31A-28-108.   Powers and duties of the association.
     (1) (a) If a member insurer is an impaired insurer, subject to any conditions imposed by the association that do not impair the contractual obligations of the impaired insurer, the association may elect to provide the protections provided by this part to the policyholders of the impaired insurer.
     (b) If the association makes the election described in Subsection (1)(a), the association may proceed under one or more of the options described in Subsection (3).
     (2) If a member insurer is an insolvent insurer, the association shall provide the protections provided by this part to the policyholders of the insolvent insurer by electing in its discretion to proceed under one or more of the options in Subsection (3).
     (3) With respect to the covered portions of covered policies of an impaired or insolvent insurer, the association may:
     (a) (i) (A) guaranty, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, the policies or contracts of the insurer; or
     (B) assure payment of the contractual obligations of the insolvent insurer; and
     (ii) provide such monies, pledges, guarantees, or other means as are reasonably necessary to discharge such duties; or
     (b) provide benefits and coverages in accordance with Subsection (4).
     (4) (a) In accordance with Subsection (3)(b), the association may:
     (i) assure payment of benefits for premiums identical to the premiums and benefits, except for terms of conversion and renewability, that would have been payable under the policies or contracts of the insurer, for claims incurred:
     (A) with respect to group policies:
     (I) not later than the earlier of the next renewal date under the policies or contracts or 45 days after the coverage date; and
     (II) in no event less than 30 days after the coverage date; or
     (B) with respect to nongroup policies or contracts:
     (I) not later than the earlier of the next renewal date, if any, under the policies or contracts or one year from the coverage date; and
     (II) in no event less than 30 days from the coverage date;
     (ii) make diligent efforts to provide 30 days' notice of any termination of the benefits provided to:
     (A) all known insureds or annuitants for nongroup policies and contracts; or
     (B) group policy owners for group policies and contracts; and
     (iii) with respect to nongroup life and accident and health insurance policies and annuities, make available substitute coverage on an individual basis, in accordance with Subsection (4)(b), to each known insured, annuitant, or owner and to each individual formerly insured or formerly an annuitant under a group policy who is not eligible for replacement group coverage on an individual basis in accordance with Subsection (4)(b), if the insured or annuitant had a right under law or the terminated policy or annuity contract to:
     (A) convert coverage to individual coverage; or
     (B) continue an individual policy in force until a specified age or for a specified time during which the insurer had:
     (I) no right unilaterally to make changes in any provision of the policy; or
     (II) a right only to make changes in premium by class.

     (b) (i) In providing the substitute coverage required under Subsection (4)(a)(iii), the association may offer to:
     (A) reissue the terminated coverage; or
     (B) issue an alternative policy.
     (ii) An alternative or reissued policy under Subsection (4)(b)(i):
     (A) shall be offered without requiring evidence of insurability; and
     (B) may not provide for any waiting period or exclusion that would not have applied under the terminated policy.
     (iii) The association may reinsure any alternative or reissued policy.
     (c) (i) An alternative policy adopted by the association shall be subject to the approval of the commissioner.
     (ii) The association may adopt alternative policies of various types for future issuance without regard to any particular impairment or insolvency.
     (iii) An alternative policy:
     (A) shall contain at least the minimum statutory provisions required in this state; and
     (B) provide benefits that are not unreasonable in relation to the premium charged.
     (iv) The association shall set the premium for an alternative policy in accordance with a table of rates that the association adopts. The premium shall reflect:
     (A) the amount of insurance to be provided; and
     (B) the age and class of risk of each insured.
     (v) For an alternative policy issued under an individual policy of the impaired or insolvent insurer:
     (A) age shall be determined in accordance with the original policy provisions; and
     (B) class of risk shall be the class of risk under the original policy.
     (vi) For an alternative policy issued to individuals insured under a group policy:
     (A) age and class of risk shall be determined by the association in accordance with the alternative policy provisions and risk classification standards approved by the commissioner; and
     (B) the premium may not reflect any changes in the health of the insured after the original policy was last underwritten.
     (vii) Any alternative policy issued by the association shall provide coverage of a type similar to that of the policy issued by the impaired or insolvent insurer, as determined by the association.
     (d) If the association elects to reissue terminated coverage at a premium rate different from that charged under the terminated policy, the premium shall be set by the association in accordance with the amount of insurance provided and the age and class of risk, subject to the approval of the commissioner or by a court of competent jurisdiction.
     (e) The association's obligations with respect to coverage under any policy of the impaired or insolvent insurer or under any reissued or alternative policy shall cease on the date the coverage or policy is replaced by another similar policy by:
     (i) the policyholder;
     (ii) the insured; or
     (iii) the association.
     (f) (i) With respect to a claim unpaid as of the coverage date and a claim incurred during the period defined in Subsection (4)(a)(i), a provider of health care services, by accepting a payment from the association upon a claim of the provider against an insured whose health care

