Committee Meeting Information

April 17 & 18, 2008

Converse County Cooperative Extension Office

Douglas, Wyoming

 

Committee Members Present

Senator Cale Case, Co-Chairman

Representative Pete Illoway, Co-Chairman

Senator Ken Decaria

Senator Stan Cooper

Senator Charlie Scott

Representative Kermit Brown

Representative Mary Gilmore

Representative Marty Martin

Representative Saundra Meyer

Representative David Miller

Representative Lorraine Quarberg

Representative Tim Stubson

Representative Dan Zwonitzer

 

committee Members Absent

Senator Grant Larson

 

Legislative Service Office Staff

Lynda Cook, Staff Attorney

Alex Kean, Research Associate

 

Others Present at Meeting

Representative Dave Edwards

Please refer to Appendix 1 to review the Committee Sign-in Sheet
for a list of other individuals who attended the meeting.

 

Joint Corporations Interim Committee Meeting Summary (April 17 & 18, 2008)

 

The Joint Corporations, Elections and Political Subdivisions Interim Committee met in Douglas to consider legislation revising the state corporations statutes, legislation providing for cluster developments in place of subdivisions, legislation to ensure accreditation of the insurance department and regulation of viatical settlements and legislation amending the coroner's statutes. 

 

Call To Order

Co-Chairman Cale Case called the meeting to order at 8:20 am.  The following sections summarize the Committee proceedings by topic.   Please see the Agenda for details. (Appendix 2).

 

approval of minutes

The committee approved the minutes of the November, 2007 meeting. 

 

Model Corporations Act

 

Chairman Case explained that the committee’s review of this act was a two year project.  The corporations statute is the background on which the other business entities statutes are superimposed.

 

Dr. Pat Arp, Deputy Secretary of State, Jeannie Sawyer, Director of the Corporations division and Karen Wheeler, legislative liaison, testified.  Dr. Arp provided a brief overview of how the corporations and other business entities statutes fit together.   (Appendix 3)   The other business entity statutes are bootstrapped to the general corporations act.  The secretary of state’s office expressed that it is ready willing and able to come to the table with discussions about the administrative aspects of the statutes but can offer little advice about the legal considerations dealing with tax issues, liability, etc. 

 

Representative Brown explained how the model act has changed over time and the committee needs to look at Wyoming’s act and see how advancements in the model act should be built into the state’s statutes in order to provide uniformity and consistency of case law.

 

Walter Eggers, Holland and Hart, and Dale Cottam, Hirst & Applegate, volunteered their time to help the committee and provide input about what the corporate bar would like to see changed in the statutes.  They have reviewed the current Model Act, spoken with other attorneys who practice with the statutes and have general areas which they would suggest amending.  He stated that the state adopted the model act many years ago but has not kept up with all the changes.  The model act was most recently amended in December 2007.  The advantage of keeping up with the changes is the ability to rely on judicial decisions in other states.  The other advantage is that the committee that makes the changes to the model act is made up of persons who are well versed in the needs of the bar.  Finally using the model act provides consistency and clarity for those practicing in Wyoming.  He advised against just scrapping the state’s statutes and adopting the model act in total because there are provisions that are not necessarily right for Wyoming.  He advised the committee should go through the current statutes line by line and determine if the model act would be better phrased.

 

Dale Cottam noted that there are certain differences in Wyoming’s statutes that are designed to solve specific problems in Wyoming.  Mr. Cottam described particular instances where an update of the statutes would help in actual practice. 

 

The attorneys suggested that one change that would be good would be to lay the groundwork for paperless filing.  Another would be to review the filing fees that are charged.  (See Appendix 4).

 

Dr. Arp testified that the secretary of state’s office would absolutely support an effort to provide for paperless filing.  She also noted that they have no opinion about fees because the office operates off general fund appropriations.  There was discussion about the cost in dollars and personnel in implementing a paperless system.

 

Mr. Cottam discussed the history of IRS rulings involving LLCs. 

 

The attorneys handed out a copy of the state’s current statutes.  (Appendix 5).   The attorneys’ suggested changes, in concept, are noted on the document.  The proposed changes will be built into a bill for the committee to review at the June meeting.

