Chapter
04-039
2004 --
H 8159
Enacted
06/09/04
A N A C T
RELATING
TO INSURANCE -- RHODE ISLAND LIFE AND HEALTH INSURANCE
GUARANTY
ASSOCIATION ACT
Introduced
By: Representative Robert A. Watson
Date
Introduced: February 24, 2004
It is enacted by the General Assembly as
follows:
SECTION 1.
Sections 27-34.3-3, 27-34.3-4, 27-34.3-5, 27-34.3-6, 27-34.3-7, 27-34.3-8,
27-34.3-9, 27-34.3-10, 27-34.3-11, 27-34.3-12,
27-34.3-14, 27-34.3-15, 27-34.3-19 and 27-34.3-
20 of the General Laws in Chapter 27-34.3
entitled "Rhode Island Life and Health Insurance
Guaranty Association Act" are hereby
amended to read as follows:
27-34.3-3.
Coverage and limitations. -- (a) This chapter shall provide coverage
for the
policies and contracts specified in subsection
(b) of this section:
(1) To persons
who, regardless of where they reside (except for non-resident nonresident
certificate holders under group policies or
contracts), are the beneficiaries, assignees or payees of
the persons covered under subdivision (2) of
this subsection, subsection (2); and
(2) To persons who
are owners of or certificate holders under such the policies or
contracts (other than unallocated annuity
contracts, and structured settlement annuities); or, in the
case of unallocated annuity contracts, to the
persons who are the contract holders, and in each
case who:
(i) Are residents
of this state,; or
(ii) Are not
residents, but only under all of the following conditions:
(A) The insurers
which insurer that issued the policies or contracts are is
domiciled in
this state;
(B) The
insurers never held a license or certificate of authority in the states in
which the
persons reside;
(C) The
states in which the persons reside have associations similar to the
association
created by this chapter; and
(D) (C)
Those The persons are not eligible for coverage by these
associations an
association in any other state due to the fact
that the insurer was not licensed in the state at the
time specified in the state's guaranty
association law.
(3) For unallocated
annuity contracts set forth in subsection (b) of this section, paragraphs
(1) and (2) of this subsection shall not apply,
and this chapter shall (except as provided in
paragraphs (5) and (a)(6) of this subsection)
provide coverage to:
(i) Persons who
are owners of the unallocated annuity contracts if the contracts are issued
to or in connection with a specific benefit plan
whose plan sponsor has its principal place of
business in this state; and
(ii) Persons
who are owners of unallocated annuity contracts issued to or in connection
with government lotteries if the owners are
residents.
(4) For
structured settlement annuities specified in subsection (b)(1) paragraphs (1)
and
(2) of this subsection shall not apply, and this
chapter shall (except as provided in paragraphs (5)
and (6) of this subsection) provide coverage to
a person who is a payee under a structured
settlement annuity (or beneficiary of a payee if
the payee is deceased), if the payee:
(i) Is a resident,
regardless of where the contract owner resides; or
(ii) Is not a
resident, but only under both of the following conditions:
(A)(I) The
contract owner of the structured settlement annuity is a resident; or
(II) The
contract owner of the structured settlement annuity is not a resident but the
insurer that issued the structured settlement
annuity is domiciled in this state; and
The state in
which the contract owner resides has an association similar to the association
created by this chapter; and
(B) Neither the
payee or beneficiary, nor the contract owner is eligible for coverage by
the association of the state in which the payee
or contract owner resides.
(5) This
chapter shall not provide coverage to:
(i) A person
who is a payee or beneficiary of a contract owner resident of this state, if
the
payee or beneficiary is afforded any coverage by
the association of another state; or
(ii) A person
covered under paragraph (3) of this subsection, if any coverage is provided
by the association of another state to the
person.
(6) This
chapter is intended to provide coverage to a person who is a resident of this
state
and, in special circumstances, to a nonresident.
In order to avoid duplicate coverage, if a person
who would otherwise receive coverage under this
chapter is provided coverage under the laws of
any other state, the person shall not be
provided coverage under this chapter. In determining the
application of the provisions of this paragraph
in situations where a person could be covered by
the association of more than one state, whether
as an owner, payee, beneficiary, or assignee, this
chapter shall be construed in conjunction with
other state laws to result in coverage by only one
association.
(b) (1) This
chapter shall provide coverage to the persons specified in subsection (a) of
this section for direct, non-group life, health,
or annuity policies or contracts and supplemental
policies or contracts to any of these,
for certificates under direct group policies and contracts, and
for unallocated annuity contracts issued by
member insurers, except as limited by this chapter.
Annuity contracts and certificates under group
annuity contracts include, but are not limited to,
guaranteed investment contracts, deposit
administration contracts, unallocated funding
agreements, allocated funding agreements,
structured settlement agreements, lottery contracts
annuities, annuities issued to or in connection
with government lotteries and any immediate or
deferred annuity contracts.
(2) This chapter
shall not provide coverage for:
(i) Any A
portion of a policy or contract not guaranteed by the insurer, or under which
the risk is borne by the policy or contract holder
owner;
(ii) Any A
policy or contract of reinsurance, unless assumption certificates have been
issued pursuant to the reinsurance policy or
contract;
(iii) Any A
portion of a policy or contract to the extent that the rate of interest on
which
it is based, or the interest rate, crediting
rate or similar factor determined by use of an index or
other external reference stated in the policy or
contract employed in calculating returns or
changes in value:
(A) Averaged over
the period of four (4) years prior to the date on which the association
becomes obligated with respect to the policy or
contract
member insurer becomes an impaired or
insolvent insurer under this chapter, whichever
is earlier,
exceeds a the rate of interest determined
by subtracting two (2) percentage points from
Moody's corporate bond yield average averaged for
that same four-year (4) period or for such
lesser period if the policy or contract was issued less
than four (4) years before the association
became obligated member insurer becomes an impaired
or insolvent insurer under this chapter,
whichever is earlier;
and
(B) On and after
the date on which the association becomes obligated with respect to the
policy or contract member insurer
becomes an impaired or insolvent insurer under this chapter,
whichever is earlier, exceeds the rate of
interest determined by subtracting three (3) percentage
points from Moody's corporate bond yield average
as most recently available;
(iv) Any A
portion of a policy or contract issued to a plan or program of an employer,
association or similar entity other
person to provide life, health or annuity benefits to its
employees or, members or others
to the extent that the plan or program is self-funded or
uninsured, including but not limited to benefits
payable by an employer, association or similar
entity other person under:
(A) A multiple
employer welfare arrangement as defined in 29 U.S.C. section 1144;
(B) A minimum
premium group insurance plan;
(C) A stop-loss
group insurance plan; or
(D) An
administrative services only contract;
(v) Any A
portion of a policy or contract to the extent that it provides dividends or
experience rating credits, or provides that any
fees or allowances be paid to any person, including
the policy or contract holder, in connection
with the service to or administration of the policy or
contract; for:
(A) dividends
or experience rating credits;
(B) voting
rights; or
(C) Payment of any
fees or allowances to any person, including the policy or contract
owner, in connection with the service to or
administration of the policy or contract.
(vi) Any A
policy or contract issued in this state by a member insurer at a time when it
was not licensed or did not have a certificate
of authority to issue the policy or contract in this
state;
(vii) Any An
unallocated annuity contract issued to an employee benefit plan protected
under the federal pension benefit guaranty
corporation
or in connection with a benefit plan
protected under the federal pension benefit
guaranty corporation, regardless of whether the
federal pension benefit guaranty corporation has
yet become liable to make any payments with
respect to the benefit plan;
(viii) Any
A portion of any unallocated annuity contract which that
is not issued to or in
connection with a specific employee, union or
association of natural persons benefit plan or a
government lottery;
(ix) Any A
portion of a policy or contract to the extent that the assessments required by
section 27-34.3-9 with respect to the policy or
contract are preempted by federal or state law; and
(x) An
obligation that does not arise under the express written terms of the policy or
contract issued by the insurer to the contract
owner or policy owner, including, without limitation:
(A) Claims
based on marketing materials;
(B) Claims
based on side letters, riders or other documents that were issued by the
insurer
without meeting applicable policy form filing or
approval requirements;
(C)
Misrepresentations of or regarding policy benefits;
(D)
Extracontractual claims; or
(E) A claim for
penalties or consequential or incidental damages;
(xi) A contractual
agreement that establishes the member insurer's obligations to provide
a book value accounting guaranty for defined
contribution benefit plan participants by reference
to a portfolio of assets that is owned by the
benefit plan or its trustee, which in each case is not an
affiliate of the member insurer;
(xii) A portion
of a policy or contract to the extent it provides for interest or other
changes in value to be determined by the use of
an index or other external reference stated in the
policy or contract, but which have not been
credited to the policy or contract, or as to which the
policy or contract owner's rights are subject to
forfeiture, as of the date the member insurer
becomes an impaired or insolvent insurer under
this chapter, whichever is earlier. If a policy's or
contract's interest or changes in value are
credited less frequently than annually, then, for
purposes of determining the values that have
been credited and are not subject to forfeiture under
section 27-34.3-3(b)(2)(xii), the interest or
change in value determined by using the procedures
defined in the policy or contract will be
credited as if the contractual date of crediting interest or
changing values was the date of impairment or
insolvency, whichever is earlier, and will not be
subject to forfeiture; and
(x) (xiii)
Any transaction or combination of transactions between a protected cell and the
general account or another protected cell of a
protected cell company organized under the
Protected Cell Companies Act, chapter 64 of this
title, as those terms are defined in that Act
chapter 64 of title 27.