insurer is an insolvent member insurer, agrees to forgive the insured of 20% of the debt which otherwise would be paid by the insurer had it not been insolvent, subject to a maximum of $8,000 being required to be forgiven by any one provider as to each claimant.
     (ii) The obligations of a solvent insurer to pay all or part of the covered claim are not diminished by the forgiveness provided for in this section.
     (5) When proceeding under Subsection (3)(b) with respect to any policy or contract carrying guaranteed minimum interest rates, the association shall assure the payment or crediting of a rate of interest consistent with Subsection 31A-28-103(2)(b)(iii).
     (6) Nonpayment of premiums within 31 days after the date required under the terms of any guaranteed, assumed, alternative, or reissued policy or contract or substitute coverage shall terminate the association's obligations under the policy or coverage under this part with respect to the policy or coverage, except with respect to any claims incurred or any net cash surrender value that may be due in accordance with this part.
     (7) (a) Premiums due after the coverage date with respect to the covered portion of a policy or contract of an impaired or insolvent insurer shall belong to and be payable at the direction of the association.
     (b) The association is liable to the policy or contract owners for unearned premiums due to policy or contract owners arising after the coverage date with respect to the covered portion of the policy or contract.
     (8) The protection provided by this part does not apply if any guaranty protection is provided to residents of this state by laws of the domiciliary state or jurisdiction of the impaired or insolvent insurer other than this state.
     (9) In carrying out its duties under Subsections (1) and (2), and subject to approval by a court in this state, the association may:
     (a) impose permanent policy or contract liens in connection with a guarantee, assumption, or reinsurance agreement, if the association finds that:
     (i) the amounts that can be assessed under this part are less than the amounts needed to assure full and prompt performance of the association's duties under this part; or
     (ii) the economic or financial conditions as they affect member insurers are sufficiently adverse to render the imposition of the permanent policy or contract liens to be in the public interest;
     (b) impose temporary moratoriums or liens on payments of cash values and policy loans, or any other right to withdraw funds held in conjunction with policies or contracts, in addition to any contractual provisions for deferral of cash or policy loan value; and
     (c) if the receivership court imposes a temporary moratorium or moratorium charge on payment of cash values or policy loans, or on any other right to withdraw funds held in conjunction with policies or contracts, out of the assets of the impaired or insolvent insurer, defer the payment of cash values, policy loans, or other rights by the association for the period of the moratorium or moratorium charge imposed by the receivership court, except for claims covered by the association to be paid in accordance with a hardship procedure:
     (i) established by the liquidator or rehabilitator; and
     (ii) approved by the receivership court.
     (10) (a) A deposit in this state held pursuant to law or required by the commissioner for the benefit of creditors, including policy owners, that is not turned over to the domiciliary liquidator upon the entry of a final order of liquidation or order approving a rehabilitation plan of

an insurer domiciled in any state shall be promptly paid to the association.
     (b) Any amount paid under Subsection (10)(a) to the association less the amount retained by the association shall be treated as a distribution of estate assets pursuant to Sections 31A-27a-601, 31A-27a-602, and 31A-27a-702.
     (11) If the association fails to act within a reasonable period of time as provided in this section, the commissioner shall have the powers and duties of the association under this part with respect to an impaired or insolvent insurer.
     (12) The association may render assistance and advice to the commissioner, upon the commissioner's request, concerning:
     (a) rehabilitation;
     (b) payment of claims;
     (c) continuance of coverage; or
     (d) the performance of other contractual obligations of any impaired or insolvent insurer.
     (13) (a) The association has standing to appear or intervene before a court or agency in this state with jurisdiction over:
     (i) an impaired or insolvent insurer concerning which the association is or may become obligated under this part; or
     (ii) any person or property against which the association may have rights through subrogation or otherwise.
     (b) The standing referred to in Subsection (13)(a) extends to all matters germane to the powers and duties of the association, including:
     (i) proposals for reinsuring, modifying, or guaranteeing the policies or contracts of the impaired or insolvent insurer; and
     (ii) the determination of the policies or contracts and contractual obligations.
     (c) The association has the right to appear or intervene before a court in another state with jurisdiction over:
     (i) an impaired or insolvent insurer for which the association is or may become obligated; or
     (ii) any person or property against which the association may have rights through subrogation of the insurer's policyholders.
     (14) (a) Any person receiving benefits under this part shall be considered to have assigned the rights under, and any causes of action against any person for losses arising under, resulting from, or otherwise relating to the covered policy or contract to the association to the extent of the benefits received because of this part, whether the benefits are payments of, or on account of:
     (i) contractual obligations;
     (ii) continuation of coverage; or
     (iii) provision of substitute or alternative coverages.
     (b) As a condition precedent to the receipt of any right or benefits conferred by this part upon that person, the association may require an assignment to it of the rights and causes of action described in Subsection (14)(a) by any:
     (i) payee;
     (ii) policy or contract owner;
     (iii) beneficiary;
     (iv) insured; or

