Utah Legislature HB0282

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H.B. 282

             1     

LIFE INSURANCE GUARANTY

             2     
ASSOCIATIONS

             3     
2000 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Sponsor: Lowell A. Nelson

             6      AN ACT RELATING TO INSURANCE; ADDRESSING COVERAGE OF THE
             7      ASSOCIATION; ADDRESSING RULES OF CONSTRUCTION; ADDRESSING
             8      DEFINITIONS; ADDRESSING CLASSES OF ASSESSMENT OF THE ASSOCIATION;
             9      ADDRESSING BOARD OF DIRECTORS; ADDRESSING POWERS AND DUTIES OF THE
             10      ASSOCIATION; ADDRESSING ASSESSMENTS ON MEMBER INSURERS; ADDRESSING
             11      PLAN OF OPERATION OF THE ASSOCIATION; ADDRESSING POWERS AND DUTIES OF
             12      COMMISSIONER; ADDRESSING PREVENTION OF INSOLVENCIES; ADDRESSING
             13      MISCELLANEOUS PROVISIONS; ADDRESSING REPORTS; ADDRESSING REQUIRED
             14      SUMMARY DOCUMENTS; ADDRESSING PROSPECTIVE APPLICATION; AND MAKING
             15      TECHNICAL CHANGES.
             16      This act affects sections of Utah Code Annotated 1953 as follows:
             17      AMENDS:
             18          31A-28-102, as last amended by Chapter 316, Laws of Utah 1994
             19          31A-28-103, as last amended by Chapter 316, Laws of Utah 1994
             20          31A-28-104, as repealed and reenacted by Chapter 211, Laws of Utah 1991
             21          31A-28-105, as last amended by Chapter 9, Laws of Utah 1996, Second Special Session
             22          31A-28-106, as enacted by Chapter 211, Laws of Utah 1991
             23          31A-28-107, as last amended by Chapter 10, Laws of Utah 1997
             24          31A-28-108, as last amended by Chapter 344, Laws of Utah 1995
             25          31A-28-109, as enacted by Chapter 211, Laws of Utah 1991
             26          31A-28-110, as enacted by Chapter 211, Laws of Utah 1991
             27          31A-28-111, as enacted by Chapter 211, Laws of Utah 1991


             28          31A-28-112, as enacted by Chapter 211, Laws of Utah 1991
             29          31A-28-113, as enacted by Chapter 211, Laws of Utah 1991
             30          31A-28-114, as last amended by Chapters 20 and 344, Laws of Utah 1995
             31          31A-28-115, as enacted by Chapter 211, Laws of Utah 1991
             32          31A-28-117, as enacted by Chapter 211, Laws of Utah 1991
             33          31A-28-119, as enacted by Chapter 211, Laws of Utah 1991
             34      ENACTS:
             35          31A-28-120, Utah Code Annotated 1953
             36      Be it enacted by the Legislature of the state of Utah:
             37          Section 1. Section 31A-28-102 is amended to read:
             38           31A-28-102. Purpose.
             39          (1) The purpose of this part is to protect, subject to certain limitations, the persons
             40      specified in Subsection 31A-28-103 (1) against failure in the performance of contractual
             41      obligations, under [the] life and disability insurance policies and annuity contracts specified in
             42      Subsection 31A-28-103 (2), because of the impairment or insolvency of the member insurer that
             43      issued the policies or contracts.
             44          (2) To provide the protection described in Subsection (1)[,]:
             45          (a) the Utah Life and Disability Insurance Guaranty Association, which currently exists,
             46      is continued [in order] to pay benefits and to continue coverages as limited [in] by this part[,]; and
             47          (b) members of the association are subject to assessment to provide funds to carry out the
             48      purpose of this part.
             49          Section 2. Section 31A-28-103 is amended to read:
             50           31A-28-103. Coverage and limitations.
             51          (1) (a) This part provides coverage for the policies and contracts specified in Subsection
             52      (2) to [persons] a person who [are] is:
             53          [(a)] (i) [beneficiaries, assignees, or payees of the persons covered under Subsection
             54      (1)(b),] a beneficiary, assignee, or payee of a person covered by Subsection (1)(a)(ii) regardless
             55      of where [they reside] that person resides, except for a nonresident certificate [holders] holder
             56      under a group [policies] policy or [contracts] contract; or
             57          [(b) owners] (ii) an owner of or a certificate [holders] holder under [such policies] a policy
             58      or [contracts; or, in the case of] contract, other than an unallocated annuity [contracts] contract or


