Chapter 157
2011 -- H 5771
Enacted 06/30/11
A N A C T
RELATING TO INSURANCE
Introduced By: Representatives Tomasso, O`Grady, Ruggiero, Guthrie, and
Dickinson
Date Introduced: March 03, 2011
It is enacted by the
General Assembly as follows:
SECTION 1. Sections 27-14.1-1, 27-14.1-3, 27-14.1-4 and
27-14.1-6 of the General
Laws in Chapter 27-14.1
entitled "Administrative Supervision" are hereby amended to read as
follows:
27-14.1-1.
Definitions. -- As used in this chapter:
(1) "Consent"
means agreement to administrative supervision by the insurer;
(2) "Exceeded its
powers" means the following conditions:
(i)
The insurer has refused to permit examination of its books, papers, accounts,
records,
or affairs by the commissioner, his or her deputies,
employees or duly commissioned examiners;
(ii) A domestic insurer
has unlawfully removed from this state books, papers,
accounts,
or records necessary for an examination of the insurer;
(iii) The insurer has
failed to promptly comply with the applicable financial reporting
statutes or rules and departmental requests relating to
those statutes or rules thereto;
(iv)
The insurer has neglected or refused to observe an order of the
commissioner to
make good, within a the time prescribed time
by law, any prohibited deficiency in its capital,
capital stock or surplus;
(v) The insurer is
continuing to transact insurance or write business after its license has
been revoked or suspended by the commissioner;
(vi)
The insurer, by contract or otherwise, has unlawfully or has in
violation of an order
of the commissioner or has without first having obtained
written approval of the commissioner if
approval is required by law:
(A) Totally reinsured
its entire outstanding business; or
(B) Merged or
consolidated substantially its entire property or business with another
insurer;
(vii) The insurer
engaged in any transaction in which it is not authorized to engage under
the laws of this state; or
(viii) The insurer
refused to comply with a lawful order of the commissioner;
(3) "Insurer"
means and includes every person subject to the provisions of this title
engaged as indemnitor, surety or
contractor in the business of entering into contracts of insurance
or of annuities
as limited to:
(i)
Any insurer who is doing an insurer business, or has transacted insurance in
this state,
and against whom claims arising from that transaction may
exist now or in the future; and
(ii) Any fraternal
benefit society which is subject to the provisions of this title; and
(4)(iii) Any
insurer writing "Mono mono
line business" for the purposes of this title
means either a stock or mutual insurance company, whether
foreign or domestic which means
any
insurer, which deals exclusively in surety bonding.
27-14.1-3. Notice
to comply with written requirements of commissioner --
Noncompliance --
Administrative supervision. -- (a) An insurer may be subject to
administrative supervision by the commissioner if upon examination
or at any other time it
appears in the commissioner's discretion that:
(1) The insurer's
condition renders the continuance of its business hazardous to the
public or to its insured;
(2) The insurer appears
to have exceeded its powers granted under its certificate of
authority and applicable law;
(3) The insurer has
failed to comply with the applicable provisions of the insurance code;
(4) The business of the
insurer is being conducted fraudulently; or
(5) The insurer gives
its consent.
(b) If the commissioner
determines that the conditions set forth in subsection (a) of this
section exist, the commissioner shall:
(1) Notify the insurer
of his or her determination;
(2) Furnish
to the insurer a written list of the requirements to abate this determination;
and
(3) Notify the insurer
that it is under the supervision of the commissioner and that the
commissioner is applying and effectuating the provisions of the
this chapter. The action by the
commissioner shall be subject to review pursuant to applicable
state administrative procedures
under the Administrative Procedures Act, chapter 35 of
title 42.
(c) If placed under
administrative supervision, the insurer shall have sixty (60) days, or
another period of time as designated by the commissioner, to
comply with the requirements of the
commissioner subject to the provisions of this chapter.
(d) If it is determined
after notice and hearing that the conditions giving rise to the
supervision still exist at the end of the supervision period
specified in subsection (c) of this
section, the commissioner may extend the period.
(e) If it is determined
that none of the conditions giving rise to the supervision exist, the
commissioner shall release the insurer from supervision.
27-14.1-4.
