H.B. 340 Enrolled

1

INSURER RECEIVERSHIP ACT
2 2007 GENERAL SESSION
3 STATE OF UTAH
4 Chief Sponsor: James A. Dunnigan
5 Senate Sponsor: Curtis S. Bramble
6
7 LONG TITLE
8 General Description:
9 This bill modifies the Insurance Code by repealing existing insurer rehabilitation and
10 liquidation provisions and enacting the Insurer Receivership Act.
11 Highlighted Provisions:
12 This bill:
13 . repeals most provisions of Title 31A, Chapter 27, Insurers Rehabilitation and
14 Liquidation, and enacts Title 31A, Chapter 27a, Insurer Receivership Act;
15 . renumbers and amends provisions in Title 31A, Chapter 27, related to
16 administrative actions;
17 . provides general provisions relating to:
18 . construction and commissioner's powers;
19 . definitions;
20 . insurer receivership laws;
21 . persons covered;
22 . court proceedings including jurisdiction, venue, notice and hearings,
23 injunctions, orders, and statutes of limitations;
24 . exemptions from fees;
25 . cooperation of officers, owners, and employees;
26 . actions by and against a receiver, providing immunity and indemnification, and
27 the possession and control of an insurer's records by a receiver;
28 . affiliates;
29

30 . executory contracts;
31 . financial obligations, including approval and payment of expenses and financial
32 reporting;
33 . reporting;
34 . records;
35 . the affect of delinquency proceedings commenced before April 30, 2007; and
36 . severability;
37 . provides procedures governing delinquency proceedings, including:
38 . commencing delinquency proceedings, expedited trials, decisions, and appeals;
39 . preserving the confidentiality of the proceedings; and
40 . finding grounds for rehabilitation or liquidation, and the entry and effect of an
41 order of rehabilitation or liquidation;
42 . provides provisions governing the rehabilitation of an insurer, including:
43 . issuing rehabilitation orders;
44 . establishing the powers and duties of the rehabilitator;
45 . filing of rehabilitation plans;
46 . terminating rehabilitation; and
47 . requiring coordination with guaranty associations to assist in the orderly
48 transition to rehabilitation or liquidation;
49 . establishes provisions for liquidation of an insurer, including:
50 . addressing liquidation orders;
51 . addressing continuance of coverage;
52 . providing for the sale or dissolution of the corporate entity;
53 . establishing the power of the liquidator;
54 . providing notice requirements; and
55 . duties of agents;
56 . addresses asset recovery, including:
57 . turning over assets;

58 . recovering from affiliates;
59 . addressing unauthorized postpetition transfers;
60 . addressing voidable preferences and liens;
61 . addressing avoidance of property title transfers;
62 . addressing fraudulent transfers and obligations;
63 . addressing receiver as lien creditor;
64 . addressing liability of transferees;
65 . providing for setoffs;
66 . providing for assessments;
67 . addressing a reinsurer's liability;
68 . reinsurance;
69 . recovering of premiums owed;
70 . commutation and release agreements; and
71 . requiring in certain circumstances reinsurance recoverable trust;
72 . establishes claim procedures relating to:
73 . filing, proof, and allowance of claims;
74 . claims under occurrence policies, surety bonds, and surety undertakings;
75 . allowance of contingent and unliquidated claims;
76 . provisions for third party claims, disputed claims, codebtors, and secured
77 creditors' claims;
78 . qualified financial contracts; and
79 . provides for the administration of deductive policies and insured collateral;
80 . provides for distribution of assets, including priority for distribution, early
81 distribution, and partial and final distribution;
82 . establishes discharge and termination of delinquency proceedings;
83 . establishes provisions relating to interstate relations; and
84 . makes technical and conforming changes.
85 Monies Appropriated in this Bill:

86 None
87 Other Special Clauses:
88 None
89 Utah Code Sections Affected:
90 AMENDS:
91 31A-1-106, as last amended by Chapter 95, Laws of Utah 1987
92 31A-2-108, as last amended by Chapter 344, Laws of Utah 1995
93 31A-2-203, as last amended by Chapter 177, Laws of Utah 2006
94 31A-2-204, as last amended by Chapter 177, Laws of Utah 2006
95 31A-2-206, as last amended by Chapters 79 and 204, Laws of Utah 1996
96 31A-2-207, as last amended by Chapter 2, Laws of Utah 2004
97 31A-2-212, as last amended by Chapter 177, Laws of Utah 2006
98 31A-2-308, as last amended by Chapter 58, Laws of Utah 2005
99 31A-5-212, as enacted by Chapter 242, Laws of Utah 1985
100 31A-5-217, as last amended by Chapter 9, Laws of Utah 1996, Second Special Session
101 31A-5-305, as last amended by Chapter 316, Laws of Utah 1994
102 31A-5-416, as last amended by Chapter 277, Laws of Utah 1992
103 31A-5-504, as last amended by Chapter 320, Laws of Utah 2006
104 31A-5-506, as last amended by Chapter 204, Laws of Utah 1986
105 31A-8-213, as last amended by Chapter 116, Laws of Utah 2001
106 31A-9-502, as last amended by Chapter 300, Laws of Utah 2000
107 31A-9-504, as enacted by Chapter 242, Laws of Utah 1985
108 31A-11-104, as last amended by Chapter 90, Laws of Utah 2004
109 31A-11-109, as enacted by Chapter 242, Laws of Utah 1985
110 31A-13-107, as last amended by Chapter 204, Laws of Utah 1986
111 31A-14-206, as last amended by Chapter 90, Laws of Utah 2004
112 31A-14-215, as last amended by Chapter 204, Laws of Utah 1986
113 31A-14-217, as last amended by Chapter 230, Laws of Utah 1992

114 31A-15-105, as last amended by Chapter 204, Laws of Utah 1986
115 31A-17-605, as last amended by Chapter 116, Laws of Utah 2001
116 31A-17-606, as last amended by Chapter 116, Laws of Utah 2001
117 31A-17-609, as last amended by Chapter 116, Laws of Utah 2001
118 31A-17-610, as last amended by Chapter 116, Laws of Utah 2001
119 31A-18-106, as last amended by Chapter 176, Laws of Utah 2006
120 31A-22-617, as last amended by Chapter 3, Laws of Utah 2005, First Special Session
121 31A-23a-704, as renumbered and amended by Chapter 298, Laws of Utah 2003
122 31A-28-108, as last amended by Chapters 116 and 161, Laws of Utah 2001
123 31A-28-114, as last amended by Chapter 161, Laws of Utah 2001
124 31A-28-207, as last amended by Chapter 308, Laws of Utah 2002
125 31A-28-213, as last amended by Chapter 363, Laws of Utah 2001
126 31A-35-103, as enacted by Chapter 293, Laws of Utah 1998
127 31A-37-504, as last amended by Chapter 312, Laws of Utah 2004
128 ENACTS:
129 31A-27-502, Utah Code Annotated 1953
130 31A-27a-101, Utah Code Annotated 1953
131 31A-27a-102, Utah Code Annotated 1953
132 31A-27a-103, Utah Code Annotated 1953
133 31A-27a-104, Utah Code Annotated 1953
134 31A-27a-105, Utah Code Annotated 1953
135 31A-27a-106, Utah Code Annotated 1953
136 31A-27a-107, Utah Code Annotated 1953
137 31A-27a-108, Utah Code Annotated 1953
138 31A-27a-109, Utah Code Annotated 1953
139 31A-27a-110, Utah Code Annotated 1953
140 31A-27a-111, Utah Code Annotated 1953
141 31A-27a-112, Utah Code Annotated 1953

