person who is a resident of this state and, in special circumstances, to a nonresident.
     (ii) To avoid duplicate coverage, if a person who would otherwise receive coverage under this part is provided coverage under the laws of any other state, the person may not be provided coverage under this part.
     (iii) In determining the application of this Subsection (1)(e) 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 part shall be construed in conjunction with other state laws to result in coverage by only one association.
     (2) (a) (i) Except as limited by this part, this part provides coverage to the persons specified in Subsection (1) for:
     (A) a direct, nongroup life, accident and health, or annuity policy or contract;
     (B) a supplemental contract to a policy or contract described in Subsection (2)(a)(i)(A);
     (C) a certificate under a direct group policy or contract; and
     (D) an unallocated annuity contract issued by a member insurer.
     (ii) For purposes of Subsection (2)(a)(i), an annuity contract and a certificate under a group annuity contract includes:
     (A) a guaranteed investment contract;
     (B) a deposit administration contract;
     (C) an unallocated funding agreement;
     (D) a structured settlement annuity;
     (E) an annuity issued to or in connection with a government lottery; and
     (F) an immediate or deferred annuity contract.
     (b) This part does not provide coverage for:
     (i) a portion of a policy or contract:
     (A) not guaranteed by the insurer; or
     (B) under which the risk is borne by the policy or contract owner;
     (ii) a policy or contract of reinsurance, unless:
     (A) an assumption certificate is issued;
     (B) the assumption certificate required by Subsection (2)(b)(ii)(A) is in effect pursuant to the reinsurance policy or contract; and
     (C) the reinsurance contract is approved by the appropriate regulatory authorities; or
     (iii) 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, if the interest rate, crediting rate, or similar factor:
     (A) is not excluded from coverage by Subsection (2)(b)(xii); and
     (B) averaged over the period of four years prior to the date on which the association becomes obligated with respect to the policy or contract, exceeds a rate of interest determined by subtracting two percentage points from Moody's Corporate Bond Yield Average averaged:
     (I) for that same four-year period; or
     (II) for the corresponding lesser period if the policy or contract was issued less than four years before the association became obligated;
     (iv) a portion of a policy or contract issued to a plan or program of an employer, association, or other person to provide life, accident and health, or annuity benefits to its employees, members, or others, to the extent that the plan or program is self-funded or uninsured,

including benefits payable by an employer, association, or other person under:
     (A) a multiple employer welfare arrangement as defined in 29 U.S.C. Sec. 1144;
     (B) a minimum premium group insurance plan;
     (C) a stop-loss group insurance plan; or
     (D) an administrative services only contract;
     (v) a portion of a policy or contract to the extent that it provides:
     (A) a dividend;
     (B) an experience rating credit;
     (C) voting rights; or
     (D) payment of a fee or allowance to any person, including the policy or contract owner, in connection with the service to or administration of the policy or contract;
     (vi) a policy or contract issued in this state by a member insurer at a time when:
     (A) it was not licensed; or
     (B) did not have a certificate of authority to issue the policy or contract in this state;
     (vii) an unallocated annuity contract issued to 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 payment with respect to the benefit plan;
     (viii) a portion of an unallocated annuity contract that is not issued to or in connection with:
     (A) a specific benefit plan of:
     (I) employees;
     (II) a union; or
     (III) an association of natural persons; or
     (B) a government lottery;
     (ix) a portion of a policy or contract to the extent that the assessment required by Section 31A-28-109 that applies to the policy or contract is preempted by federal or state law;
     (x) an obligation that does not arise under the express written terms of the policy or contract issued by an insurer to the contract owner or policy owner, including:
     (A) a claim based on marketing materials;
     (B) a claim based on documents that are issued by the insurer without meeting applicable policy form filing or approval requirements;
     (C) a misrepresentation regarding a policy benefit;
     (D) an extra-contractual claim;
     (E) a claim for penalties; or
     (F) a claim for consequential or incidental damages;
     (xi) a contract 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 a person that is:
     (A) (I) the benefit plan; or
     (II) the benefit plan's trustee; and
     (B) not an affiliate of the member insurer; and
     (xii) a portion of a policy or contract to the extent it provides for interest or other changes in value:
     (A) to be determined by the use of an index or other external reference stated in the