Confidentiality of certain proceedings and records. --
(a) Notwithstanding
any other provision of law and except as set forth in
this section, proceedings, hearings, notices,
correspondence, reports, records, and other information in the
possession of the commissioner or
the department of business regulation relating to the
supervision of any insurer are confidential
except as provided by this section.
(b) The personnel of
the department of business regulation shall have access to these
proceedings, hearings, notices, correspondence, reports, records,
or information as permitted by
the commissioner.
(c) The commissioner
may open the proceedings or hearings or disclose the notices,
correspondence, reports, records, or information to a department,
agency, or instrumentality of
this or another state or of the
necessary or proper for the enforcement of the laws of this or
another state of the
(d) The commissioner
may open the proceedings or hearings or make public the notices,
correspondence, reports, records, or other information if the
commissioner deems that it is in the
best interest of the public or in the best interest of the
insurer, its insureds, creditors, or the
general public.
(e) This section does
not apply to hearings, notices, correspondence, reports, records, or
other information obtained upon the appointment of a
receiver for the insurer by a court of
competent jurisdiction.
27-14.1-6.
Review and stay of action. -- During the period of
supervision the insurer
may contest an action taken or proposal proposed
to be taken by the supervisor specifying the
manner in which the action being complained of would not
result in improving the condition of
the insurer. Denial of the insurer's request upon
reconsideration entitles the insurer to request a
proceeding under the Administrative Procedures Act, chapter 35
of title 42.
SECTION 2. Section 27-30-2 of the General Laws in Chapter
27-30 entitled "Consumer
Credit Insurance" is
hereby amended to read as follows:
27-30-2.
Scope and definitions. -- (a)
Citation and scope.
(1) This chapter may be
cited as "Consumer Credit Insurance Act."
(2) All consumer credit
insurance sold in connection with loans or other credit
transactions for personal, family or household purposes shall be
subject to the provisions of this
chapter except:
(i)
Insurance written in connection with a credit transaction that is:
(A) Secured by a first
mortgage or deed of trust; and
(B) Made to finance the
purchase of real property or the construction of a dwelling
thereon, or to refinance a prior credit transaction made for
such a purpose;
(b)(ii)
Insurance sold as an isolated transaction on the part of the insurer and not
related
to an agreement or a plan for insuring debtors of the
creditor.
(c)(iii)
Insurance for which no identifiable charge is made to the debtor.
(d)(iv) Insurance on accounts receivable.
(e)(b) Definitions.
- For the purpose of this chapter:
(1)
"Commissioner" means the director of the department of business
regulation or his or
designee;
(2)
"Compensation" means commissions, dividends, retrospective rate
credits, service
fees, expense allowances or reimbursements, gifts,
furnishing of equipment, facilities, goods or
services, or any other form of remuneration resulting directly
from the sale of consumer credit
insurance;
(3) "Consumer
credit insurance" is a general term used in this chapter to refer to any
or
all credit life insurance, credit accident and health
insurance, credit unemployment insurance
specifically defined in this chapter;
(4) "Credit
accident and health insurance" means insurance on a debtor to provide
indemnity for payments or debt becoming due on a specific loan
or other credit transaction while
the debtor is disabled as defined in the policy;
(5) "Credit life
insurance" means insurance on a debtor or debtors, pursuant to or in
connection with a specific loan or other credit transaction, to
provide for satisfaction of a debt, in
whole or in part, upon the death of an insured debtor;
(6) "Credit
transaction" means any transaction by the terms of which the repayment of
money loaned or loan commitment made, or payment for goods,
services or properties sold or
leased, is to be made at a future date or dates;
(7) "Credit
unemployment insurance" means insurance on a debtor to provide indemnity
for payments or debt becoming due on a specific loan or
other credit transaction while the debtor
is involuntarily unemployed as defined in the policy;
(8)
"Creditor" means the lender of money or vendor or lessor
of goods, services,
property, rights, or privileges, for which payment is arranged
through a credit transaction or any
successor to the right, title, or interest of any lender,
vendor, or lessor, and an affiliate, associate,
or subsidiary of any of them or any director, officer,
or employee of any of them or any other
person in any way associated with any of them;
(9) "Debtor"
means a borrower of money or a purchaser or lessee of goods, services,
