N.D. Insurance Reserve Fund chief defends operations after market-conduct exam; committee presses on claims, reinsurance and Fire and Tornado Fund move

BISMARCK, N.D. — The House Appropriations Government Operations Division heard testimony on House Bill 1010 and a market-conduct examination of the North Dakota Insurance Reserve Fund on a day when lawmakers pressed the fund nd the Insurance Commissioner about claims handling, underinsured public properties and a pending transfer of the Fire and Tornado Fund.

The hearing matters because the reserve fund insures cities, counties, school districts and other political subdivisions across North Dakota; problems in claims practice or oversight can affect local budgets and taxpayers, lawmakers said.

Keith Peach, chief executive officer of the North Dakota Insurance Reserve Fund, told the committee the NDRF is a member-owned nonprofit established in 1986 to meet political subdivisions—overage needs. "The Naderf is not required to exist statutorily or constitutionally. We operate independently as a self insurance pool, but are regulated by the North Dakota Insurance Department, similar to insurance companies," Peach said. He told lawmakers the pool has saved members and taxpayers about $150,000,000 since its founding and has had only one general rate increase in the last 25 years.

The Insurance Department—xaminer focused on claims-handling practices. The report identified files with incomplete documentation, differences in how first-party and third-party claims were handled, and denial letters that lacked detailed explanations. Peach said the examination evaluated documentation, not whether decisions were legally correct, and argued some files closed without payment were "notice only" files tracking potential claims that did not materialize. He said, during the audit period, "only 27% of third party claim closures resulted from liability denials." Peach also cited an independent review by Farley Consulting that found some files marked deficient by the department did contain needed documentation.

Peach described steps the NDRF has taken in response: a complaints policy to track written grievances; hiring internal legal counsel and engaging outside counsel for complex matters; standardized claims workflows and checklists; a revised claims philosophy to ensure more consistent handling of first-party and third-party claims; and clearer denial letters that reference supporting evidence.

Lawmakers asked detailed questions about how claims are investigated and paid. Peach said the fund purchases reinsurance and maintains multiple coverage layers up to $10,000,000; amounts above $2,000,000 are reinsured. "Anything over $2,000,000, we reinsure," Peach said, naming Great American as a reinsurer. He described a claims staff of nine employees (one director, one assistant director, six adjusters and one administrative assistant), split between inside desk adjusters for lower-dollar first-party claims and outside adjusters for complex or potentially litigious matters; he said all adjusters are based in Bismarck and the fund uses independent adjusters when needed.

The Foreman Museum collapse that left the local facility underinsured drew sustained attention from committee members. Representative Brandenburg described delays and frustration with payments for repairs and volunteer labor. Peach described the standard progression for large property claims: an initial actual cash value (ACV) payment, engineer review for structural repairs, then submission of documentation for recoverable depreciation and any replacement-cost payments. He also cited coinsurance deductions in the museum case that reduced payouts.

The Insurance Commissioner, John Gottfried, told the committee the department—xam stands and encouraged members to read the report, but said he acknowledged progress and that relationships with NDRF have improved.

Committee directions and staff notes recorded during the hearing show lawmakers asked staff to add language in the budget amendment to preserve continuing authority for federal grant funds that the Insurance Department administers; they also instructed staff to include a separate section for the elected insurance commissioner—areer salary in the amendment. Committee members rejected a proposal (originating in the executive budget) to direct insurance premium tax revenue to a Fire Marshal operating fund, saying that provision was not recommended by the Insurance Department.

The committee did not record a roll-call vote on these decisions; staff instructed to reflect the committee—onsensus on the worksheet and draft amendments.

Committee members said they will monitor implementation of the NDRF—orrective steps and whether legislative changes tied to the Fire and Tornado Fund transfer (bills referenced in committee discussion) produce automatic inflators and improved property valuations for political subdivisions.

The committee closed discussion on HB 1010 after staff confirmed worksheet changes and section language to carry forward the committee irections.