(c) The benefits for
which that the association may become liable obligated to
cover
shall in no event exceed the lesser of:
(1) The
contractual obligations for which the insurer is liable or would have been
liable
if it were not an impaired or insolvent insurer;
or
(2) (i) With
respect to any one life, regardless of the number of policies or contracts:
(A) Three hundred
thousand dollars ($300,000) in life insurance death benefits, but not
more than one hundred thousand dollars
($100,000) in net cash surrender and net cash withdrawal
values for life insurance;
(B) One hundred
thousand dollars ($100,000) in health insurance benefits, including any
net cash surrender and net cash withdrawal
values;
In health insurance benefits:
(I) One hundred
thousand dollars ($100,000) for coverages not considered as disability
insurance or basic hospital, medical and
surgical insurance or major medical insurance, including
any net cash surrender and net cash withdrawal
values;
(II) Three
hundred thousand dollars ($300,000) for disability insurance;
(III) Five
hundred thousand dollars ($500,000) for basic hospital, medical and surgical
insurance; or
(C) One hundred
thousand dollars ($100,000) in the present value of annuity benefits,
including net cash surrender and net cash
withdrawal values;
(ii) With respect
to each individual participating in a governmental retirement plan
established under Section 401, 403(b) or 457 of
the U.S. Internal Revenue Code, 26 U.S.C.
section 401, 403(b) or 457, covered by an
unallocated annuity contract or the beneficiaries of
each such individual if deceased, in the
aggregate, one hundred thousand dollars ($100,000) in
present value annuity benefits, including net
cash surrender and net cash withdrawal values;
(iii) With
respect to each payee covered by an annuity contract issued by an insurer to
provide benefits pursuant to of a structured
settlement agreement annuity or beneficiary or
beneficiaries, or beneficiary of each the
payee if deceased, one hundred thousand dollars
($100,000) in present value annuity benefits, in
the aggregate, including net cash surrender and
net cash withdrawal values if any;
(iv) Provided,
that However in no event shall the Association association
be liable to
expend obligated to cover more than: (A)
an aggregate of three hundred thousand dollars
($300,000) in the aggregate benefits
with respect to any one individual life under this paragraph
and paragraphs (i) and, (ii) and
(iii) of this subdivision except with respect to benefits for basic
hospital, medical and surgical insurance and
major medical insurance under subparagraph 2(i)(B)
of this subsection, in which case the aggregate
liability of the association shall not exceed five
hundred thousand dollars ($500,000) with respect
to any one individual; or (B) with respect to
one owner of multiple non-group policies of life
insurance, whether the policy owner is an
individual, firm, corporation or other person,
and whether the persons insured are officers,
managers, employees or other persons, more than
five million dollars ($5,000,000) in benefits,
regardless of the number of policies and
contracts held by the owner;
(iv) (v)
With respect to any either: (A) one contract owner provided coverage
under
subsection (a)(3)(i); or (B) one contract plan
sponsor whose plans own directly or in trust any one
or more holder covered by any unallocated
annuity contract contracts not included in paragraph
(ii) of this subdivision, five million dollars
($5,000,000) in benefits, irrespective of the number of
such contracts held by that contract holder. with
respect to the contract owner or plan sponsor.
Provided, however, in the case where one or more
unallocated annuity contracts that are covered
contracts under this chapter and are owned by a
trust or other entity for the benefit of two (2) or
more plan sponsors, coverage shall be afforded
by the association if the largest interest in the trust
or entity owning the contract or contracts is
held by a plan sponsor whose principal place of
business is in this state and in no event shall
the association be obligated to cover more than five
million dollars ($5,000,000) in benefits with
respect to all such unallocated contracts;
(vi) The
limitations set forth in this subsection are limitations on the benefits for
which
the association is obligated before taking into
account either its subrogation and assignment rights
or the extent to which those benefits could be
provided out of the assets of the impaired or
insolvent insurer attributable to covered
policies. The costs of the association's obligations under
this chapter may be met by the use of assets
attributable to covered policies or reimbursed to the
association pursuant to its subrogation and
assignment rights.
(d) In
performing its obligations to provide coverage under section 27-34.3-8, the
association shall not be required to guarantee,
assume, reinsure or perform, or cause to be
guaranteed, assumed, reinsured or performed,
contractual obligations of the insolvent or impaired
insurer under a covered policy or contract that
do not materially affect the economic values or
economic benefits of the covered policy or
contract.
27-34.3-4.
Construction. -- This chapter shall be liberally construed to
effect the purpose
under section 27-34.3-2 which shall
constitute an aid and guide to interpretation.
27-34.3-5.
Definitions. -- As used in this chapter:
(1)
"Account" means either of the two accounts created under section
27-34.3-6.
(2)
"Association" means the Rhode Island life and health insurance
guaranty association
created under section 27-34.3-6.
(3)
"Authorized assessment" or the term "authorized" when used
in the context of
assessments means a resolution by the board of
directors has been passed whereby an assessment
will be called immediately or in the future from
member insurers for a specified amount. An
assessment is authorized when the resolution is
passed.
(4) "Benefit
plan" means a specific employee, union or association of natural persons
benefit plan.
(5)
"Called assessment" or the term "called" when used in the
context of assessments
means that a notice has been issued by the
association to member insurers requiring that an
authorized assessment be paid within the time
frame set forth within the notice. An authorized
assessment becomes a called assessment when
notice is mailed by the association to member
insurers.
(3) (6)
"Commissioner" means the commissioner of insurance within the
department of
business regulation of this state.
(4) (7)
"Contractual obligation" means any obligation under a policy or
contract or
certificate under a group policy or contract, or
portion of a group policy or contract for which
coverage is provided under section 27-34.3-3.
(5) (8)
"Covered policy" means any policy or contract within the scope of
this chapter or
portion of a policy or contract for which
coverage is provided
under section 27-34.3-3.
(9)
"Extra-contractual claims" means claims not arising directly out of
contract
provisions, including, for example, claims
relating to bad faith in the payment of claims, punitive
or exemplary damages or attorneys' fees and
costs.
(6) (10)
"Impaired insurer" means a member insurer which is not an insolvent
insurer,
and:
(i) Is deemed
by the commissioner to be potentially unable to fulfill its contractual
obligations; or
(ii) Is
is placed under an order of rehabilitation or conservation by a court of
competent
jurisdiction.
(7) (11)
"Insolvent insurer" means a member insurer which after the
effective date of this
chapter January 1, 1996, is placed under an
order of liquidation by a court of competent
jurisdiction with a finding of insolvency.
(8) (12)
"Member insurer" means any insurer licensed or which holds a
certificate of
authority to transact in this state any kind of
insurance for which coverage is provided under
section 27-34.3-3, and includes any insurer
whose license or certificate of authority in this state
may have been suspended, revoked, not renewed or
voluntarily withdrawn, but does not include:
(i) A non-profit
hospital or medical service organization, whether profit or nonprofit; or
(ii) A health
maintenance organization; or
(iii) A fraternal
benefit society; or
(iv) A mandatory
state pooling plan; or
(v) A mutual
assessment company or any entity other person that operates on an
assessment basis; or
(vi) An insurance
exchange; or
(vii) An
organization that has a certificate or license limited to the issuance of
charitable
gift annuities; or
(vii) (viii)
Any An entity similar to any of the above.
(9) (13)
"Moody's corporate bond yield average" means the monthly average
corporates
as published by Moody's Investors Service,
Inc. investors service, inc., or any successor to it.
(14)
"Owner" of a policy or contract and "policy owner" and
"contract owner" means the
person who is identified as the legal owner
under the terms of the policy or contract or who is
otherwise vested with legal title to the policy
or contract through a valid assignment completed in
accordance with the terms of the policy or
contract and properly recorded as the owner on the
books of the insurer. The terms owner, contract
owner and policy owner do not include persons
with a mere beneficial interest in a policy or
contract.