property, rights, or privileges for which payment is arranged
through a credit transaction;
(10) "Gross
debt" means the sum of the remaining payments owed to the creditor by the
debtor;
(11) "Identifiable
charge" means a charge for a type of consumer credit insurance that is
made to debtors having such insurance and not made to
debtors not having such insurance; it
includes a charge for insurance that is disclosed in the
credit or other instrument furnished to the
debtor which sets out the financial elements of the credit
transaction and any difference in the
finance, interest, service or other similar charge made to debtors
who are in like circumstances
except for the insured or non-insured status of the debtor
or of the property used as security for
the credit transaction;
(12) "Net
debt" means the amount necessary to liquidate the remaining debt in a
single
lump-sum payment, excluding all unearned interest and other
unearned finance charges;
(13) "Open-end
credit" means credit extended by a creditor under an agreement in
which:
(i)
The creditor reasonably contemplates repeated transactions;
(ii) The creditor
imposes a finance charge from time to time on an outstanding unpaid
balance; and
(iii) The amount of
credit that may be extended to the debtor during the term of the
agreement (up to any set limit by the creditor) is generally made
available to the extent that any
outstanding balance is repaid.
SECTION 3. Section 27-4.8-5 of the General Laws in Chapter
27-4.8 entitled "Group
Life Insurance" is
hereby amended to read as follows:
27-4.8-5.
Group life insurance standard provision. -- (a) No
policy of group life
insurance shall be delivered in this state unless it contains
in substance the following provisions,
or provisions which in the opinion of the commissioner
are more favorable to the persons insured,
or at least as favorable to the persons insured and more
favorable to the policyholder, however:
(1) Subsections (f) to
(k) inclusive shall not apply to policies insuring the lives of
debtors;
(2) The standard
provisions required for individual life insurance policies shall not apply
to group life insurance policies; and
(3) If the group life
insurance policy is on a plan of insurance other than the term plan, it
shall contain a nonforfeiture
provision or provisions which, in the opinion of the commissioner, is
or are equitable to the insured persons and to the
policyholder. Nothing herein shall be construed
to require that group life insurance policies contain
the same nonforfeiture provisions as are
required for individual life insurance policies.
(b) The policy shall
contain a provision that the policyholder is entitled to a grace period
of thirty-one (31) days for the payment of any premium
due except the first, during which grace
period the death benefit coverage shall continue in force,
unless the policyholder gives the insurer
written notice of discontinuance in advance of the date of
discontinuous and in accordance with
the terms of the policy. The policy may provide that the
policyholder shall be liable to the insurer
for the payment of a pro rata premium for the time the
policy was in force during the grace
period.
(c) The policy shall
contain a provision that the validity of the policy shall not be
contested except for nonpayment of premiums after it has been
in force for two (2) years from its
date of issue; and that no statement made by any person
insured under the policy relating to his or
her insurability shall be used in contesting the validity
of the insurance with respect to which the
statement was made after the insurance has been in force prior
to the contest for a period of two
(2) years during the person's
lifetime nor unless it is contained in a written instrument signed by
him or her. This provision shall not preclude the
assertion at any time of defenses based upon
provisions in the policy that relate to eligibility for
coverage.
(d) The policy shall
contain a provision that a copy of the application, if any, of the
policy holder shall be attached to the policy when issued,
that all statements made by the
policyholder or by the persons insured shall be deemed
representations and not warranties and
that no statement made by any person insured shall be used
in any contest unless a copy of the
instrument containing the statement is or has been furnished to
the person or, in the event of death
or incapacity of the insured person, to his or her
beneficiary or personal representative.
(e) The policy shall
contain a provision setting forth the conditions, if any, under which
the insurer reserves the right to require a person
eligible for insurance to furnish evidence of
individual insurability satisfactory to the insurer as a
condition to part or all of his coverage.
(f) The policy shall
contain a provision specifying an equitable adjustment of premiums
or benefits, or both, to be made in the event the age of
a person insured has been misstated. The
provision to contain a clear statement of the method of
adjustment to be made.