142 31A-27a-113, Utah Code Annotated 1953
143 31A-27a-114, Utah Code Annotated 1953
144 31A-27a-115, Utah Code Annotated 1953
145 31A-27a-116, Utah Code Annotated 1953
146 31A-27a-117, Utah Code Annotated 1953
147 31A-27a-119, Utah Code Annotated 1953
148 31A-27a-120, Utah Code Annotated 1953
149 31A-27a-201, Utah Code Annotated 1953
150 31A-27a-202, Utah Code Annotated 1953
151 31A-27a-203, Utah Code Annotated 1953
152 31A-27a-204, Utah Code Annotated 1953
153 31A-27a-205, Utah Code Annotated 1953
154 31A-27a-206, Utah Code Annotated 1953
155 31A-27a-207, Utah Code Annotated 1953
156 31A-27a-208, Utah Code Annotated 1953
157 31A-27a-209, Utah Code Annotated 1953
158 31A-27a-301, Utah Code Annotated 1953
159 31A-27a-302, Utah Code Annotated 1953
160 31A-27a-303, Utah Code Annotated 1953
161 31A-27a-304, Utah Code Annotated 1953
162 31A-27a-305, Utah Code Annotated 1953
163 31A-27a-401, Utah Code Annotated 1953
164 31A-27a-402, Utah Code Annotated 1953
165 31A-27a-403, Utah Code Annotated 1953
166 31A-27a-404, Utah Code Annotated 1953
167 31A-27a-405, Utah Code Annotated 1953
168 31A-27a-406, Utah Code Annotated 1953
169 31A-27a-407, Utah Code Annotated 1953

170 31A-27a-501, Utah Code Annotated 1953
171 31A-27a-502, Utah Code Annotated 1953
172 31A-27a-503, Utah Code Annotated 1953
173 31A-27a-504, Utah Code Annotated 1953
174 31A-27a-505, Utah Code Annotated 1953
175 31A-27a-506, Utah Code Annotated 1953
176 31A-27a-507, Utah Code Annotated 1953
177 31A-27a-508, Utah Code Annotated 1953
178 31A-27a-509, Utah Code Annotated 1953
179 31A-27a-510, Utah Code Annotated 1953
180 31A-27a-511, Utah Code Annotated 1953
181 31A-27a-512, Utah Code Annotated 1953
182 31A-27a-513, Utah Code Annotated 1953
183 31A-27a-514, Utah Code Annotated 1953
184 31A-27a-515, Utah Code Annotated 1953
185 31A-27a-516, Utah Code Annotated 1953
186 31A-27a-601, Utah Code Annotated 1953
187 31A-27a-602, Utah Code Annotated 1953
188 31A-27a-603, Utah Code Annotated 1953
189 31A-27a-604, Utah Code Annotated 1953
190 31A-27a-605, Utah Code Annotated 1953
191 31A-27a-606, Utah Code Annotated 1953
192 31A-27a-607, Utah Code Annotated 1953
193 31A-27a-608, Utah Code Annotated 1953
194 31A-27a-609, Utah Code Annotated 1953
195 31A-27a-610, Utah Code Annotated 1953
196 31A-27a-611, Utah Code Annotated 1953
197 31A-27a-612, Utah Code Annotated 1953

198 31A-27a-701, Utah Code Annotated 1953
199 31A-27a-702, Utah Code Annotated 1953
200 31A-27a-703, Utah Code Annotated 1953
201 31A-27a-704, Utah Code Annotated 1953
202 31A-27a-705, Utah Code Annotated 1953
203 31A-27a-801, Utah Code Annotated 1953
204 31A-27a-802, Utah Code Annotated 1953
205 31A-27a-803, Utah Code Annotated 1953
206 31A-27a-804, Utah Code Annotated 1953
207 31A-27a-805, Utah Code Annotated 1953
208 31A-27a-901, Utah Code Annotated 1953
209 31A-27a-902, Utah Code Annotated 1953
210 RENUMBERS AND AMENDS:
211 31A-27-501, (Renumbered from 31A-27-101, as last amended by Chapter 204, Laws of
212 Utah 1986)
213 31A-27-503, (Renumbered from 31A-27-201, as last amended by Chapter 161, Laws of
214 Utah 1987)
215 31A-27-504, (Renumbered from 31A-27-203, as last amended by Chapter 204, Laws of
216 Utah 1986)
217 31A-27a-118, (Renumbered from 31A-27-107, as enacted by Chapter 242, Laws of
218 Utah 1985)
219 REPEALS:
220 31A-27-102, as last amended by Chapter 308, Laws of Utah 2002
221 31A-27-103, as last amended by Chapter 298, Laws of Utah 2003
222 31A-27-104, as last amended by Chapter 131, Laws of Utah 1999
223 31A-27-105, as enacted by Chapter 242, Laws of Utah 1985
224 31A-27-106, as last amended by Chapter 204, Laws of Utah 1986
225 31A-27-108, as enacted by Chapter 242, Laws of Utah 1985