(10) (15)
"Person" means any individual, corporation, limited liability
company,
partnership, association, governmental body
or entity or voluntary organization.
(16) "Plan
sponsor" means:
(i) The
employer in case of a benefit plan established or maintained by a single
employer;
(ii) The
employee organization in the case of a benefit plan established or maintained
by
an employee organization; or
(iii) In the
case of a benefit plan established or maintained by two (2) or more employers
or jointly by one or more employers and one or more
employee organizations, the association,
committee, joint board of trustees, or other
similar group of representatives of the parties who
establish or maintain the benefit plan.
(11) (17)
"Premiums" means amounts or considerations (by whatever name
called)
received on covered policies or contracts less returned
premiums, considerations and deposits
returned on the policies or contracts, and less dividends and
experience credits. on them.
"Premiums" does not include any
amounts or consideration received for any policies or contracts
or for the portions of any policies or
contracts for which coverage is not provided under section
27-34.3-3(b) except that assessable premium
shall not be reduced on account of section 27-34.3-
3(b)(2)(iii) relating to interest limitations
and section 27-34.3-3(c)(2) relating to limitations with
respect to any one individual, any
one participant and any one contract owner holder;.
provided
that "premiums" "Premiums"
shall not include:
(i) any
premiums Premiums in excess of five million dollars ($5,000,000) on any
an
unallocated annuity contract not issued under a
governmental retirement benefit plan (or its
trustee) established under section 401, 403(b) or 457 of
the United States Internal Revenue Code,
26 U.S.C. section 401, 403(b) or 457.
(ii) With
respect to multiple nongroup policies of life insurance owned by one owner,
whether the policy owner is an individual, firm,
corporation or other person, and whether the
persons insured are officers, managers,
employees or other persons, premiums in excess of five
million dollars ($5,000,000) with respect to
these policies or contracts, regardless of the number
of policies or contracts held by the owner.
(18)(i)
"Principal place of business" of a plan sponsor or a person other
than a natural
person means the single state in which the
natural persons who establish policy for the direction,
control and coordination of the operations of
the entity as a whole primarily exercise that
function, determined by the association in its
reasonable judgment by considering the following
factors:
(A) The state
in which the primary executive and administrative headquarters of the
entity is located;
(B) The state in
which the principal office of the chief executive officer of the entity is
located;
(C) The state
in which the board of directors (or similar governing person or persons) of
the entity conducts the majority of its
meetings;
(D)The state in
which the executive or management committee of the board of directors
(or a similar governing person or persons) of
the entity, conducts the majority of its meetings;
(E) The state
from which the management of the overall operations of the entity is
directed; and
(F) In the case
of a benefit plan sponsored by affiliated companies comprising a
consolidated corporation, the state in which the
holding company or controlling affiliate has its
principal place of business as determined using
the above factors. However, in the case of a plan
sponsor, if more than fifty percent (50%) of the
participants in the benefit plan are employed in a
single state, that state shall be deemed to be
the principal place of business of the plan sponsor.
(ii) The
principal place of business of a plan sponsor of a benefit plan described in
subsection (16)(iii) of this section shall be
deemed to be the principal place of business of the
association, committee, joint board of trustees
or other similar group of representatives of the
parties who establish or maintain the benefit
plan that, in lieu of a specific or clear designation of
a principal place of business, shall be deemed
to be the principal place of business of the
employer or employee organization that has the
largest investment in the benefit plan in question.
(19)
"Receivership court" means the court in the insolvent or impaired
insurer's state
having jurisdiction over the conservation,
rehabilitation or liquidation of the insurer.
(12) (20)
"Resident" means any a person to whom a contractual
obligation is owed and
who resides in this state at the time a
member insurer is determined to be an impaired or insolvent
insurer and to whom a contractual obligation is
owed on
the date of entry of court order that
determines a member insurer to be an impaired
insurer or a court order that determines a member
insured to be an insolvent insurer, whichever
occurs first.
A person may be a resident of only one
state, which in the case of a person other than
a natural person shall be its principal place of
business. Citizens of the United States that
are either: (i) residents of foreign countries; or (ii)
residents of United States possessions, territories
or protectorates that do not have an association
similar to the association created by this
chapter, shall be deemed residents of the state of
domicile of the insurer that issued the polices
or contracts.
(21)
"Structured settlement annuity" means an annuity purchased in order
to fund
periodic payments for a claimant in payment for
or with respect to personal injuries suffered by
the claimant.
(22)
"State" means a state, the District of Columbia, Puerto Rico, or a
United States
possession, territory or protectorate.
(13) (23)
"Supplemental contract" means any a written agreement
entered into for the
distribution of proceeds under a life, health
or annuity of policy or contract proceeds.
(14) (24)
"Unallocated annuity contract" means any annuity contract or group
annuity
certificate which is not issued to and owned by
an individual, except to the extent of any annuity
benefits guaranteed to an individual by an
insurer under the contract or certificate.
27-34.3-6.
Creation of the association. -- (a) There is created a nonprofit legal
entity to
be known as the Rhode Island life and health
insurance guaranty association. All member insurers
shall be and remain members of the association as
a condition of their authority to transact
insurance in this state. The association shall
perform its functions under the plan of operation
established and approved under section
27-34.3-10, or as previously established and approved
under section 27-34.1-11 and shall exercise its
powers through a board of directors established
under section 27-34.3-7 or as previously
established under section 27-34.1-8. For purposes of
administration and assessment, the association
shall maintain two (2) accounts:
(1) The life
insurance and annuity account which includes the following subaccounts:
(i) Life
insurance account;
(ii) Annuity
account which shall include annuity contracts owned by a governmental
retirement plan (or its trustee) established
under section 401, 403(b) or 457 of the United States
Internal Revenue Code, 26 U.S.C. section 401,
403(b) or 457, but shall otherwise exclude
unallocated annuities; and
(iii) Unallocated
annuity account which shall include exclude contracts owned by
a
governmental retirement benefit plan (or its
trustee) established under section 401, 403(b) or 457
of the United States Internal Revenue Code, 26
U.S.C. section 401, 403(b) or 457. qualified
under Section 403(b) of the United States Internal
Revenue Code, 26 U.S.C. 403(b).
(2) The health
insurance account.
(b) The
association shall come under the immediate supervision of the commissioner and
shall be subject to the applicable provisions of
the insurance laws of this state. Meetings or
records of the association may be open to the
public upon majority vote of the board of directors.
27-34.3-7.
Board of directors. -- (a) The board of directors of the association
shall
consist of not less than five (5) nor more than
nine (9) member insurers serving terms as
established in the plan of operation. The
insurer members of the board shall be selected by
member insurers subject to the approval of the
commissioner. The board of directors, previously
established under section 27-34.1-8, shall
continue to operate in accordance with the provision of
this section. Vacancies on the board shall be
filled for the remaining period of the term by a
majority vote of the remaining board members, for
member insurers subject to the approval of the
commissioner.
(b) In approving
selections to the board, the commissioner shall consider, among other
things, whether all member insurers are fairly
represented.
(c) Members of
the board may be reimbursed from the assets of the association for
expenses incurred by them as members of the
board of directors but members of the board shall
not be compensated by the association for their
services.
27-34.3-8.
Powers and duties of the association. -- (a) If a member insurer is an
impaired domestic insurer, the
association may, in its discretion, and subject to any conditions
imposed by the association that do not impair
the contractual obligations of the impaired insurer,
and that are approved by the commissioner, and
that are, except in cases of court-ordered
conservation or rehabilitation, also approved by
the impaired insurer:
(1) Guarantee,
assume or reinsure, or cause to be guaranteed, assumed, or reinsured, any
or all of the policies or contracts of the
impaired insurer;
(2) Provide the
monies, pledges, loans, notes, guarantees or other means that are proper
to effectuate subdivision (1) of this subsection
and assure payment of the contractual obligations
of the impaired insurer pending action under
subdivision (1) of this subsection. ; or
(3) Loan money
to the impaired insurer.
(b) (1) If a
member insurer is an impaired insurer, whether domestic, foreign or alien,
and the insurer is not paying claims in a timely
manner, then subject to the preconditions
specified in subdivision (2) of this subsection,
the association shall, in its discretion, either:
(i) Take any
of the actions specified in subsection (a) of this section, subject to the
conditions in subsection (a) of this section; or
(ii) Provide
substitute benefits in lieu of the contractual obligations of the impaired
insurer solely for health claims, periodic
annuity benefit payments, death benefits, supplemental
benefits, and cash withdrawals for policy or
contract owners who petition for those benefits under
claims of emergency or hardship in accordance
with standards proposed by the association and
approved by the commissioner.