(g) The policy shall
contain a provision that any sum becoming due by reason of the
death of the person insured shall be payable to the
beneficiary designated by the person insured,
except that, where the policy contains conditions pertaining
to family status, the beneficiary may
be the family member specified by the policy terms,
subject to the provisions of the policy in the
event there is no designated beneficiary, as to all or any
part of the sum, living at the death of the
person insured, and subject to any right reserved by the
insurer in the policy and set forth in the
certificate to pay at its option a part of the sum not exceeding
two thousand dollars ($2000) to any
person appearing to the insurer to be equitably entitled to
it by reason of having incurred funeral
or other expenses incident to the last illness or death
of the person insured.
(h) The policy shall
contain a provision that the insurer will issue to the policyholder for
delivery to each person insured a certificate setting forth a
statement as to the insurance
protection to which he or she is entitled, to whom the insurance
benefits are payable, a statement
as to any dependent's coverage included in the
certificate, and the rights and conditions set forth
in subsections (h), (i), (j)
and (k) following.
(i)
The policy shall contain a provision that, if the insurance, or any portion of
it, on a
person covered under the policy or on the dependent of a
person covered, ceases because of
termination of employment or of membership in the class or
classes eligible for coverage under
the policy, the person shall be entitled to have issued
to him or her by the insurer, without
evidence of insurability, an individual policy of life
insurance without disability or other
supplementary benefits, provided application for the individual
policy shall be made, and the first
premium paid to the insurer, within thirty-one (31) days
after termination and provided further
that:
(1) The individual
policy shall, at the option of the person, be on any one of the forms
then customarily issued by the insurer at the age and for
the amount applied for, except that the
group policy may exclude the option to elect term
insurance;
(2) The individual
policy shall be in an amount not in excess of the amount of life
insurance that ceases because of termination, less the amount
of any life insurance for which the
person becomes eligible under the same or any other group
policy within thirty-one (31) days
after termination, provided that any amount of insurance
that shall have matured on or before the
date of termination as an endowment payable to the person
insured, whether in one sum or in
installments or in the form of an annuity, shall not, for the
purposes of this provision, be included
in the amount that is considered to cease because of
termination; and
(3) The premium on the
individual policy shall be at the insurer's then customary rate
applicable to the form and amount of the individual policy, to
the class of risk to which the person
then belongs, and to the individual age attained on the
effective date of the individual policy.
Subject to the same conditions set forth above, the
conversion privilege shall be available:
(i)
To a surviving dependent, if any, at the death of an employee or member, with
respect
to the coverage under the group policy that terminates
by reason of the death; and
(ii) To the dependent
of the employee or member upon termination of coverage of the
dependent, while the employee or member remains insured under
the group policy, by reason of
the dependent ceasing to be a qualified family member
under the group policy.
(j) The policy shall
contain a provision that if the group policy terminates or is amended
so as to terminate the insurance of any class of insured
persons, every person insured thereunder
at the date of termination whose insurance terminates,
including the insured dependent of a
covered person, and who has been so insured for at least five
(5) years prior to the termination
date shall be entitled to have issued by the insurer an
individual policy of life insurance, subject to
the same conditions and limitations as are provided by
subsection (h) above, except that the group
policy may provide that the amount of the individual policy
shall not exceed the smaller of:
(i)(1) The amount of the person's life
insurance protection ceasing because of the
termination or amendment of the group policy, less the amount of
any life insurance for which the
person is or becomes eligible under a group policy issued or
reinstated by the same or another
insurer within thirty-one (31) days after termination; or
(ii)(2)
Ten-thousand dollars ($10,000).
(k) The policy shall
contain a provision that, if a person insured under the group policy,
or the insured dependent of a covered person, dies
during the period within which the individual
would have been entitled to have an individual policy
issued in accordance with subsection (h) or
(i) above
and before the individual policy shall have become effective, the amount of
life
insurance which he or she would have been entitled to have
issued under the individual policy
shall be payable as a claim under the group policy, whether
or not application for the individual
policy or the payment of the first premium therefore has
been made.