policy or contract; and
     (B) (I) that have not been credited to the policy or contract; or
     (II) 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 part.
     (3) Subject to Subsection (4), the benefits for which the association may become liable may not exceed the lesser of:
     (a) the contractual obligations for which the insurer is liable or would have been liable if it were not an impaired or insolvent insurer;
     (b) with respect to one life, regardless of the number of policies or contracts:
     (i) for a life insurance policy:
     (A) if the insured died before the coverage date, $500,000 of the death benefit;
     (B) if the insurer received a valid request for cash surrender before the coverage date but has not paid the cash surrender value before the coverage date, $200,000 of cash surrender benefits; or
     (C) if neither Subsection (3)(b)(i)(A) nor (B) apply, the covered portion of each benefit provided under the policy;
     (ii) for an annuity contract, the covered portion of each benefit provided under the contract;
     (iii) for an accident and health policy:
     (A) classified as health insurance, $500,000; or
     (B) not classified as health insurance, the covered portion of each benefit provided under the policy;
     (c) for an individual, or a beneficiary of that individual if the individual is deceased, participating in a governmental retirement plan established under Section 401, 403(b), or 457, Internal Revenue Code, covered by an unallocated annuity contract, in the aggregate $200,000 in present value of annuity benefits, including:
     (i) net cash surrender; and
     (ii) net cash withdrawal values; or
     (d) for a payee of a structured settlement annuity or a beneficiary of the payee if the payee is deceased, the limits set forth in Subsection (3)(b).
     (4) Notwithstanding Subsections (3)(a) through (d), the association may not be obligated to cover more than:
     (a) an aggregate of $500,000 in benefits for any one life under:
     (i) Subsection (3)(b)(i)(A);
     (ii) Subsection (3)(b)(i)(B);
     (iii) Subsection (3)(b)(ii); or
     (iv) Subsection (3)(b)(iii);
     (b) $5,000,000 in benefits for one owner of multiple nongroup policies of life insurance:
     (i) whether the policy owner is an individual, firm, corporation, or other person;
     (ii) whether the persons insured are officers, managers, employees, or other persons; and
     (iii) regardless of the number of policies and contracts held by the owner; and
     (c) $5,000,000 in benefits, regardless of the number of contracts held by the contract owner or plan sponsor, for:
     (i) one contract owner provided coverage under Subsection (1)(b)(ii)(B); or
     (ii) one plan sponsor whose plans own, directly or in trust, one or more unallocated

annuity contracts not included in Subsection (3)(b)(ii).
     (5) (a) Notwithstanding Subsection (4)(c) and except as provided in Subsection (5)(b), the association shall provide coverage if one or more unallocated annuity contracts are:
     (i) covered contracts under this part;
     (ii) owned by a trust or other entity for the benefit of two or more plan sponsors; and
     (iii) 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 the state.
     (b) Notwithstanding Subsection (5)(a) the association may not be obligated to cover more than $5,000,000 in benefits with respect to all unallocated contracts described in Subsection (5)(a).
     (6) (a) The limitations set forth in Subsections (3) and (4) are limitations on the benefits for which the association is obligated before taking into account:
     (i) the association's subrogation and assignment rights; or
     (ii) the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer attributable to covered policies.
     (b) The costs of the association's obligations under this part may be met by the use of assets:
     (i) attributable to covered policies; or
     (ii) reimbursed to the association pursuant to the association's subrogation and assignment rights.
     (c) On and after the date on which the association becomes obligated for any covered policy, the association may not be obligated to provide benefits to the extent that the benefits are based on 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 if the interest rate, crediting rate, or similar factor exceeds the rate of interest determined by subtracting three percentage points from Moody's Corporate Bond Yield Average as most recently available on each date on which interest is credited or attributed to the covered policy.
     (d) In performing its obligations to provide coverage under Section 31A-28-108, the association may not be required to guarantee, assume, reinsure, perform, or cause to be guaranteed, assumed, reinsured, or performed a contractual obligation of the insolvent or impaired insurer under a covered policy or contract that does not materially affect the economic values or economic benefits of the covered policy or contract.

Amended by Chapter 116, 2001 General Session
Amended by Chapter 161, 2001 General Session
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Last revised: Thursday, May 28, 2009