the State provided financial assistance. To the extent the analysis required under paragraph (1) of this subsection determines that funds available for distribution are attributed to a year in which financial assistance is provided, the Commissioner shall order the Society to pay a portion of the distribution to the State. The amount paid to the State shall be determined based on the ratio of State expenditures for financial assistance to total premiums earned for each premium year for which State financial assistance was made.

If the Society requests a rate increase of more than 7.5% and, at the time of the rate filing, the Society’s surplus is more than 500% of its authorized control level risk-based capital, the Commissioner may determine whether the Society’s surplus is excessive. If, after a hearing, the Commissioner determines that the surplus is excessive, the Commissioner may order the rates filed to be reduced.

The Legislative Auditor shall conduct a fiscal and compliance audit of the accounts and transactions of the Society for each year in which the Society receives a disbursement from the Rate Stabilization Account under § 19–805 of this article. Within one year of the date of an audit report required under subsection (a) of this section, the Legislative Auditor shall conduct a follow–up audit to determine the status of any audit recommendations. The Society shall pay the cost of each audit.

For policies that take effect on or after January 11, 2005 and through December 31, 2009, the Society may not pay a commission at a rate that exceeds 5% of the premium.