     (v) annuitant.
     (c) The subrogation rights obtained by the association under this Subsection (14) shall have the same priority against the assets of the impaired or insolvent insurer as that possessed by the person entitled to receive benefits under this part.
     (d) In addition to Subsections (14)(a) through (c), the association has all common law rights of subrogation and any other equitable or legal remedy that would have been available to the impaired or insolvent insurer or owner, beneficiary, or payee of a policy or contract with respect to the policy or contract, including in the case of a structured settlement annuity any rights of the owner, beneficiary, or payee of the annuity to the extent of benefits received pursuant to this part against a person originally or by succession responsible for the losses arising from the personal injury relating to the annuity or payment of the annuity.
     (e) If a provision of this Subsection (14) is invalid or ineffective with respect to any person or claim for any reason, the amount payable by the association with respect to the related covered obligations shall be reduced by the amount realized by any other person with respect to the person or claim that is attributable to the policies, or portion of the policies, covered by the association.
     (f) If the association has provided benefits with respect to a covered policy and a person recovers amounts as to which the association has rights as described in this Subsection (14), the person shall pay to the association the portion of the recovery attributable to the covered policies.
     (15) (a) In addition to the rights and powers elsewhere in this part, the association may:
     (i) enter into contracts that are necessary or proper to carry out the provisions and purposes of this part;
     (ii) sue or be sued, including taking any legal actions necessary or proper to:
     (A) recover any unpaid assessments under Section 31A-28-109; and
     (B) settle claims or potential claims against the association;
     (iii) borrow money to effect the purposes of this part;
     (iv) employ or retain the persons necessary or the appropriate staff members to:
     (A) handle the financial transactions of the association; and
     (B) perform other functions as become necessary or proper under this part;
     (v) take necessary or appropriate legal action to avoid or recover payment of improper claims;
     (vi) exercise, for the purposes of this part and to the extent approved by the commissioner, the powers of a domestic life or health insurer, but in no case may the association issue insurance policies or annuity contracts other than those issued to perform its obligation under this part;
     (vii) request information from a person seeking coverage from the association to aid the association in determining the association's obligations under this part with respect to the person;
     (viii) take other necessary or appropriate action to discharge the association's duties and obligations under this part or to exercise the association's powers under this part; and
     (ix) act as a special deputy liquidator if appointed by the commissioner.
     (b) Any note or other evidence of indebtedness of the association under Subsection (15)(a)(iii) that is not in default:
     (i) is a legal investment for a domestic insurer; and
     (ii) may be carried as admitted assets.
     (c) A person seeking coverage from the association shall promptly comply with a request