(2) The
association shall be subject to the requirements of subdivision (1) of this
subsection only if:
(i) The laws
of its state of domicile provide that until all payments of or on account of
the impaired insurer's contractual obligations
by all guaranty associations, along with all expenses
of the guaranty associations and interest on all
such payments and expenses, shall have been
repaid to the guaranty associations or a plan of
repayment by the impaired insurer shall have been
approved by the guaranty associations:
(A) The delinquency
proceeding shall not be dismissed;
(B) Neither
the impaired insurer nor its assets shall be returned to the control of its
shareholders or private management;
(C) It shall
not be permitted to solicit or accept new business or have any suspended or
revoked license restored; and
(ii) (A) The
impaired insurer is a domestic insurer, and it has been placed under an order
of rehabilitation by a court of competent
jurisdiction in this state; or
(B) The
impaired insurer is a foreign or alien insurer, and
(I) It has
been prohibited from soliciting or accepting new business in this state;
(II) Its
certificate of authority has been suspended or revoked in this state; and
(III) A
petition for rehabilitation or liquidation has been filed in a court of
competent
jurisdiction in its state of domicile by the
commissioner of the state.
(c) (b)
If a member insurer is an insolvent insurer, the association shall, in its
discretion,
either:
(1)(i) (A)
Guaranty, assume or reinsure, or cause to be guaranteed, assumed or reinsured,
the policies or contracts of the insolvent
insurer; or
(ii) (B)
Assure payment of the contractual obligations of the insolvent insurer; and
(iii) (ii)
Provide the monies, pledges, loans, notes, guarantees, or other
means that are
reasonably necessary to discharge those the
association's duties; or
(2) With
respect only to life and health insurance policies, provide Provide
benefits and
coverages in accordance with subsection (d)
of this section. the following provisions:
(d) When
proceeding under paragraph (b)(1)(ii) or subdivision (c)(2) of this section,
the
association shall, with respect to only life and
health insurance policies:
(1) (i)
Assure With respect to life and health insurance policies and
annuities, assure
payment of benefits for premiums identical to
the premiums and benefits (except for terms of
conversion and renewability) that would have
been payable under the policies or contracts of the
insolvent insurer, for claims incurred:
(i) (A)
With respect to group policies and contracts, not later than the earlier
of the next
renewal date under such policies or contracts or
forty-five (45) days, but in no event less than
thirty (30) days after the date on which the
association becomes obligated with respect to the
policies or contracts;
(ii) (B)
With respect to individual nongroup policies, contracts and
annuities not later
than the earlier of the next renewal date (if any)
under the policies or contracts or one year, but in
no event less than thirty (30) days from the
date on which the association becomes obligated with
respect to the policies and contracts;
(2) (ii)
Make diligent efforts to provide all known insured or group policyholders
annuitants (for non-group policies and
contracts) or group policy owners with respect to group
policies or contracts thirty (30) days
notice of the termination (pursuant to subparagraph (i) of this
paragraph) of the benefits provided; and
(3) (iii)
With respect to individual nongroup life and health insurance
policies and
annuities covered by the association, make available to each
known insured or annuitant, or
owner if other than the insured, or annuitant
and with respect to an individual formerly insured or
formerly an annuitant under a group policy
who is not eligible for replacement group coverage,
make available substitute coverage on an
individual basis in accordance with the provisions of
subdivision (4) (iv) of this
subsection, if the insureds or annuitants had a right under law or the
terminated policy to convert coverage to
individual coverage or to continue an individual policy
or annuity in force until a specified age or for a
specified time, during which the insurer had no
right unilaterally to make changes in any
provision of the policy or annuity or had a right only to
make changes in premium by class.;
(4) (i) (iv)(A)
In providing the substitute coverage required under subdivision (3) (iii)
of
this subsection, the association may offer
either to reissue the terminated coverage or to issue an
alternative policy.
(B) (ii)
Alternative or reissued policies shall be offered without requiring evidence of
insurability, and shall not provide for any
waiting period or exclusion that would not have applied
under the terminated policy.
(iii) (C)
The association may reinsure any alternative or reissued policy.
(5) (i) (v)(A)
Alternative policies adopted by the association shall be subject to the
approval of the domiciliary insurance
commissioner and the receivership court. The association
may adopt alternative policies of various types
for future issuance without regard to any particular
impairment or insolvency.
(ii) (B)
Alternative policies shall contain at least the minimum statutory provisions
required in this state and provide benefits that
shall not be unreasonable in relation to the
premium charged. The association shall set the premium
in accordance with a table of rates which
it shall adopt. The premium shall reflect the
amount of insurance to be provided and the age and
class of risk of each insured, but shall not
reflect any changes in the health of the insured after the
original policy was last underwritten.
(iii) (C)
Any alternative policy issued by the association shall provide coverage of a
type
similar to that of the policy issued by the
impaired or insolvent insurer, as determined by the
association.
(6) (vi)
If the association elects to reissue terminated coverage at a premium rate
different from that charged under the terminated
policy, the premium shall be set by the
association in accordance with the amount of
insurance provided and the age and class of risk,
subject to approval of the commissioner or by
a court of competent jurisdiction. domiciliary
insurance commissioner and the receivership
court.
(7) (vii)
The association's obligations with respect to coverage under any policy of the
impaired or insolvent insurer or under any
reissued or alternative policy shall cease on the date
such coverage or policy is replaced by another
similar policy by the policyholder policy owner,
the insured, or the association.
(e) (viii)
When proceeding under paragraph (b)(1)(ii) or subsection (c) (2)
of this section
with respect to any policy or contract carrying
guaranteed minimum interest rates, the association
shall assure the payment or crediting of a rate
of interest consistent with section 27-34.3-
3(b)(2)(iii).
(f) (c)
Nonpayment of premiums within thirty-one (31) days after the date required
under
the terms of any guaranteed, assumed,
alternative or reissued policy or contract or substitute
coverage shall terminate the association's obligations
under the policy or coverage under this
chapter with respect to the policy or coverage,
except with respect to any claims incurred or any
net cash surrender value which may be due in
accordance with the provisions of this chapter.
(g) (d)
Premiums due for coverage after entry of an order of liquidation of an
insolvent
insurer shall belong to and be payable at the
direction of the association, and the association shall
be liable for unearned premiums due to policy or
contract owners arising after the entry of the
order.
(h) (e)
The protection provided by this chapter shall not apply where any guaranty
protection is provided to residents of this
state by laws of the domiciliary state or jurisdiction of
the impaired or insolvent insurer other then
this state.
(i) (f)
In carrying out its duties under subsections (b) and (c) of this
section, the
association may, subject to approval by the
court:
(1) Impose
Subject to approval by a court of competent jurisdiction in this state,
impose
permanent policy or contract liens in connection
with any guarantee, assumption or reinsurance
agreement, if the association finds that the
amounts which can be assessed under this chapter are
less than the amounts needed to assure full and prompt
performance of the association's duties
under this chapter, or that the economic or
financial conditions as they affect member insurers are
sufficiently adverse to render the imposition of
such permanent policy or contract liens, to be in
the public interest; and/or
(2) Impose
Subject to approval by a court of competent jurisdiction in this state,
impose
temporary moratoriums or liens on payments of
cash values and policy loans, or any other right to
withdraw funds held in conjunction with policies
or contracts, in addition to any contractual
provisions for deferral of cash or policy loan
value. In addition, in the event of a temporary
moratorium or moratorium charge imposed by the
receivership court on payment of cash values
or policy loans, or on any other right to
withdraw funds held in conjunction with policies or
contracts, out of the assets of the impaired or
insolvent insurer, the association may defer the
payment of such cash values, policy loans or
other rights by the association for the period of the
moratorium or moratorium charge imposed by the
receivership court, except for claims covered
by the association to be paid in accordance with
a hardship procedure established by the
liquidator or rehabilitator and approved by the
receivership court.
(g) A deposit
in this state, held pursuant to law or required by the commissioner for the
benefit of creditors, including policy owners,
not turned over to the domiciliary liquidator upon
the entry of a final order of liquidation or
order approving a rehabilitation plan of an insurer
domiciled in this state or in a reciprocal
state, pursuant to section 27-14.3-56, shall be promptly
paid to the association. The association shall
be entitled to retain a portion of any amounts so
paid to it equal to the percentage determined by
dividing the aggregate amount of policy owners'
claims related to that insolvency for which the
association has provided statutory benefits by the
aggregate amount of all policy owners' claims in
this state related to that insolvency and shall
remit to the domiciliary receiver the amount so
paid to the association and retained pursuant to
this subsection. Any amount so paid to the
association less the amount retained by it shall be
treated as a distribution of estate assets
pursuant to section 27-14.3-38 or similar provision of the
state of domicile of the impaired or insolvent
insurer.