 

There was discussion about shareholder meetings and how they can be held.  The attorneys suggested a change to reflect Delaware's laws.  There was also discussion about standards of liability for directors.  There was discussion about chapter 12 and 13 and the committee’s need to be careful not to affect shareholders substantive rights.

 

Brown v. Arp & Hammond, 141 P. 3d 673 (Wyo. 2006) was discussed.  The case dealt with reduction of shares through a reverse stock split and forcing discounted sale of resulting fractional shares.  The attorneys suggested that the court looked to the model act language and that changed the outcome of the case.  They suggested that the revision of the statute to reflect the model act is a desirable change because it would provide more clarity.

 

It was noted that administrative dissolution provisions were changed in 2008 Senate File 18 and 26 and would need close attention.  There is also a desire to see the look back period lengthened from two years.  It was suggested that there could be increased fees depending on the length of time to discourage delays.  The committee will need to consider tax and liability considerations of any action.  There was also discussion about judicial dissolution provisions.  They suggested that there is not enough direction within the current statutes.  It was also noted that even the model act does not provide enough direction.  The case of Weiss v. Weiss discusses the problem.

 

The committee directed LSO staff to work with Mr. Eggers and Mr. Cottam and anyone else who wants to be involved to come back at the next meeting with a bill that incorporates the changes discussed.  Senator Scott suggested the working group go through the model act, consider the differences and decide if those changes would make the state more business friendly.  With each change he wants to see discussion of why the particular section is better.  The Secretary of State's office will contact the Attorney General’s office to get them involved.  Senators Case and Scott and Representatives Brown and Stubson will work with the group too. 

 

Subdivisions- cluster developments.

 

Mark Reid, Sheridan County Planner, provided a presentation on the need for county planning tools to encourage cluster developments.  (Appendix 6).   He discussed the advantages of preserving open space, including agriculture, recreation and wildlife use.  The presentation included review of several county land use policies encouraging development to preserve open space and agricultural uses.  He discussed the use of conservation design to preserve natural features, lower road and utility development costs, increase market value and therefore increase taxes and save potential for agricultural uses.  He noted that counties can use the zoning process now to encourage conservation design but not many counties use zoning. 

 

The committee discussed current requirements and how they can be counter productive to encouragement of conservation design process.  The concept of giving counties authority to set different standards for road width was discussed.  The question of safety for emergency vehicles and school buses was debated.

 

Mr. Reed provided copies of maps showing land use plans.  He also noted that he supports the 2002 bill more than the one from last year.

 

The committee discussed how the counties need to staff the planning function better.  County commissions that meet only once a month can delay the process and lack of technical assistance makes it difficult for county commissioners to apply the statutes.  It was also noted that it is often difficult to find entities to take the conservation easements and maintain the open spaces.  There was also discussion of how the use of septic systems does not work well with these cluster developments.  Senator Scott suggested that any bill that allows for easements for septic use on adjoining agricultural property ensure the tax status of that adjoining property.

 

The committee discussed how the bill provides incentives through allowing density bonuses and avoidance of subdivision permit requirements.  It was also noted that some people don’t want to live that closely to each other.  Mr. Reed discussed how the homeowner’s association requirement in last years bill is problematic because his current county commission does not want to get involved in private contractual matters.  There was discussion about requiring mutual benefit corporations instead of homeowners’ associations. 

 

Laurie Urbigkit, Wyoming Association of Realtors, testified that they are excited about the conservation design process.  They like the idea of shortening the time frame and stated that limiting some of the requirements will make lots more affordable.  It was noted that the inconsistency and long time frames are the most expensive problems.

 

Anne MacKinnon provided written testimony recommending legislation to provide funding to cities and counties to do more planning and zoning.  (Appendix 7),   She argued for tying state funding for infrastructure to the existence of a local comprehensive plan.  She suggested creating a state board that funds public/private model developments.

 

Jonathan Tigert, Lincoln County Planner, testified in support of the cluster development process.  He stated that it allows more lots than would be created in the 35 acre ranchettes process.  It can preserve unique areas and lower infrastructure costs.  He noted that the bill creates a voluntary program.  He also noted that the smaller lots sell more quickly.  It helps control noxious weeds because the lot sizes are small enough to mow.  He stated that his county commissioners are concerned about policing homeowners’ associations.

