# Title 26.1 — Insurance

## Chapter 26.1-14 — Medical Malpractice Insurance

### § 26.1-14-01. Purpose.

There is a nationwide crisis in the field of medical malpractice insurance and physicians
practicing medicine within the state of North Dakota are finding, or will find, it increasingly
difficult, if not impossible, to obtain medical malpractice insurance. The purpose of this chapter
is to provide for the payment of indemnities to persons suffering injury arising out of the
rendering of or the failure to render professional services by physicians and to provide means
whereby physicians may obtain insurance against liability therefor, subject to the limitations and
immunities provided in this chapter.
### § 26.1-14-02. Definitions.

As used in this chapter, unless the context or subject matter otherwise requires:
1. "Company" means the North Dakota medical malpractice mutual insurance company.
2. "Physician" means physician and surgeon (M.D.) and osteopathic physician and
surgeon (D.O.).
3. "Practice of medicine" means the practice of medicine, surgery, and obstetrics and has
the same meaning specified in section 43-17-01.
### § 26.1-14-03. Authority.

An incorporated mutual insurance company is authorized to be known as the North Dakota
medical malpractice mutual insurance company. The company is subject to and governed by
this chapter and is not subject to the laws of this state relating to insurance and insurance
companies except as specifically provided in this chapter. The company has all the powers,
privileges, and immunities granted by and is subject to all the obligations imposed upon a
mutual insurance company under chapters 26.1-12 and 10-33. If a provision of chapter 26.1-12
or 10-33 and a provision of this chapter are both by their terms applicable, the provision of this
chapter controls.
### § 26.1-14-04. Board of directors - Articles of incorporation - Bylaws - Insuring powers.

1. The company will be governed by a board of directors consisting of eleven members.
The commissioner shall appoint the initial board within thirty days of notification by the
North Dakota board of medicine of its decision for implementation of this chapter from
fifteen nominees proposed by that board. The initial board shall serve for an initial term
of seven months. Thereafter, the directors must be elected by the members of the
company in accordance with the articles of incorporation and bylaws.
2. At least seven members of the board of directors must be licensed physicians and at
least two members of the board must have had insurance underwriting or claims
handling experience.
3. Within thirty days after appointment by the commissioner, the initial board of directors
shall prepare and file articles of incorporation and bylaws in accordance with this
chapter and chapter 26.1-12.
4. Upon filing the articles of incorporation and bylaws with the commissioner, the articles
and bylaws are operative and the commissioner shall issue a certificate of authority
subject only to verification by the commissioner that the required initial surplus of the
company has been paid and all deposits have been completed.
5. The certificate of authority authorizes the company to issue policies of casualty
insurance as follows:
a. Insurance against liability of physicians for injury arising out of the rendering of or
failure to render professional services by the insured.
b. Insurance against the liability of any person for whose act or omissions a
physician is responsible under subdivision a, or with whom the physician is
associated, including partners, employees, employers, associates, consultants, a
professional service corporation whose stock is owned by an insured, or a

professional service limited liability company whose membership interests are
owned by the insured.
c. Insurance against other liabilities for injury by persons employed in, by property
used in, or by activities incidental to, the practice of medicine by the named
insured, when issued as incidental coverage with or supplemental to insurance
specified in subdivision a.
### § 26.1-14-05. Initial policyholders surplus - Tax - Membership fee.

1. If physicians practicing medicine within North Dakota find it difficult to obtain medical
malpractice insurance, the North Dakota board of medicine, by a majority vote of its
membership, may elect to initiate and implement this chapter. Before fifteen days from
the date the election to implement this chapter is made, the board shall certify to the
state treasurer a list of all licensed physicians as shown in the latest record of the
board.
2. A special one-time tax for the privilege of practicing medicine in North Dakota will be
levied on licensed physicians listed by the state treasurer in accordance with
subsection 1 in the amount of five hundred dollars per licensed physician, to be levied,
assessed, and collected by the state treasurer. The tax does not apply to any
physician who submits a statement, sworn to under penalties of perjury, stating that
the physician has permanently terminated the practice of medicine in the state of North
Dakota. The state treasurer shall prescribe the form of the statement.
3. The legislative assembly appropriates and dedicates the entire proceeds of the tax
provided by this chapter as the initial policyholders surplus of the company, and the
treasurer and director of the office of management and budget shall promptly pay over
the proceeds of the tax to the company.
4. The board of directors of the company may establish membership fees in amounts as
it deems reasonable to be paid by members of the company. Any physician who has
paid the tax specified in subsection 2 must be credited the amount of the tax paid
against the liability for any membership fee.
5. Upon payment of the specified membership fee, a physician may be insured by the
company for any and all hazards customarily insured by the company, subject to any
limitation of coverage specified by the company in accordance with policy limitations,
exclusions, conditions, deductibles, and loss-sharing requirements.
### § 26.1-14-06. Minimum surplus.

The minimum surplus to be maintained by the company must be three hundred thousand
dollars.
### § 26.1-14-07. Management and administration of the company.

