COALEX REPORT 67

	Coalex Report 67

This is the Office of Surface Mining's library of COALEX Research Reports. COALEX is a database of mining and reclamation information, including the Surface Mining Law and regulations, maintained in LEXIS-NEXIS -- a commercial, on-line research service. These reports have been compiled under a cooperative agreement between the Office of Surface Mining and the Interstate Mining Compact Commission, which represents most U.S. coal producing states. The following report includes an analysis of a specific issue requested by a state regulatory authority with responsibility for carrying out the Surface Mining Law. Copies of the research reports and attachments are available to the public, upon request. For additional information, or to obtain copies of the listed attachments, contact Ron Tarquinio by phone at (202) 208-2882 or by e-mail at rtarquin@osmre.gov.

                   
COALEX STATE INQUIRY REPORT - 67
October 20, 1986

Danny Brown, Commissioner
Division of Mined Land Reclamation
Department of Mines, Minerals & Energy
Big Stone Gap, Virginia 24219

TOPIC: MINE SUBSIDENCE INSURANCE

INQUIRY: Identify states which have implemented mine subsidence insurance programs.

SEARCH RESULT: Five states (Illinois, Kentucky, Ohio, Pennsylvania, and West Virginia) have
implemented mine subsidence insurance programs. These programs all have the same basic
structure. A "mine subsidence insurance fund" is created, which is to be administered by a board
or other authority. Once the fund is in place, every insurance policy issued or renewed on a
structure is to include or make available insurance for losses caused by subsidence damage.
Structures located in specified counties are exempt from this requirement. Any person authorized
to write property insurance policies is also authorized to participate in the mine subsidence
insurance program. Premium rates are to be set by the governing authority. Once an insurer has
written such a policy, the company is to enter into a reinsurance agreement with the state
authority, in which the company cedes one hundred percent (within specified dollar limits) of the
subsidence insurance to the state authority and receives a ceding commission. The state authority
then handles all claims arising under the program.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

   The five state programs differ in several areas. These areas include:

1) LOSSES COVERED: The West Virginia and Kentucky laws' definitions of "mine subsidence" only
include damage resulting from the collapse of an underground coal mine. Ohio and Illinois
specifically include other types of mines, such as clay, limestone, salt, and fluorspar. Losses
caused by earthquake, landslide, volcanic eruption, or collapse of storm and sewer drains are
excluded.


2) FUND APPROPRIATIONS: All of the state funds are partially financed by the premiums
collected under the programs. Four states also provide for state appropriations to the fund. The
Illinois program calls for an initial advance of $100,000 to provide for administrative costs and to
provide a beginning balance for the fund. If the balance in the Illinois fund falls below $50,000,
the Director may advance the fund enough money to pay any outstanding claims. In no case may
the amounts advanced to the fund exceed $500,000. (Ill. Rev. Stat. Ch. 73, Sec. 803(a) (1984))

   The West Virginia program allows the legislature or the governor to appropriate up to $500,000
from the governor's civil contingency fund to pay claims against the fund which occur prior to the
accumulation of sufficient reserves in the fund. If the legislature or the governor does not
appropriate these monies, the board may advance funds from the general insurance fund to pay
claims; however, this money must be repaid. (W. Va. Code Sec. 33-30-4 (1985))

   Specific dollar amounts are not included in the Ohio and Pennsylvania laws, but provisions are
made for state appropriations to the funds. The Kentucky law does not call for state funding, but
mandates that the subsidence insurance fund shall not be implemented until federal funds are
received for administrative costs and for a reserve. (1984 Ky. Acts 304.44-130)


3) TOTAL AMOUNT INSURED: The Illinois, Ohio and Kentucky statutes set the maximum amount
to be insured at $50,000. The deductible is two percent of the policy's total insured value, but in
no case is the deductible to be less than $250.00 or more than $500.00. (Ill. Rev. Stat. Ch 73,
Sec. 804 (1984); Ohio Rev. Code Sec. 3929.56 (1984); 1984 Ky. Acts 304.44-030) West
Virginia's law calls for the same deductible as the other states, but sets the maximum amount to
be insured at $75,000. The amount insured is not to exceed the amount of fire insurance on the
structure. (W. Va. Code Sec. 33-30-6(1985)) The Pennsylvania law sets the maximum amount
insured at $100,000.


4) EXEMPTIONS: All of the laws allow structures located within certain areas to be exempted from
the mandatory coverage. In West Virginia, certain counties are specifically exempted by law, and
coverage is only provided if requested by the policyholder. (W. Va. Code Sec. 33-30-06 (1985))
Ohio's law allows the superintendent of insurance to exempt policies issued in any specified
county upon application of the mine subsidence insurance underwriting association. (Ohio Rev.
Code Sec. 3929.57 (1985))

   In Kentucky, the administrator is to exempt policies issued in counties or portions of counties
which do not have underground coal bearing strata. Counties which have not voted to approve
the availability of mine subsidence insurance are also exempt from coverage. (1984 Ky. Acts
304.44-060) Under Illinois law, the Director is to exempt every policy issued in any county of one
million or more inhabitants or any county contiguous to any such county, and may exempt any
other specified county of the state. (Ill. Rev. Stat. Ch. 73, Sec 805 (1984)) In Pennsylvania, the
coverage is voluntary for anyone building over active or abandoned mines.


ATTACHMENTS
A    Illinois Revised Statutes, Ch. 73, Sections 801 et seq. (1984).
B    1984 Kentucky Acts Sec. 304.44.
C    Ohio Administrative Code, Ch. 3929 (1984).
D    Pennsylvania, Telephone Survey.
E    West Virginia Code, Ch. 33, Article 30 (1985).

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