(j) (h)
If the association fails to act within a reasonable period of time with
respect to an
insolvent insurer, as provided in
subsections
(b)(1)(ii), (c),
and (d) of this section, the
commissioner shall have the powers and duties of
the association under this chapter with respect
to impaired or the insolvent
insurers.
(k) (i)
The association may render assistance and advice to the commissioner, upon his
the commissioner's request, concerning
rehabilitation, payment of claims, continuance of
coverage, or the performance of other
contractual obligations of any impaired or insolvent
insurer.
(l) (j)
The association shall have standing to appear or intervene before any
court or
agency in this state with jurisdiction over an
impaired or insolvent insurer concerning which the
association is or may become obligated under
this chapter or with jurisdiction over any person or
property against whom the association may have
rights through subrogation or otherwise. This
standing Standing shall extend to all matters
germane to the powers and duties of the association,
including, but not limited to, proposals for
reinsuring, modifying or guaranteeing the policies or
contracts of the impaired or insolvent insurer
and the determination of the polices or contracts and
contractual obligations. The association shall
also have the right to appear or intervene before a
court or agency in another state with
jurisdiction over an impaired or insolvent insurer for which
the association is or may become obligated or
with jurisdiction over a third party any person or
property against whom the association may have rights
through subrogation of the insurer's
policyholders or otherwise.
(m) (k)
(1) Any A person receiving benefits under this chapter shall be
deemed to have
assigned the rights under, and any causes of
action against any person for losses arising under,
resulting from or otherwise relating to, the
covered policy or contract to the association to the
extent of the benefits received because of this
chapter, whether the benefits are payments of or on
account of contractual obligations, continuation
of coverage or provision of substitute or
alternative coverage. The association may
require an assignment to it of these rights and cause
causes of action by any payee, policy or contract
owner, beneficiary, insured or annuitant as a
condition precedent to the receipt of any right
or benefits conferred by this chapter upon this the
person.
(2) The
subrogation rights of the association under this subsection shall have the same
priority against the assets of the impaired or
insolvent insurer as that possessed by the person
entitled to receive benefits under this chapter.
(3) In addition
to subdivisions (1) and (2) of this subsection, the association shall have
all common law rights of subrogation and any
other equitable or legal remedy which that would
have been available to the impaired or insolvent
insurer or holder owner, beneficiary or payee, of
a policy or contract with respect to the policy
or contract. contracts including without limitation,
in the case of a structured settlement annuity,
any rights of the owner, beneficiary or payee of the
annuity, to the extent of benefits received
pursuant to this chapter, against a person originally or
by succession responsible for the losses arising
from the personal injury relating to the annuity or
payment therefore, excepting any such person
responsible solely by reason of serving as an
assignee in respect of a qualified assignment
under section 130 of the United States Internal
Revenue Code, 26 U.S.C. section 130.
(4) If the
preceding provisions of this subsection are invalid or ineffective with respect
to
any person or claim for any reason, the amount
payable by the association with respect to the
related covered obligations shall be reduced by
the amount realized by any other person with
respect to the person or claim that is
attributable to the policies, or portion thereof, covered by the
association.
(5) If the
association has provided benefits with respect to a covered obligation and a
person recovers amounts to which the association
has rights as described in the preceding
paragraphs of this subsection, the person shall
pay to the association the portion of the recovery
attributable to the policies, or portions
thereof, covered by the association.
(n) (l)
The In addition to the rights and powers provided in this chapter,
the association
may:
(1) Enter into
any contracts as are necessary or proper to carry out the provisions and
purposes of this chapter;
(2) Sue or be
sued, including taking any legal actions necessary or proper to recover any
unpaid assessments under section 27-34.3-9 and
to settle claims or potential claims against it;
(3) Borrow money
to effect the purposes of this chapter; any notes or other evidence of
indebtedness of the association not in default
shall be legal investments for domestic insurers and
may be carried as admitted assets;
(4) Employ or
retain persons as are necessary or appropriate to handle the
financial
transactions of the association, and to perform
any other functions that as become necessary or
proper under this chapter;
(5) Take any
such legal action that may be necessary or appropriate to avoid or
recover
payment of improper claims;
(6) Exercise, for
the purposes of this chapter and to the extent approved by the
commissioner, the powers of a domestic life or
health insurer, but in no case may the association
issue insurance policies or annuity contracts
other than those issued to perform its obligations
under this chapter.;
(7) Organize
itself as a corporation or another legal form permitted by the laws of this
state;
(8) Request
information from a person seeking coverage from the association in order to
aid the association in determining its
obligations under this chapter with respect to the person, and
the person shall promptly comply with the
request; and
(9) Take other
necessary or appropriate action to discharge its duties and obligations
under this chapter or to exercise its powers
under this chapter,
(o) (m)
The association may join an organization of one or more other state
associations
of similar purposes, to further the purposes and
administer the powers and duties of the
association.
(n)(1) At any
time within one year after the date on which the association becomes
responsible for the obligations of a member
insurer (the coverage date), the association may elect
to succeed to the rights and obligations of the
member insurer, that accrue on or after the
coverage date and that relate to contracts
covered, in whole or in part, by the association, under
any one or more indemnity reinsurance agreements
entered into by the member insurer as a
ceding insurer and selected by the association.
However, the association may not exercise an
election with respect to a reinsurance agreement
if the receiver, rehabilitator or liquidator of the
member insurer has previously and expressly
disaffirmed the reinsurance agreement. The
election shall be effected by a notice to the
receiver, rehabilitator or liquidator and to the affected
reinsurers. If the association makes an election,
subparagraphs (i) through (iv) below shall apply
with respect to the agreements selected by the
association:
(i) The
association shall be responsible for all unpaid premiums due under the
agreements
(for periods both before and after the coverage
date), and shall be responsible for the performance
of all other obligations to be performed after
the coverage date, in each case which relate to
contracts covered, in whole or in part, by the
association. The association may charge contracts
covered in part by the association, through
reasonable allocation methods, the costs for
reinsurance in excess of the obligations of the
association;
(ii) The
association shall be entitled to any amounts payable by the reinsurer under the
agreements with respect to losses or events that
occur in periods after the coverage date and that
relate to contracts covered by the association,
in whole or in part, provided, that, upon receipt of
any such amounts, the association shall be
obliged to pay to the beneficiary under the policy or
contract on account of which the amounts were
paid a portion of the amount equal to the excess
of:
(A) The amount
received by the association; over
(B) The
benefits paid by the association on account of the policy or contract less the
retention of the impaired or insolvent member
insurer applicable to the loss or event;
(iii) Within
thirty (30) days following the association's election, the association and each
indemnity reinsurer shall calculate the net balance
due to or from the association under each such
reinsurance agreement as of the date of the
association's election, giving full credit to all items
paid by either the member insurer (or its
receiver, rehabilitator or liquidator) or the indemnity
reinsurer during the period between the coverage
date and the date of the association's election.
Either the association or indemnity reinsurer
shall pay the net balance due the other within five
(5) days of the completion of the aforementioned
calculation. If the receiver, rehabilitator or
liquidator has received any amounts due the
association pursuant to subparagraph (ii), the
receiver, rehabilitator or liquidator shall
remit the same to the association as promptly as
practicable.
(iv) If the
association, within sixty (60) days of the election, pays the premiums due for
periods both before and after the coverage date,
that relate to contracts covered by the association,
(in whole or in part), the reinsurer shall not be
entitled to terminate the reinsurance agreements
insofar as the agreements relate to contracts
covered by the association, (in whole or in part) and
shall not be entitled to set off any unpaid
premium due for periods prior to the coverage date
against amounts due to the association.