 

Jim Magagna, Wyoming Stockgrowers Association, testified in general support of the bill and the concept.  He suggested that there should be a distinction between preserving open space through creating a ranch and creating a golf course.  He also stated that the provisions should be maximum rather than minimum.  He asked that the bill define what a tract is for purposes of the bill.  Rep. Stubson noted that the encouragement to keep the requirements reasonable is the fact that if they are too restrictive then people won’t use the exception anyway.

 

Wayne Graves, Johnson County Planning Commission, testified in support of an alternative that provides for transferable development rights.  He provided a copy of 2001 House Bill 251 which provides for transferable development rights.  The committee expressed concern that the bill really didn’t fit within the purview of the approved topic.

 

The committee chose to start with the 2008 LSO 0029.C1 and discuss the concepts.  (Appendix 8).  Representative Brown discussed the homeowners’ association provisions of the bill.  He suggested that the provision is a mechanism for putting the onus back on the homeowners to provide for their own infrastructure plus it provides for enforcing those responsibilities.  There was discussion of whether the homeowners’ association provisions should be put in a separate bill.  Senator Scott asked that the bill should allow for a homeowners’ association or some other similar association that can handle the problems.  Senator Scott suggested that the requirement be a county option and let the commissioners exempt any portion of the subdivision that would not benefit from the improvements and that the bill limit the requirements to page 9 lines 9-12.  He suggested that the bill not call it a homeowners’ association but call it an organization that has those authorities.

 

Mr. Reid explained the difference between density and minimum lot size.   The committee asked LSO to bring a definition of open space garnered from other statutes.  LSO will also look at the difference between the terms "conserve" and "preserve".  The committee would like to see a method for enforcing the lack of development for the 40 year period. 

 

Senator Scott suggested a new section that states that clusters are exempt from 18-5-315 and then allows for density bonuses and parcel bonuses.  Then allow parcel bonuses and density bonuses for more than 2 lots per 35 acres rather than not more than.  The bill should provide for enforcement of open space reservations and that at the end of the 40 year the homeowners would have first right of refusal but have to maintain it as open space for another 40 years.

 

The committee asked that bill be made purely a cluster development bill.  The rest can be brought in a different bill.  The meeting recessed at 5 p.m.

 

* * * * * *

 

April 18, 2008.

Co-Chairman Illoway called the meeting to order at 8:00 a.m.

 

Insurance Department Issues

 

Ken Vines, Director of the Insurance Department, testified that the insurance department needs to periodically update its statutes in order to maintain its accreditation.  The model audit law needs to be updated this year.  Risk based capital laws can wait until a future interim.

 

The model audit law was adopted by the legislature in 1994.  It relates to solvency regulation – ensuring that an insurance company will be solvent in the future to meet their obligations.  The purpose of the law is to provide an independent review of an annual statement of an insurance company's financial information.  Mr. Vines stated that the statements are important because the department does an analysis of those statements. 

 

Mr. Vines testified that there are only 5 domestic insurance companies in Wyoming: Mountain West Farm Bureau, Blue Cross/Blue Shield of Wyoming, Win Health, Founders Title and Wyoming Farmers Mutual Insurance.

 

Mr. Vines explained how the NAIC accredits state insurance departments.  He stated that because insurance is not regulated at the federal level but companies operate nationally, there is a great need to have a national organization to back up state regulation.  The purpose of the NAIC is to ensure consistency across the country.  The accreditation program establishes that consistency.

 

Mr. Vines testified that domestic companies are thoroughly audited every three years.  Financial statements are filed quarterly with a more in-depth filing annually.  The department does not regulate rates unless there is a non competitive market.  The only lines that are non-competitive in Wyoming are medical malpractice for doctors and hospitals.

 

All states belong to the NAIC and all but one is accredited right now.  The insurance department audits the domestic companies but relies on other states’ audits for foreign corporations.  They have authority to do audits of foreign companies if there is a specific issue.