226 31A-27-109, as enacted by Chapter 204, Laws of Utah 1986
227 31A-27-110, as enacted by Chapter 131, Laws of Utah 1999
228 31A-27-202, as last amended by Chapter 204, Laws of Utah 1986
229 31A-27-301, as last amended by Chapter 204, Laws of Utah 1986
230 31A-27-302, as last amended by Chapter 252, Laws of Utah 2003
231 31A-27-303, as last amended by Chapter 204, Laws of Utah 1986
232 31A-27-304, as last amended by Chapter 344, Laws of Utah 1995
233 31A-27-305, as last amended by Chapter 308, Laws of Utah 2002
234 31A-27-306, as enacted by Chapter 242, Laws of Utah 1985
235 31A-27-307, as last amended by Chapter 131, Laws of Utah 1999
236 31A-27-308, as last amended by Chapter 185, Laws of Utah 1997
237 31A-27-309, as enacted by Chapter 242, Laws of Utah 1985
238 31A-27-310, as last amended by Chapter 131, Laws of Utah 1999
239 31A-27-311, as last amended by Chapter 13, Laws of Utah 1998
240 31A-27-311.5, as last amended by Chapter 252, Laws of Utah 2003
241 31A-27-312, as last amended by Chapter 230, Laws of Utah 1992
242 31A-27-313, as enacted by Chapter 242, Laws of Utah 1985
243 31A-27-314, as last amended by Chapter 105, Laws of Utah 2004
244 31A-27-315, as last amended by Chapter 177, Laws of Utah 2006
245 31A-27-316, as last amended by Chapter 298, Laws of Utah 2003
246 31A-27-317, as last amended by Chapter 308, Laws of Utah 2002
247 31A-27-318, as enacted by Chapter 242, Laws of Utah 1985
248 31A-27-319, as last amended by Chapter 204, Laws of Utah 1986
249 31A-27-320, as last amended by Chapter 204, Laws of Utah 1986
250 31A-27-321, as last amended by Chapter 277, Laws of Utah 1992
251 31A-27-322, as enacted by Chapter 204, Laws of Utah 1986
252 31A-27-323, as last amended by Chapter 131, Laws of Utah 1999
253 31A-27-324, as last amended by Chapter 298, Laws of Utah 2003