for information by the association under Subsection (15)(a)(vii).
     (16) The association may join an organization of one or more other state associations of similar purposes to further the purposes and administer the powers and duties of the association.
     (17) (a) Except as provided in Subsection (17)(b), at any time within one year after the coverage date, the association may elect to succeed to the rights and obligations of the member insurer that:
     (i) accrue on or after the coverage date; and
     (ii) relate to covered policies under any one or more indemnity reinsurance agreements entered into by the member insurer as a ceding insurer and selected by the association.
     (b) Notwithstanding Subsection (17)(a), the association may not exercise an election with respect to a reinsurance agreement if the receiver, rehabilitator, or liquidator of the member insurer has previously and expressly disaffirmed the reinsurance agreement.
     (c) The election described in Subsection (17)(a) shall be effected by a notice to:
     (i) (A) the receiver;
     (B) rehabilitator; or
     (C) liquidator; and
     (ii) the affected reinsurers.
     (d) If the association makes an election under Subsection (17)(a), the association shall comply with Subsections (17)(d)(i) through (vi) with respect to the agreements selected by the association.
     (i) For contracts covered, in whole or in part, by the association, the association shall be responsible for:
     (A) all unpaid premiums due under the agreements for periods both before and after the coverage date; and
     (B) the performance of all other obligations to be performed after the coverage date.
     (ii) The association may charge contracts covered in part by the association the costs for reinsurance in excess of the obligations of the association, through reasonable allocation methods.
     (iii) The association is entitled to any amounts payable by the reinsurer under the agreements with respect to losses or events that:
     (A) occur in periods after the coverage date; and
     (B) relate to contracts covered by the association, in whole or in part.
     (iv) On receipt of any amounts under Subsection (17)(d)(iii), the association shall pay to the beneficiary under the policy or contract on account of which the amounts were paid an amount equal to the excess of the amount received by the association over the benefits paid or payable by the association on account of the policy or contract.
     (v) (A) Within 30 days following the association's election, the association and each indemnity reinsurer shall calculate the net balance due to or from the association under each reinsurance agreement as of the date of the association's election, giving full credit to all items paid by either the member insurer, or its receiver, rehabilitator, or liquidator, or the indemnity reinsurer during the period between the coverage date and the date of the association's election.
     (B) Either the association or indemnity reinsurer shall pay the net balance due the other within five days of the completion of the calculation under Subsection (17)(d)(v)(A).
     (C) If the receiver, rehabilitator, or liquidator has received any amounts due the association pursuant to Subsection (17)(d)(iii), the receiver, rehabilitator, or liquidator shall remit

the same to the association as promptly as practicable.
     (vi) If the association, within 60 days of the election, pays the premiums due for periods both before and after the coverage date that relate to contracts covered by the association, in whole or in part, the reinsurer may not:
     (A) terminate the reinsurance agreements, to the extent the agreements relate to contracts covered by the association, in whole or in part; and
     (B) set off any unpaid premium due for periods prior to the coverage date against amounts due the association.
     (e) An insurer other than the association shall succeed to the rights and obligations of the association under Subsections (17)(a) through (d) effective as of the date agreed upon by the association and the other insurer and regardless of whether the association has made the election referred to in Subsections (17)(a) through (d) provided that:
     (i) the association transfers its obligations to the other insurer;
     (ii) the association and the other insurer agree to the transfer;
     (iii) the indemnity reinsurance agreements automatically terminate for new reinsurance unless the indemnity reinsurer and the other insurer agree to the contrary;
     (iv) the obligations described in Subsection (17)(d)(iv) may not apply on and after the date the indemnity reinsurance agreement is transferred to the third party insurer; and
     (v) this Subsection (17)(e) may not apply if the association has previously expressly determined in writing that the association will not exercise the election referred to in Subsections (17)(a) through (d).
     (f) (i) This Subsection (17) supersedes the provisions of any law of this state or of any affected reinsurance agreement that provides for or requires any payment of reinsurance proceeds on account of losses or events that occur in periods after the coverage date, to the receiver, liquidator, or rehabilitator of an insolvent member insurer.
     (ii) The receiver, rehabilitator, or liquidator shall remain entitled to any amounts payable by the reinsurer under the reinsurance agreement with respect to losses or events that occur in periods prior to the coverage date, subject to applicable setoff provisions.
     (g) Except as otherwise expressly provided in Subsections (17)(a) through (f), this Subsection (17) does not:
     (i) alter or modify the terms and conditions of the indemnity reinsurance agreements of the insolvent member insurer;
     (ii) abrogate or limit any rights of any reinsurer to claim that it is entitled to rescind a reinsurance agreement; or
     (iii) give a policy owner or beneficiary an independent cause of action against an indemnity reinsurer that is not otherwise set forth in the indemnity reinsurance agreement.
     (18) The board of directors of the association shall have discretion and may exercise reasonable business judgment to determine the means by which the association is to provide the benefits of this part in an economical and efficient manner.
     (19) If the association has arranged or offered to provide the benefits of this part to a covered person under a plan or arrangement that fulfills the association's obligations under this part, the person is not entitled to benefits from the association in addition to or other than those provided under the plan or arrangement.
     (20) (a) Venue in a suit against the association arising under this part shall be in Salt Lake County.

     (b) The association may not be required to give an appeal bond in an appeal that relates to a cause of action arising under this part.

Amended by Chapter 309, 2007 General Session
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Last revised: Thursday, May 28, 2009