(l) Where active
employment is a condition of insurance, the policy shall contain a
provision that an insured may continue coverage during the
insured's total disability by timely
payment to the policyholder of that portion, if any, of the
premium that would have been required
from the insured had total disability not occurred. The
continuation shall be on a premium paying
basis for a period of six (6) months from the date on which
the total disability started, but not
beyond the earlier of:
(i)
Approval by the insurer of continuation of the coverage under any disability
provision
which the group insurance policy may contain; or
(ii) The discontinuance
of the group insurance policy.
(m) In the case of a
policy insuring the lives of debtors, the policy shall contain a
provision that the insurer will furnish to the policyholder for
delivery to each debtor insured
under the policy a certificate of insurance describing the
coverage and specifying that the death
benefit shall first be applied to reduce or extinguish the
indebtedness.
SECTION 4. Chapter 27-12.2 of the General Laws entitled
"Administrative Supervision
Act" is hereby
repealed in its entirety.
CHAPTER
27-12.2
Administrative
Supervision Act
27-12.2-1.
Definitions. -- As used in this
chapter:
(1)
"Consent" means agreement to administrative supervision by the
insurer.
(2) "Exceeded its
powers" means the following conditions:
(i)
The insurer has refused to permit examination of its books, papers, accounts,
records
or affairs by the commissioner, his or her deputies,
employees, or duly commissioned examiners;
(ii) A domestic
insurer has unlawfully removed from this state, books, papers, accounts
or records necessary for an examination of the insurer;
(iii) The insurer
has failed to promptly comply with the applicable financial reporting
statutes or rules and departmental requests relating thereto;
(iv)
The insurer has neglected or refused to observe an order of the
commissioner to
make good, within the time prescribed by law, any
prohibited deficiency in its capital, capital
stock, or surplus;
(v) The insurer is
continuing to transact insurance or write business after its license has
been revoked or suspended by the commissioner;
(vi)
The insurer, by contract or otherwise, has unlawfully or has in
violation of an order
of the commissioner, or has without first having
obtained written approval of the commissioner if
approval is required by law:
(A) Totally
reinsured its entire outstanding business, or
(B) Merged or
consolidated substantially its entire property or business with another
insurer;
(vii) The insurer
engaged in any transaction in which it is not authorized to engage under
the laws of this state; or
(viii) The insurer
refused to comply with a lawful order of the commissioner; and
(3)
"Insurer" means and includes every person engaged as indemnitor, surety or
contractor in the business of entering into contracts of
insurance or of annuities as limited to:
(i)
Any insurer who is doing an insurer business, or has transacted insurance in
this state,
and against whom claims arising from that transaction may
exist now or in the future; and
(ii) Any fraternal
benefit society which is subject to the provisions of chapter 25 of this
title.
27-12.2-2.
Applicability. -- The provisions of
this chapter shall apply to all domestic
insurers, including protected cell companies organized under
the Protected Cell Companies Act,
chapter 64 of this title, and any of its protected cells
established under that chapter, to the extent
not inconsistent with the provisions of that chapter, and
any other insurer doing business in this
state whose state of domicile has asked the commissioner to
apply the provisions of this chapter
as regards the insurer.
27-12.2-3.
Administrative supervision. -- (a) An insurer may be subject to
administrative supervision by the commissioner if upon examination
or at any other time it
appears in the commissioner's discretion that:
(1) The insurer's condition
renders the continuance of its business hazardous to the
public or to its insured;
(2) The insurer
appears to have exceeded its powers granted under its certificate of
authority and applicable law;
(3) The insurer has
failed to comply with the applicable provisions of the insurance code;
(4) The business of
the insurer is being conducted fraudulently; or
(5) The insurer
gives its consent.
(b) If the
commissioner determines that the conditions set forth in subsection (a) exist,
the commissioner shall:
(1) Notify the
insurer of his or her determination;
(2) Furnish to the insurer a written list of the requirements to
abate this determination;
and
(3) Notify the
insurer that it is under the supervision of the commissioner and that the
commissioner is applying and effectuating the provisions of this
chapter. That action by the
commissioner shall be subject to review pursuant to the applicable
Administrative Procedures
Act, chapter 35 of title 42.
(c) If placed under
administrative supervision, the insurer shall have sixty (60) days, or
another period of time as designated by the commissioner, to
comply with the requirements of the
commissioner subject to the provisions of this chapter.