 

Mr. Vines testified that there are 27 people in the department.  They have a consumer advocate department to handle complaints which consists of 4 people to deal with approximately 500 formal complaints per year.  They have an insurance consultants department: which consists of 4 people to provide insurance expertise within the department and review any new insurance policies offered in the state.  They have 7 people in the examination department who do the audits and financial examinations.  The department is funded by an assessment on insurance companies.  They have a licensing department that handles licensing of insurance agents, both local and out of state. 

 

Mr. Vines provided a handout describing the changes needed in the law.  (Appendix 9).  The revisions deal with auditor independence, corporate governance and internal control over financial reporting. 

 

With respect to auditor independence the department would like the following changes:  the lead audit partner may not serve in that capacity for more than five consecutive years and may not rejoin in that capacity for a period of more than five years.  He stated that if the CPA is providing other non-audit services they are coming too close to management of the company.  The department has a list of those other non-audit services that should not be allowed.  The laws should also preclude a CPA firm from doing an audit for one year after one of its partners leaves the CPA firm and becomes a manager of the company.

 

With respect to corporate governance the department would like to see the laws require insurers to have an audit committee that is directly responsible for the appointment, oversight and compensation of the auditor.   The laws should require that a certain percentage of the audit committee be independent from the company.

 

With respect to internal control over financial reporting, the department would like the laws to require an internal report be filed with the insurance department that provides an assessment of the internal controls over financial reporting.  No CPA opinion would be required of this management assessment.  This would not be required of companies with less than $500 million in premiums so it currently would not apply to any of the domestic companies.  The committee discussed lowering the amount. 

 

Mr. Vines noted that the implementation date would be January 1, 2010.  He also noted that he is not aware of any industry opposition to these changes.

 

Mike Mores, Farmers Insurance, testified in support of the changes.

 

Dan Neal, Equality State Policy Center, testified that they have heard that the department needs better authority to oversee complaints.  Mr. Vines noted that the department may only look to whether an insurer violated the code and even if they do find a clear violation they may only fine the company or deny or revoke their license. 

 

The committee asked staff to draft a bill addressing these issues.  They asked LSO staff to include staff notes on where there could be stricter requirements on smaller companies.

 

Viatical Settlements.

 

Mr. Vines explained that viatical settlements are financial transactions in which a policy owner has a terminal or chronic illness and sells the life insurance policy to a third party for more than the cash value offered by the life insurance company, but less than the net death benefit.  The purchaser becomes the new beneficiary of the policy at maturation and is responsible for all subsequent premium payments.  Wyoming law does not allow a stranger to purchase a policy in the first place but there is nothing prohibiting the subsequent sale of a policy.   The department brings this concern because they believe the practice is rife with fraud on the elderly.  He noted it also is a form of gambling on the life of others.  He also noted that there are also tax consequences that may not be explained to the insured.  Older consumers who sell their policies may not realize that they will not be able to replace the policy or obtain new life insurance because of their age or health.

 

Mr. Vines provided a copy of the NAIC’s model act on regulating viatical settlements.   (Appendix 10).  It provides for licensing and bonding of these providers, approval of contracts and disclosure statements prior to use, filing of annual statements and provides for extensive disclosures and regulation of advertising of these products.

 

The committee asked Mr. Vines to go through the model act and pare it down to the provisions that are relevant to Wyoming and provide the LSO with an electronic copy for inclusion in a bill to be considered in a future meeting.  Mr. Vines noted that there are two competing models and he will look to both models in deciding what is best for Wyoming.  The bill would likely not be brought back to the committee until the August meeting.

 

The committee took the remaining time to discuss the issue of the handling of complaints by the department.  Mr. Vines testified that the state insurance department does not have authority to regulate ERISA cases, which are self funded insurance plans.  He also does not have authority to force health insurance companies to cover specific treatments.  He discussed the unfair trade practices act which does provide some authority to bring a cease and desist action when they find an insurer is engaging in a course of conduct that is violating the insurance code or the contracts.  The committee discussed how too often the consumer cannot afford to enforce their rights through the legal system.  Mr. Vines offered to bring to the committee examples of other states’ statutes giving the department broader authority.  The committee discussed the interstate nature of health insurance.