(2) In the
event the association transfers its obligations to another insurer, and if the
association and the other insurer agree, the
other insurer shall succeed to the rights and
obligations of the association under paragraph
(1) effective as of the date agreed upon by the
association and the other insurer and regardless
of whether the association has made an election
referred to above in paragraph (1) provided
that:
(i) The
indemnity reinsurance agreements shall automatically terminate for new
reinsurance unless the indemnity reinsurer and
the other insurer agree to the contrary;
(ii) The
obligations described in paragraph (1)(ii) of this subsection shall not apply
on
and after the date the indemnity reinsurance
agreement is transferred to the third-party insurer;
(iii) This
paragraph (2) shall not apply if the association has previously expressly
determined in writing that it will not exercise
the election referred to in paragraph (1);
(3) The
provisions of subsection (n) shall supercede the provisions of any law of this
state
or of any affected reinsurance agreement that
provides for or requires any payment of reinsurance
proceeds, on account of losses or events that
occur in periods after the coverage date, to the
receiver, liquidator or rehabilitator of the
insolvent member insurer. The receiver, rehabilitator or
liquidator shall remain entitled to any amounts
payable by the reinsurer under the reinsurance
agreement with respect to losses or events that
occur in periods prior to the coverage date (subject
to applicable setoff provisions); and
(4) Except as
otherwise expressly provided in this chapter, nothing herein shall:
(i) Alter or
modify the terms and conditions of the indemnity reinsurance agreements of
the insolvent member insurer; or
(ii) Abrogate
or limit any rights of any reinsurer to claim that it is entitled to rescind a
reinsurance agreement; or
(iii) Shall
give a policy owner or beneficiary an independent cause of action against an
indemnity reinsurer that is not otherwise set
forth in the indemnity reinsurance agreement.
(o) The board
of directors of the association shall have discretion and shall exercise
reasonable business judgment to determine the
means by which the association is to provide the
benefits of this chapter in an economical and
efficient manner.
(p) Where the
association has arranged or offered to provide the benefits of this chapter
to a covered person under a plan or arrangement
that fulfills the association's obligations under
this chapter, the person shall not be entitled
to benefits from the association in addition to or other
than those provided under the plan or
arrangement.
(q) In carrying
out its duties in connection with guaranteeing, assuming or reinsuring
policies or contracts under subsection (a) or
(b) of this section, the association may, subject to
approval of the receivership court, issue
substitute coverage for a policy or contract that provides
an interest rate, crediting rate or similar
factor determined by use of an index or other external
reference stated in the policy or contract
employed in calculating returns or changes in value by
issuing an alternative policy or contract in
accordance with the following provisions:
(1) In lieu of
the index or other external reference provided for in the original policy or
contract, the alternative policy or contract
provides for:
(i) a fixed
interest rate; or
(ii) payment of
dividends with minimum guarantees; or
(iii) a
different method of calculating interest or changes in value.
(2) There is no
requirement for evidence of insurability, waiting period or other exclusion
that would not have applied under the replaced
policy or contract; and
(3) The
alternative policy or contract is substantially similar to the replaced policy
or
contract in all other material terms.
27-34.3-9.
Assessments. -- (a) For the purpose of providing the funds necessary to
carry
out the powers and duties of the association,
the board of directors shall assess the member
insurers, separately for each account, at that
such time and for such amounts as the board finds
necessary. Assessments shall be due not less
than thirty (30) days after prior written notice to the
member insurers and shall accrue interest at
nine percent (9%) per annum on and after the due
date.
(b) There shall
be two (2) classes of assessments, as follows:
(1) Class A assessments
shall be made authorized and called for the purpose of meeting
administrative and legal costs and other
expenses and examinations conducted under the authority
of section 27-34.3-12(5). Class A assessments
may be made authorized and called whether or not
related to a particular impaired or insolvent
insurer.
(2) Class B
assessments shall be made authorized and called to the extent
necessary to
carry out the powers and duties of the
association under section 27-34.3-8 with regard to an
impaired or an insolvent insurer.
(c) (1) The
amount of any Class A assessment shall be determined by the board and may
be made authorized and called on a
pro rata or non-pro rata basis. If pro rata, the board may
provide that it be credited against future Class
B assessments. A The total of all non-pro rata
assessment shall not exceed one hundred fifty
dollars ($150) per member insurer in any one
calendar year. The amount of any Class B
assessment shall be allocated for assessment purposes
among the accounts pursuant to an allocation
formula that may be based on the premiums or
reserves of the impaired or insolvent insurer or
any other standard deemed by the board in its sole
discretion as being fair and reasonable under
the circumstances.
(2) Class B
assessments against member insurers for each account and subaccount shall
be in the proportion that the premiums received
on business in this state by each assessed member
insurer or policies or contracts covered by each
account for the three (3) most recent calendar
years for which information is available
preceding the year in which the insurer became impaired
or insolvent, as the case may be, (or,
in the case of an assessment with respect to an impaired
insurer, the three (3) most recent calendar
years for which information is available preceding the
year in which the insurer became impaired) bears to the
premiums received on business in this
state for such calendar years by all assessed
member insurers.
(3) Assessments
for funds to meet the requirements of the Association with respect to an
impaired or insolvent insurer shall not be made
authorized or called until necessary to implement
the purposes of this chapter. Classification of
assessments under subsection (b) of this section and
computation of assessments under this subsection
shall be made with a reasonable degree of
accuracy, recognizing that exact determinations
may not always be possible. The association
shall notify each member insurer of its
anticipated pro rata share of an authorized assessment not
yet called within one hundred eighty (180) days
after the assessment is authorized.
(d) The
association may abate or defer, in whole or in part, the assessment of a member
insurer if, in the opinion of the board, payment
of the assessment would endanger the ability of
the member insurer to fulfill its contractual
obligations. In the event an assessment against a
member insurer is abated, or deferred in whole
or in part, the amount by which the assessment is
abated or deferred may be assessed against the
other member insurers in a manner consistent with
the basis for assessments set forth in this
section. Once the conditions which have caused a
deferral have been removed or rectified, the
member insurer shall pay all assessments that were
deferred pursuant to a repayment plan approved
by the association.
(e) (1) (i)
The Subject to the provisions of subparagraph (ii) of this paragraph,
the total of
all assessments upon authorized by the
association with respect to a member insurer for the life
each subaccount of the life insurance and annuity account and
for each subaccount under it the
health account shall not in any one calendar year exceed
three percent (3%) and for the health
account shall not in any one calendar year
exceed three percent (3%) of the insurer's average of
that member insurer's average annual premiums received in
this state on the policies and contracts
covered by the subaccount or account
during the three (3) calendar years preceding the year in
which the insurer became an impaired or
insolvent insurer.
(ii) If two (2)
or more assessments are authorized in one calendar year with respect to
insurers that become impaired or insolvent in
different calendar years, the average annual
premiums for purposes of the aggregate
assessment percentage limitation referenced in
subparagraph (i) of this paragraph shall be
equal and limited to the higher of the three (3) year
average annual premiums for the applicable
subaccount or account as calculated pursuant to this
section.
(iii) If
the maximum assessment, together with the other assets of the association in
any
account, does not provide in any one year in
either account an amount sufficient to carry out the
responsibilities of the association, the
necessary additional funds shall be assessed as soon after
this as permitted by this chapter.
(2) The board may
provide in the plan of operation a method of allocating funds among
claims, whether relating to one or more impaired
or insolvent insurers, when the maximum
assessment will be insufficient to cover
anticipated claims.
(3) If a one
percent (1%) the maximum assessment for any a subaccount
of the life and
annuity account in any one year does not provide
an amount sufficient to carry out the
responsibilities of the association, then
pursuant to subdivision (c)(2) of this section, the board
shall access all assess the other
subaccounts of the life and annuity account for the necessary
additional amount, subject to the maximum stated
in subdivision (1) of this subsection.
(f) The board
may, by an equitable method as established in the plan of operation, refund
to member insurers, in proportion to the
contribution of each insurer to that account, the amount
by which the assets of the account exceed the
amount the board finds is necessary to carry out
during the coming year the obligations of the
association with regard to that account, including
assets accruing from assignment, subrogation,
net realized gains and income from investments. A
reasonable amount may be retained in any account
to provide funds for the continuing expenses
of the association and for future losses claims.
(g) It shall be
proper for any member insurer, in determining its premium rates and
policy owner dividends as to any kind of
insurance within the scope of this chapter, to consider
the amount reasonably necessary to meet its
assessment obligations under this chapter.
(h) The
association shall issue to each insurer paying an assessment under this
chapter,
other than Class A assessment, a certificate of
contribution, in a form prescribed by the
commissioner, for the amount of the assessment
so paid. All outstanding certificates shall be of
equal dignity and priority without reference to
amounts or dates of issue. A certificate of
contribution may be shown by the insurer in its
financial statement as an asset in such form and
for such amount, if any, and period of time as
the commissioner may approve.
(i)(1) A member
insurer that wishes to protest all or part of an assessment shall pay when
due the full amount of the assessment as set
forth in the notice provided by the association. The
payment shall be available to meet association
obligations during the pendency of the protest or
any subsequent appeal. Payment shall be
accompanied by a statement in writing that the payment
is made under protest and setting forth a brief
statement of the grounds for the protest.
(2) Within
sixty (60)_days following the payment of an assessment under protest by a
member insurer, the association shall notify the
member insurer in writing of its determination
with respect to the protest unless the
association notifies the member insurer that additional time
is required to resolve the issues raised by the
protest.