(d) If it is
determined after notice and a hearing that the conditions giving rise to the
supervision still exist at the end of the supervision period
specified in this section, the
commissioner may extend the period.
(e) If it is determined
that none of the conditions giving rise to the supervision exist, the
commissioner shall release the insurer from supervision.
27-12.2-4.
Confidentiality of proceedings and records. --
(a) Notwithstanding any
other provision of law and except as set forth in this
section, proceedings, hearings, notices,
correspondence, reports, records, and other information in the
possession of the commissioner or
the department of business regulations relating to the
supervision of any insurer are confidential
except as provided by this section.
(b) The personnel of
the department of business regulations shall have access to these
proceedings, hearings, notices, correspondence, reports, records,
or information as permitted by
the commissioner.
(c) The commissioner
may open the proceedings or hearings or disclose the notices,
correspondence, reports, records, or information to a department,
agency or instrumentality of this
or another state of the
necessary or proper for the enforcement of the laws of this or
another state of the
(d) The commissioner
may open the proceedings or hearings or make public the notices,
correspondence, reports, records, or other information if the
commissioner deems that it is in the
best interest of the public or in the best interest of the
insurer, its insureds, creditors, or the
general public.
(e) This section
does not apply to hearings, notices, correspondence, reports, records, or
other information obtained upon the appointment of a
receiver for the insured by a court of
competent jurisdiction.
27-12.2-5.
Prohibited acts during supervision. -- During the period of
supervision, the
commissioner or his or her designated appointee shall serve as the
administrative supervisor. The
commissioner may provide that the insurer may not do any of the
following acts during the period
of supervision, without the prior approval of the commissioner
or his or her appointed supervisor:
(1) Dispose of,
convey, or encumber any of its assets or its business in force;
(2) Withdraw any of its bank accounts;
(3) Lend any of its funds;
(4) Invest any of its funds;
(5) Transfer any of
its property;
(6) Incur any debt,
obligation, or liability;
(7) Merge or
consolidate with another company;
(8) Approve new
premiums or renew any policies;
(9) Enter into any new reinsurance contract or treaty;
(10) Terminate,
surrender, forfeit, convert, or lapse any insurance policy, certificate, or
contract, except for nonpayment of premiums due;
(11) Release, pay,
or refund premium deposits, accrued cash or loan values, unearned
premiums, or other reserves on any insurance policy,
certificate, or contract;
(12) Make any
material change in management; or
(13) Increase
salaries and benefits of officers or directors or the preferential payment of
bonuses, dividends, or other payments deemed preferential.
27-12.2-6.
Review and stay of action. -- During
the period of supervision the insurer
may contest an action taken or proposed to be taken by
the supervisor specifying the manner in
which the action being complained of would not result in
improving the condition of the insurer.
Denial of the insurer's request upon reconsideration
entitles the insurer to request a proceeding
under the Administrative Procedures Act, chapter 35 of
title 42.
27-12.2-7.
Administrative election of proceeding. --
Nothing contained in this chapter
shall preclude the commissioner from initiating proceedings
against the insured under chapters 13
or 14.3 of this title or as permitted by law, regardless
of whether the commissioner has previously
initiated administrative supervision proceedings under this
chapter against the insurer.
27-12.2-8.
Rules. -- The commissioner is
empowered to adopt reasonable rules and
regulations necessary for the implementation of this chapter.
27-12.2-9.
Meetings between the commissioner of insurance and the supervisor.
--
Notwithstanding any other provision of law, the
commissioner may meet with a supervisor
appointed under this chapter and with the attorney or other
representative of the supervisor,
without the presence of any other person, at the time of any
proceeding or during the pendency of
any proceeding held under the authority of this chapter
to carry out the commissioner's duties
under this chapter or for the supervisor to carry out his
or her duties under this chapter.
27-12.2-10.
Immunity. -- There shall be no
liability on the part of, and no cause of action
of any nature shall arise against, the commissioner or
the department of business regulations or its
employees or agents for any action taken by them in the
performance of their powers and duties
under this chapter.
SECTION 5. This act shall take effect upon passage.
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LC01255
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