 

Dan Neal asked Mr. Vines to address the huge rate increases in medical insurance rates.  He also asked about an insurance company's ability to pay only “usual and customary” costs in order to deny payment.  There was also discussion about how community rate banding results in the young and healthy subsidizing the old or infirm.

 

Coroners

 

Mark Harris, former legislator and Ed McAuslan, Fremont County Coroner testified about four proposals the coroners association would like to see addressed.  (Appendix 11).

 

Mr. Harris discussed the need to improve training for coroners.  Training used to be required in four hour blocks and they are looking to get training allowed in one hour blocks.  This will help with providing consistent and ongoing training because of the part time nature of the job for most coroners in the state.

 

Mr. McAuslan brought several suggestions for changes in the statutes.  First they are concerned that there is no requirement for investigation into “anticipated deaths”.  Their concern is that this increases the potential for assisted suicide or euthanasia.  The coroners are suggesting that the physician of record examine the patient to ensure that the cause of death is as diagnosed.   The committee discussed what this change would cost and who would pay for it.  There was also discussion about what would happen if the doctor determines the death was not anticipated and by then the scene of the death is disturbed.  The committee discussed how there is concern about disturbing the dignity of the deceased and their family.  The committee expressed concern about the onus that the proposal puts on the family doctor.  It was noted that determination of whether the death was caused by the diagnosed illness would almost require a full blown autopsy. 

 

Tom Ferguson, Albany County Coroner, provided a report regarding the need for a medical examiner system.  (Appendix 12).

 

The coroners' second recommendation is to clarify the statutes dealing with disposition of property of the deceased.  Currently coroners have authority over property found with the body of the deceased.  They testified that they have had problems where property of the deceased shouldn’t be left sitting around but they don’t have authority to take control of it.  He provided the example of a man who committed suicide and left a box of money in the kitchen that they didn’t want to just leave sitting around.  They also mentioned a man who committed suicide and left a flock of sheep with no one to take care of them. 

 

The coroners' third request involves the records the coroner may review.  They are currently authorized to inspect medical and psychological data.  They testified that sometimes they need to see additional records other than medical documents.  They could get those documents if they convened a full inquest but sometimes the situation doesn’t call for that expense.

 

The coroners' final request deals with the exhumation of bodies over 100 years old.  The coroners' proposal provides for a county coroner to have jurisdiction over human remains, and then if they determine that the remains are older than 100 years old the state archeologist would obtain jurisdiction.  There was some discussion about how this would apply on reservation lands. 

 

Senator Scott moved that the LSO draft a bill for the coroners including proposals 2, 3 and 4 with changes as discussed and noted on the pages.  The motion failed.  Representative Stubson asked for a bill just encompassing proposal 4.  The motion passed.

 

Meeting Adjournment

There being no further business, Co-Chairman Pete Illoway adjourned the meeting at 2:00 pm.

 

Respectfully submitted,

 

 

 

Representative Pete Illoway, Co-Chairman                              Senator Cale Case, Co-Chairman

 

 

 

 

 

 

 

 

 

 

Appendix		Appendix Topic		Appendix Description		Appendix Provider
1		Committee Sign-In Sheet		Lists meeting attendees		Legislative Service Office
2		Committee Meeting Agenda		Provides an outline of the topics the Committee planned to address at meeting		Legislative Service Office
3		Corporations		Business Entities Synopsis		Secretary of State
4		Corporations		Wyoming vs. Colorado Filing Fees Memo		Dale Cottam
5		Corporations		Wyoming Corporations Statutes		Walter Eggers
6		Subdivisions		Rural Land Use Process		Mark Reid
7		Subdivisions		Written Testimony		Anne MacKinnon
8		Subdivisions		08 LSO 0029.C1-Subdivisions-development.		Legislative Service Office
9		Insurance		Revisions to Model Regulation Requiring Annual Audited Financial Reports		Ken Vines
10		Insurance		Viatical Settlements Model Act		Ken Vines
11		Coroners		Proposed statutory amendments		Mark Harris
12		Coroners		Report on Need for Medical Examiners		Tom Ferguson