(3) Within
thirty (30) days after a final decision has been made, the association shall
notify the protesting member insurer in writing
of that final decision. Within sixty (60) days of
receipt of notice of the final decision, the
protesting member insurer may appeal that final action
to the commissioner.
(4) In the
alternative to rendering a final decision with respect to a protest based on a
question regarding the assessment base, the
association may refer the protest to the commissioner
for a final decision, with or without a
recommendation from the association.
(5) If the protest
or appeal on the assessment is upheld, the amount paid in error or excess
shall be returned to the member company.
Interest on a refund due a protesting member shall be
paid at the rate actually earned by the
association.
(j) The
association may request information of member insurers in order to aid in the
exercise of its power under this section and
member insurers shall promptly comply with a
request.
27-34.3-10.
Plan of operation. -- (a) (1) The plan of operation as previously
established
and approved under this section 27-34.1-11
shall continue to be effective under this section. The
association may amend the plan of operation and
the amendments shall be when necessary or
suitable to assure the fair, reasonable and
equitable administration of the association.
Amendments shall become effective upon the
commissioner's written approval.
(2) If at any
time the association fails to submit suitable amendments to the plan, the
commissioner shall, after notice and hearing,
adopt and promulgate any reasonable rules
necessary or advisable to effectuate the
provisions of this chapter. The rules shall continue in
force until modified by the commissioner or
superseded by amendments to the plan submitted by
the association and approved by the
commissioner.
(b) All member
insurers shall comply with the plan of operation.
(c) The plan of
operation shall, in addition to requirements enumerated in this chapter:
(1) Establish
procedures for handling the assets of the association;
(2) Establish the
amount and method of reimbursing members of the board of directors
under section 27-34.3-7;
(3) Establish
regular places and times for meetings including telephone conference calls
of the board of directors;
(4) Establish
procedures for records to be kept of all financial transactions of the
association, its agents, and the board of
directors;
(5) Establish the
procedures by which selections for the board of directors will be made
and submitted to the commissioner;
(6) Establish any
additional procedures for assessments under section 27-34.3-9;
(7) Contain
additional provisions necessary or proper for the execution of the powers and
duties of the association.
(d) The plan of
operation may provide that any or all powers and duties of the
association, except those under section
27-34.3-8(m)(l)(3) and section 27-34.3-9, are delegated to
a corporation, association, or other
organization which performs or will perform functions similar
to those of this association, or its equivalent,
in two (2) or more states. This corporation,
association, or organization shall be reimbursed
for any payments made on behalf of the
association and shall be paid for its
performance of any function of the association. A delegation
under this subsection shall take effect only
with the approval of both the board of directors and
the commissioner, and may be made only to a
corporation, association, or organization which
extends protection not substantially less
favorable and effective than that provided by this
chapter.
27-34.3-11.
Duties and powers of the commissioner. -- In addition to the duties and
powers enumerated in this chapter,
(1) (a)
The commissioner shall:
(i) (1)
Upon request of the board of directors, provide the association with a
statement of
the premiums in this and any other appropriate
states for each member insurer;
(ii) (2)
When an impairment is declared and the amount of the impairment is determined,
serve a demand upon the impaired insurer to make
good the impairment within a reasonable time;
notice to the impaired insurer shall constitute
notice to its shareholders, if any; the failure of the
insurer to promptly comply with a demand shall
not excuse the association from the performance
of its powers and duties under this chapter;
(iii) (3)
In any liquidation or rehabilitation proceeding involving a domestic insurer,
be
appointed as the liquidator or rehabilitator.
(2) (b)
The commissioner may suspend or revoke, after notice and hearing, the
certificate
of authority to transact insurance in this state
of any member insurer which fails to pay an
assessment when due or fails to comply with the
plan of operation. As an alternative the
commissioner may levy a forfeiture on any member
insurer which fails to pay an assessment
when due. The forfeiture shall not exceed five
percent (5%) of the unpaid assessment per month,
but no forfeiture shall be less than one hundred
dollars ($100) per month.
(3) (c)
Any A final action of the board of directors or the association
may be appealed to
the commissioner by any member insurer if the
appeal is taken within sixty (60) days of its
receipt of notice of the final action being
appealed. If a member company is appealing an
assessment, the amount assessed shall be paid to
the association and available to meet association
obligations during the pendancy of an appeal. If
the appeal on the assessment is upheld, the
amount paid in error or excess shall be returned
to the member company. Any A final action or
order of the commissioner shall be subject to
judicial review in a court of competent jurisdiction.
(4) (d)
The liquidator, rehabilitator, or conservator of any impaired insurer may
notify all
interested persons of the effect of this
chapter.
27-34.3-12.
Prevention of insolvencies. -- To aid in the detection and prevention
of
insurer insolvencies or impairments:
(1) The
commissioner may, in his or her discretion: (a) It shall be the duty of
the
commissioner:
(i) Notify
(1) To notify the commissioners of all the other states, territories of
the United
States and the District of Columbia within
thirty (30) days following the action taken or the date
the action occurs, when the commissioner
takes any of the following actions against a member
insurer:
(A) (i)
Revocation of license;
(B) (ii)
Suspension of license; or
(C) (iii)
Makes any a formal order that the company restrict its premium
writing, obtain
additional contributions to surplus, withdraw
from the state, reinsure all or any part of its
business, or increase capital, surplus, or any
other account for the security of policyholders policy
owners or creditors.
(ii) Report
(2) To report to the board of directors when the commissioner has taken
any
of the actions set forth in paragraph (i) of
this subdivision or has received a report from any other
commissioner indicating that this action has
been taken in another state. The report to the board
of directors shall contain all significant
details of the action taken or the report received from
another commissioner.
(iii) Report
(3) To report to the board of directors when the commissioner has
reasonable
cause to believe from any examination, whether
completed or in process, of any member
company that the company may be an impaired or
insolvent insurer.
(iv) Furnish
(4) To furnish to the board of directors the NAIC insurance regulatory
information system (IRIS) ratios and listings of
companies not included in the ratios developed by
the National Association of Insurance
Commissioners national association of insurance
commissioners, and the board may use the information
contained in the ratios and listings in
carrying out its duties and responsibilities
under this section. The report and the information
contained in it shall be kept confidential by
the board of directors until the time it is made public
by the commissioner or other lawful authority.
(2) (b)
The commissioner may seek the advice and recommendations of the board of
directors concerning any matter affecting his
the duties and responsibilities of the commissioner
regarding the financial condition of member insurers
and companies seeking admission to
transact insurance business in this state.
(3) (c)
The board of directors may, upon majority vote, make reports and
recommendations to the commissioner upon any
matter germane to the solvency, liquidation,
rehabilitation or conservation of any member
insurer or germane to the solvency of any company
seeking to do an insurance business in this
state. The reports and recommendations shall not be
considered public documents.
(4) It shall
be the duty of the (d) The board of directors may, upon
majority vote, to
notify the commissioner of any information
indicating any a member insurer may be an impaired
or insolvent insurer.
(5) The board of
directors may, upon majority vote, request that the commissioner order
an examination of any member insurer which the
board in good faith believes may be an impaired
or insolvent insurer. Within thirty (30) days of
the receipt of the request, the commissioner shall
begin an examination. The examination may be
conducted as a National Association of Insurance
Commissioners examination or may be conducted by
persons the commissioner designates. The
cost of the examination shall be paid by the
association and the examination report shall be
treated as are other examination reports. The
commissioner shall notify the board of directors
when the examination is completed. The request
for an examination shall be kept on file by the
commissioner, but it shall not be open to public
inspection prior to the release of the examination
report to the public.
(6) (e)
The board of directors may, upon majority vote, make recommendations to the
commissioner for the detection and prevention of
insurer insolvencies.
(7) The board
of directors shall, at the conclusion of any insurer insolvency in which the
association was obligated to pay covered claims,
prepare a report to the commissioner containing
any information as it may have in its possession
bearing on the history and causes of the
insolvency. The board shall cooperate with the
boards of directors of guaranty associations in
other states in preparing a report on the
history and causes of insolvency of a particular insurer,
and may adopt by reference any report prepared
by other associations.
27-34.3-14.
Miscellaneous provisions. -- (a) Nothing in this This
chapter shall be
construed to reduce the liability for unpaid
assessments of the insureds of an impaired or
insolvent insurer operating under a plan with
assessment liability.