254 31A-27-325, as last amended by Chapter 204, Laws of Utah 1986
255 31A-27-326, as last amended by Chapter 105, Laws of Utah 2004
256 31A-27-327, as last amended by Chapter 105, Laws of Utah 2004
257 31A-27-328, as last amended by Chapter 131, Laws of Utah 1999
258 31A-27-329, as enacted by Chapter 242, Laws of Utah 1985
259 31A-27-330, as last amended by Chapter 9, Laws of Utah 1996, Second Special Session
260 31A-27-330.5, as last amended by Chapter 185, Laws of Utah 1997
261 31A-27-330.6, as last amended by Chapter 105, Laws of Utah 2004
262 31A-27-331, as enacted by Chapter 242, Laws of Utah 1985
263 31A-27-332, as last amended by Chapter 308, Laws of Utah 2002
264 31A-27-333, as last amended by Chapter 204, Laws of Utah 1986
265 31A-27-334, as last amended by Chapter 204, Laws of Utah 1986
266 31A-27-335, as last amended by Chapter 300, Laws of Utah 2000
267 31A-27-335.5, as last amended by Chapter 344, Laws of Utah 1995
268 31A-27-336, as enacted by Chapter 242, Laws of Utah 1985
269 31A-27-337, as last amended by Chapter 308, Laws of Utah 2002
270 31A-27-338, as enacted by Chapter 242, Laws of Utah 1985
271 31A-27-339, as last amended by Chapter 204, Laws of Utah 1986
272 31A-27-340, as last amended by Chapter 308, Laws of Utah 2002
273 31A-27-341, as last amended by Chapter 308, Laws of Utah 2002
274 31A-27-342, as enacted by Chapter 242, Laws of Utah 1985
275 31A-27-401, as last amended by Chapter 204, Laws of Utah 1986
276 31A-27-402, as enacted by Chapter 242, Laws of Utah 1985
277 31A-27-403, as enacted by Chapter 242, Laws of Utah 1985
278 31A-27-404, as enacted by Chapter 242, Laws of Utah 1985
279 31A-27-405, as enacted by Chapter 242, Laws of Utah 1985
280 31A-27-406, as enacted by Chapter 242, Laws of Utah 1985
281 31A-27-407, as last amended by Chapter 204, Laws of Utah 1986

282 31A-27-408, as enacted by Chapter 242, Laws of Utah 1985
283 31A-27-409, as last amended by Chapter 204, Laws of Utah 1986
284 31A-27-410, as last amended by Chapter 344, Laws of Utah 1995
285 31A-27-411, as last amended by Chapter 204, Laws of Utah 1986
286
287 Be it enacted by the Legislature of the state of Utah:
288 Section 1. Section 31A-1-106 is amended to read:
289 31A-1-106. Residual unlicensed domestic insurers.
290 (1) Every person doing an insurance business in Utah not covered under another
291 section of this title, that does not hold a valid certificate of authority or license under [the
292 Insurance Code,] this title shall, by July 1, 1987, complete one of the actions prescribed in
293 Subsections (2) through (5). This section does not apply to an unauthorized foreign insurer
294 doing an insurance business in Utah in full compliance with Section 31A-15-103 .
295 (2) An insurer under Subsection (1) may incorporate and apply, or if already
296 incorporated, may apply for a certificate of authority under Chapter 5, 6, 7, 8, or 9. If the
297 commissioner is satisfied that the insurer substantially complies with the requirements of the
298 appropriate chapter necessary for the protection of insureds and the public, the commissioner
299 shall issue a certificate of authority.
300 (3) An insurer under Subsection (1) may transfer all its obligations to a corporation
301 authorized under this title to assume them, according to a plan approved by the commissioner.
302 The commissioner may disapprove the plan on a finding, after a hearing, that it is contrary to
303 the interests of insureds, the public, or the law.
304 (4) An insurer under Subsection (1) may adopt a plan to run off existing obligations
305 without accepting any new policyholders or new obligations. The commissioner may
306 disapprove the plan on a finding, after a hearing, that it is contrary to the interests of insureds,
307 the public, or the law.
308 (5) The commissioner may, by order, exempt an insurer from the requirements of
309 Subsection (1) or extend the deadline under Subsection (1) on a finding that:

310 (a) incorporation, licensing, reinsurance, or run off would cause disproportionate
311 expense, loss, or substantial hardship; and
312 (b) the nature of the existing and prospective business, the assets, or the business plan
313 of the insurer can be reasonably expected to continue to operate in a sound manner and can be
314 subjected to adequate regulatory controls.
315 (6) Whenever the commissioner grants an exemption under Subsection (5), the
316 commissioner shall issue to the insurer a certificate of authority. The commissioner may
317 amend the certificate at any time, specifying the business that the insurer may transact and
318 specifying in detail the controls to which the insurer shall be subject. These controls shall
319 correspond as nearly as practicable to the controls applicable to corporations transacting a like
320 business.
321 (7) It is a ground for liquidation under Section [ 31A-27-307 ] 31A-27a-207 if an insurer
322 has not completed action under one of Subsections (2) through (4) and has not applied for and
323 been granted exemption under Subsection (5) before July 1, 1987.
324 Section 2. Section 31A-2-108 is amended to read:
325 31A-2-108. Legal services.
326 (1) Except as provided in Subsection (4), the commissioner shall call upon the attorney
327 general for the legal counsel and assistance necessary to enforce [the provisions of] this title.
328 Upon the commissioner's request, or upon the attorney general's own initiative, the attorney
329 general may hire special legal counsel under Section 67-5-5 to represent the [Insurance]
330 department.
331 (2) Upon the commissioner's request, or upon the commissioner's own initiative, the
332 attorney general may aid in any investigation, hearing, or other procedure under this title and
333 may institute, prosecute, and defend proceedings relating to the enforcement or interpretation
334 of this title, including any proceeding to which the state, or the commissioner or any employee
335 of the department in an official capacity, is a party or is interested.
336 (3) The commissioner may refer such evidence as is available concerning violations of
337 this title or of any rule or order under this title to the proper county attorney or district attorney,

338 who may, with or without this reference, institute the appropriate criminal proceedings.
339 (4) For proceedings authorized by [Title 31A, Chapter 27, Insurers Rehabilitation and
340 Liquidation] Chapter 27a, Insurer Receivership Act, the commissioner may employ on a
341 contract basis legal counsel other than the attorney general, with the fees, costs, and expenses
342 of the counsel and the attorney general being a class one administrative expense under Section
343 [31A-27-335 ] 31A-27a-701 .
344 Section 3. Section 31A-2-203 is amended to read:
345 31A-2-203. Examinations and alternatives.
346 (1) (a) Whenever the commissioner considers it necessary in order to inform the
347 commissioner about any matter related to the enforcement of this title, the commissioner may
348 examine the affairs and condition of:
349 (i) a licensee under this title;
350 (ii) an applicant for a license under this title;
351 (iii) a person or organization of persons doing or in process of organizing to do an
352 insurance business in this state; or
353 (iv) a person who is not, but should be, licensed under this title.
354 (b) When reasonably necessary for an examination under Subsection (1)(a), the
355 commissioner may examine:
356 (i) so far as they relate to the examinee, the accounts, records, documents, or evidences
357 of transactions of:
358 (A) the insurer or other licensee;
359 (B) any officer or other person who has executive authority over or is in charge of any
360 segment of the examinee's affairs; or
361 (C) any affiliate of the examinee; or
362 (ii) any third party model or product used by the examinee.
363 (c) (i) On demand, each examinee under Subsection (1)(a) shall make available to the
364 commissioner for examination:
365 (A) any of the examinee's own accounts, records, files, documents, or evidences of

366 transactions; and
367 (B) to the extent reasonably necessary for an examination, the accounts, records, files,
368 documents, or evidences of transactions of any persons under Subsection (1)(b).
369 (ii) Except as provided in Subsection (1)(c)(iii), failure to make the documents
370 described in Subsection (1)(c)(i) available is concealment of records under Subsection
371 [ 31A-27-307 (7)] 31A-27a-207 (1)(e).
372 (iii) If the examinee is unable to obtain accounts, records, files, documents, or
373 evidences of transactions from persons under Subsection (1)(b), that failure is not concealment
374 of records if the examinee immediately terminates the relationship with the other person.
375 (d) (i) Neither the commissioner nor an examiner may remove any account, record, file,
376 document, evidence of transaction, or other property of the examinee from the examinee's
377 offices unless:
378 (A) the examinee consents in writing; or
379 (B) a court grants permission.
380 (ii) The commissioner may make and remove copies or abstracts of the following
381 described in Subsection (1)(d)(i):
382 (A) an account;
383 (B) a record;
384 (C) a file;
385 (D) a document;
386 (E) evidence of transaction; or
387 (F) other property.
388