1. If, in the judgment of the board of directors, the affairs of the company thereby may be
administered suitably and efficiently, the company may enter into a contract, not to
exceed five years in duration, whereby the affairs of the company may be administered
by a licensed insurer or a licensed nonprofit health service plan, subject to any
continuing direction by the board of directors as specified in the articles of
incorporation, the bylaws, and the contract.
2. The basis of compensation to the administering licensed insurer or plan in any contract
described in this section must be reimbursement of expenses reasonably allocable to
the business of the company plus an appropriate and reasonable additional allowance
as specified in the contract. Any additional allowance, if based upon premium volume
or size of membership, must contain a reasonable aggregate dollar maximum. The
amount of the fee may not be made dependent on the underwriting or investment
profits of the company.
3. Upon the execution of any contract, the company shall promptly file a copy with the
commissioner. The contract becomes effective thirty days from the date of the filing
unless the commissioner, prior to the effective date, disapproves the contract as illegal,

unduly onerous, or not in the best interest of the company and states the reasons for
the findings.
### § 26.1-14-08. Rates and rate filing.

The rates and premiums to be charged for insurance by the company are subject to chapter
26.1-25 except that the commissioner may not disapprove or terminate the effectiveness of any
rate filing made by or on behalf of the company on the grounds that the rates or premiums are
excessive.
### § 26.1-14-09. Reserves for malpractice claims.

1. The reserve maintained by the company for outstanding losses under insurance
against injury arising out of the rendering of or the failure to render professional
services by an insured for all policies written during the eight years immediately
preceding the date of the reserve determination must be seventy percent of the earned
premiums of each of the eight years less all losses and loss expense payments made
under policies written in the corresponding years.
2. In any event, the reserves for each of the eight years may not be less than the
aggregate of estimated unpaid losses and loss expenses for claims incurred under
liability policies written in the corresponding year computed on an individual case basis
as to cases known and reported, plus reserves in an amount estimated in the
aggregate to provide for the payment of all losses or claims incurred on or prior to the
date of valuation but not previously reported, including an amount estimated to provide
for the expenses of adjustment, settlement, or litigation of the losses or claims.
### § 26.1-14-10. Dividends to policyholders.

Every policy issued by the company must include a provision that the company periodically
will ascertain and apportion any divisible surplus under the policy which may accrue on policy
anniversaries or other dividend dates specified in the contract. This provision must provide that
no apportionment or payment of any divisible surplus may take place until the expiration of at
least eight years from the termination of the policy period for which the dividend applies. This
provision also must provide that the dividends may be paid only as directed by the board of
directors from divisible surplus after due consideration of the financial condition and operating
needs of the company.
### § 26.1-14-11. Limited liability of insureds.

1. Any person insured by the company for liability because of injury arising out of the
rendering of or the failure to render professional services in limits equal to or greater
than five hundred thousand dollars for each claim or suit covered, subject to an
aggregate limit of liability for all claims insured in a single policy period equal to or in
excess of one million dollars, is immune from all liability in excess of these limits, and
further is immune from any liability for sums owing by the company under the terms of
the policy regardless of whether or not the company has paid the sums. The immunity
established by this section applies to an insured individual, professional service
corporations, or professional service limited liability companies notwithstanding any
other provision of the law.
2. This section does not relieve an insured from the insured's personal share of liability
not in excess of the five hundred thousand dollar and one million dollar limitations
specified in subsection 1 for a loss, expense, or damage not insured by the company
by reason of noncoverage, exclusions, deductibles, loss-sharing provisions, or
conditions in the applicable policy of the company.
### § 26.1-14-12. Terms of coverage - Classifications.

1. The terms and conditions of all policies issued by the company to physicians must be
essentially uniform in terms and coverage.

2. Notwithstanding subsection 1, the company may prescribe reasonable classifications
of physicians' and insureds' activities and exposures based on good-faith
determination of relative exposures and hazards among classifications and may vary
the limits, coverages, exclusions, conditions, and loss-sharing provisions among
classifications. Additionally, the company may describe, in the case of an individual
physician within a class, reasonable variations in the terms of coverage including
deductibles in loss-sharing provisions, based upon the insured's prior loss experience
and current professional training and capability.
### § 26.1-14-13. Exemption from taxation.

The property, income, premiums, and activities of the company are exempt from all taxes
and assessments and from any fees specified for licenses and certifications of the insurance
laws except for the tax imposed by section 26.1-03-17 and any assessment made by the
insurance guaranty association in the event that an affirmative election is held in accordance
with section 26.1-14-15.
### § 26.1-14-14. Services to the company.

Any licensed nonprofit health service plan by appropriate action of the board of directors or
board of trustees may enter into a contract with the company in accordance with section
under any contract, the contracting health service plan is subject to the provisions of this
chapter applying to the company.
### § 26.1-14-15. Optional membership in insurance guaranty association.

The company may not be a member insurer under chapter 26.1-42.1 unless the board of
directors by appropriate resolution, certified to and filed with the commissioner on or before
December thirty-first following the issuance of its certificate of authority, elects to become a
member. If there is an affirmative election, the company becomes a member of the insurance
guaranty association effective July first of the following year. The election is irrevocable. In
absence of a timely election, no policyholder, claimant, or creditor of the company may receive
any payment by the insurance guaranty association.
