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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