(b) Records shall
be kept of all negotiations and meetings in which the association or
its
representatives are involved of the board of
directors to discuss the activities of the association in
carrying out its powers and duties under section
27-34.3-8. Records of the negotiations or
meetings shall be made public only upon The records of the
association with respect to an
impaired or insolvent insurer shall not be
disclosed prior to
the termination of a liquidation,
rehabilitation or conservation proceeding
involving the impaired or insolvent insurer, upon the
termination of the impairment or insolvency of
the insurer, or upon the order of a court of
competent jurisdiction. Nothing in this
subsection shall limit the duty of the association to render
a report of its activities under section
27-34.3-15.
(c) For the
purpose of carrying out its obligations under this chapter, the association
shall
be deemed to be a creditor of the impaired or
insolvent insurer to the extent of assets attributable
to covered policies reduced by any amounts to
which the association is entitled as subrogee
pursuant to section 27-34.3-8(m)(k).
Assets of the impaired or insolvent insurer attributable to
covered policies shall be used to continue all
covered policies and pay all contractual obligations
of the impaired or insolvent insurer as required
by this chapter. Assets attributable to covered
policies, as used in this subsection, are that
proportion of the assets which the reserves that should
have been established for covered policies bear
to the reserves that should have been established
for all policies of insurance written by the
impaired or insolvent insurer.
(d)As a
creditor of the impaired or insolvent insurer as established in subsection (c)
of
this section and consistent with section
27-14.3-38, the association and other similar associations
shall be entitled to receive a disbursement of
assets out of the marshalled assets, from time to time
as the assets become available to reimburse it,
as a credit against contractual obligations under
this chapter. If the liquidator has not, within
one hundred twenty (120) days of a final
determination of insolvency of an insurer by the
receivership court, made an application to the
court for the approval of a proposal to disperse
assets out of marshalled assets to guaranty
associations having obligations because of the
insolvency, then the association shall be entitled to
make application to the receivership court for
approval of its own proposal to disburse these
assets.
(d) (e)
(1) Prior to the termination of any liquidation, rehabilitation or conservation
proceeding, the court may take into consideration
the contributions of the respective parties,
including the association, the shareholders, and
policy owners of the insolvent insurer, and any
other party with a bona fide interest, in making
an equitable distribution of the ownership rights
of the insolvent insurer. In that determination,
consideration shall be given to the welfare of the
policyholders policy owners of the continuing
or successor insurer.
(2) No
distribution to stockholders, if any, of an impaired or insolvent insurer shall
be
made until and unless the total amount of valid
claims of the association with interest on the
claims for funds expended in carrying out it
powers and duties under section 27-34.3-8 with
respect to the insurer have been fully recovered
by the association.
(e) (f)
(1) If an order for liquidation or rehabilitation of an insurer domiciled in
this state
has been entered, the receiver appointed under
the order shall have a right to recover on behalf of
the insurer, from any affiliate that controlled
it, the amount of distributions, other than stock
dividends paid by the insurer on its capital
stock, made at any time during the five (5) years
preceding the petition for liquidation or
rehabilitation subject to the limitations of subdivisions (2)
-- (4) of this subsection.
(2) No
distribution shall be recoverable if the insurer shows that when paid the
distribution was lawful and reasonable, and that
the insurer did not know and could not
reasonably have known that the distribution
might adversely affect the ability of the insurer to
fulfill its contractual obligations.
(3) Any person
who was an affiliate who that controlled the insurer at the time
the
distributions were paid shall be liable up to
the amount of distributions received. Any person who
was an affiliate who that
controlled the insurer at the time the distributions were declared, shall be
liable up to the amount of distributions which
would have been received if they had been paid
immediately. If two (2) or more persons are
liable with respect to the same distributions, they
shall be jointly and severally liable.
(4) The maximum
amount recoverable under this subsection shall be the amount needed
in excess of all other available assets of the
insolvent insurer to pay the contractual obligations of
the insolvent insurer.
(5) If any person
liable under subdivision (3) of this subsection is insolvent, all its
affiliates that controlled it at the time the
distribution was paid, shall be jointly and severally
liable for any resulting deficiency in the
amount recovered from the insolvent affiliate.
27-34.3-15.
Examination of the association -- Annual report. -- The association
shall
be subject to examination and regulation by the
commissioner. The board of directors shall
submit to the commissioner each year, not later
than one hundred twenty (120) days after the
association's fiscal year, a financial report in
a form approved by the commissioner and a report
of its activities during the preceding fiscal
year. Upon the request of a member insurer, the
association shall provide the member insurer
with a copy of the report.
27-34.3-19. Prohibited
advertisement of insurance guaranty association act in
insurance sales. Prohibited advertisement
of insurance guaranty association act in
insurance sales – Notice to policy owners. – (a) No person,
including an insurer, agent,
producer, or affiliate of an insurer shall make,
publish, disseminate, circulate or place before the
public, or cause directly or indirectly, to be
made, published, disseminated, circulated or placed
before the public, in any newspaper, magazine or
other publication, or in the form of a notice,
circular, pamphlet, letter or poster, or in
the form of e-mail or an electronic website, or over any
radio station or television station, or in any
other way, any advertisement, announcement or
statement, written or oral, which uses the
existence of the insurance guaranty association of this
state for the purpose of sales, solicitation or
inducement to purchase any form of insurance
covered by the Rhode Island life and health
insurance guaranty association act; provided, that this
section shall not apply to the Rhode Island
life and health insurance guaranty association or any
other entity which does not sell or solicit
insurance. The use of the protection afforded by this
chapter, other than as provided by this section,
by any person in the sale, marketing or advertising
of insurance constitutes unfair methods of competition
and unfair or deceptive acts or practices
under chapter 29 of this title and is subject to
the sanctions imposed in that chapter.
(b) The
association shall prepare a summary document describing the general purposes
and current limitations of this chapter in
compliance with subsection (c) of this section. This
document shall be submitted to the commissioner
for approval. At the expiration of the sixty (60)
days after the date on which the commissioner
approves the document, an insurer may not deliver
a policy or contract to a policy or contract
owner unless the summary document is delivered to
the policy or contract owner at the time of
delivery of the policy or contract. The document shall
also be available upon request by a policy
owner. The distribution, delivery or contents or
interpretation of this document does not
guarantee that either the policy or the contract or the
owner of the policy or contract is covered in
the event of the impairment or insolvency of a
member insurer. The summary document shall be
revised by the association as amendments to
this chapter may require. Failure to receive
this document does not give the policy owner,
contract owner, certificate holder or insured
any greater rights than those stated in this act.
(c) The summary
document prepared under subsection (b) of this section shall contain a
clear and conspicuous disclaimer on its face.
The commissioner shall establish the form and
content of the disclaimer. The disclaimer shall:
(1) State the
name and address of the association and the insurance department;
(2) Prominently
warn the policy or contract owner that the association may not cover the
policy or, if coverage is available, it will be
subject to substantial limitations and exclusions and
conditioned on continued residence in this
state;
(3) State the
types of policies for which guaranty funds will provide coverage;
(4) State that
the insurer and its agents are prohibited by law from using the existence of
the association for the purpose of sales,
solicitation or inducement to purchase any form of
insurance;
(5) State that
the policy or contract owner should not rely on coverage under the
association when selecting an insurer;
(6) Explain
rights available and procedures for filing a complaint to allege a violation of
any provisions of this chapter; and
(7) Provide
other information as directed by the commissioner including, but not limited
to, sources for information about the financial
condition of insurers provided that the information
is not proprietary and is subject to disclosure
under chapter 2 of title 38.
(d) A member
insurer shall retain evidence of compliance with subsection (b) for so long
as the policy or contract for which the notice
is given remains in effect.
27-34.3-20.
Prospective application. -- This chapter shall not apply to any insurer
that is
insolvent or unable to fulfill its contractual
obligations prior to the effective date of this chapter.
The January 1, 1996, and any such insurer
shall be subject to the provisions under chapter 34.1 of
this title. Nothing in this chapter shall be
construed to require an insurer to recompute its
assessment bases for any year prior to January
1, 2005, and any assessment bases computed
between January 1, 1966 and December 31, 2004
are hereby acknowledged and recognized as
factual on the basis of premium date collected
from or reported by member insurers with respect
to those years.
SECTION 2. The
amendments to section 27-34.3(2), 27-34.3-3(a)(3), 27-34.3-3(a)(4),
27-34.3-3(b)(2)(viii), 27-34.3-3(c)(2)(iv)(B),
27-34.3-4, 27-34.3-5(17)(ii), 27-34.3-8(b), 27-34.3-
8(g), 27-34.3-8(n), and 27-34.3-9(e) in this act
shall apply to the association's rights and
obligations with respect to such insurers that
become insolvent or impaired on or after January 1,
2005.
The remaining
provisions of this act shall take effect upon passage and shall apply to
insurers that become insolvent or impaired on or
after January 1, 1996.
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LC02477
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