             59      structured settlement annuity, [to the persons who are the contract holders, and who are] if the
             60      owner or certificate holder is:
             61          [(i) residents] (A) a resident of Utah; or
             62          [(ii)] (B) not [residents] a resident of Utah, but only [under the following conditions] if:
             63          [(A)] (I) the [insurers which] insurer that issued the [policies] policy or [contracts are]
             64      contract is domiciled in this state;
             65          [(B)] (II) [the insurers never held a license or certificate of authority in] the [states] state
             66      in which the [persons reside;] person resides has an association similar to the association created
             67      by this part; and
             68          (III) the person is not eligible for coverage by an association in any other state because the
             69      insurer was not licensed in the state at the time specified in the state's guaranty association's law.
             70          [(C) the states have associations similar to the association created by this chapter; and]
             71          [(D) the persons are not eligible for coverage by the associations described in Subsection
             72      (1)(b)(ii)(C).]
             73          (b) For an unallocated annuity contract specified in Subsection (2):
             74          (i) Subsections (1)(a)(i) and (ii) do not apply; and
             75          (ii) except as provided in Subsections (1)(d) and (1)(e), this part shall provide coverage for
             76      the unallocated annuity contract specified in Subsection (2) to a person who is:
             77          (A) the owner of the unallocated annuity contract if the contract is issued to or in
             78      connection with a specific benefit plan whose plan sponsor has its principal place of business in
             79      this state; and
             80          (B) an owner of an unallocated annuity contract issued to or in connection with a
             81      government lottery if the owner is a resident.
             82          (c) For a structured settlement annuity specified in Subsection (2):
             83          (i) Subsection (1)(a)(i) and (ii) do not apply; and
             84          (ii) except as provided in Subsections (1)(d) and (1)(e), this part shall provide coverage for
             85      the structured settlement annuity specified in Subsection (2) to a person who is a payee under a
             86      structured settlement annuity, or beneficiary of a payee if the payee is deceased, if the payee:
             87          (A) is a resident, regardless of where the contract owner resides; or
             88          (B) is not a resident, but only if the contract owner of the structured settlement annuity is
             89      a resident, or the contract owner of the structured settlement annuity is not a resident, but:


             90          (I) the insurer that issued the structured settlement annuity is domiciled in this state;
             91          (II) the state in which the contract owner resides has an association similar to the
             92      association created by this part; and
             93          (III) the payee, beneficiary, or the contract owner is not eligible for coverage by the
             94      association of the state in which the payee or contract owner resides.
             95          (d) This part may not provide coverage for the policies and contracts specified in
             96      Subsection (2) to:
             97          (i) a person who is a payee or beneficiary of a contract owner resident of this state, if the
             98      payee or beneficiary is afforded any coverage by the association of another state; or
             99          (ii) a person covered under Subsection (1)(b), if any coverage is provided by the
             100      association of another state to the person.
             101          (e) (i) This part provides coverage for the policies and contracts specified in Subsection
             102      (2) to a person who is a resident of this state and, in special circumstances, to a nonresident.
             103          (ii) To avoid duplicate coverage, if a person who would otherwise receive coverage under
             104      this part is provided coverage under the laws of any other state, the person may not be provided
             105      coverage under this part.
             106          (iii) In determining the application of the provisions of this Subsection (1)(e) in situations
             107      where a person could be covered by the association of more than one state, whether as an owner,
             108      payee, beneficiary, or assignee, this part shall be construed in conjunction with other state laws to
             109      result in coverage by only one association.
             110          (2) (a) (i) Except as [otherwise] limited by this part, this part provides coverage to the
             111      persons specified in Subsection (1) for:
             112          (A) a direct, nongroup life, disability, annuity [and] policy or contract;
             113          (B) a supplemental [policies or contracts, for certificates] contract to a policy or contract
             114      described in Subsection (2)(a)(i)(A);
             115          (C) a certificate under a direct group [policies and contracts,] policy or contract; and [for]
             116          (D) an unallocated annuity [contracts] contract issued by a member [insurers] insurer.
             117      [Annuity contracts]
             118          (ii) For purposes of Subsection (2)(a)(i), an annuity contract and [certificates] a certificate
             119      under a group annuity [contracts include] contract includes:
             120          (A) a guaranteed investment [contracts,] contract;


             121          (B) a deposit administration [contracts,] contract;
             122          (C) an unallocated funding [agreements,] agreement;
             123          (D) a structured settlement [agreements, lottery contracts,] annuity;
             124          (E) an annuity issued to or in connection with a government lottery; and [any]
             125          (F) an immediate or deferred annuity [contracts] contract.
             126          (b) This part does not provide coverage for:
             127          (i) [any] a portion of a policy or contract:
             128          (A) not guaranteed by the insurer[,]; or
             129          (B) under which the risk is borne by the policy or contract [holder] owner;
             130          (ii) [any] a policy or contract of reinsurance, unless:
             131          (A) an assumption [certificates have been] certificate is issued;
             132          (B) the assumption certificate required by Subsection (2)(b)(ii)(A) is in effect pursuant to
             133      the reinsurance policy or contract; and
             134          (C) the reinsurance contract is approved by the appropriate regulatory authorities; or
             135          (iii) [any] a portion of a policy or contract to the extent that the rate of interest on which
             136      it is based[:] or the interest rate, crediting rate, or similar factor determined by use of an index or
             137      other external reference stated in the policy or contract employed in calculating returns or changes
             138      in value, if the interest rate, crediting rate, or similar factor is not excluded from coverage by
             139      Subsection (2)(b)(xii), [(A)] averaged over the period of four years prior to the date on which the
             140      association becomes obligated with respect to the policy or contract, exceeds a rate of interest
             141      determined by subtracting two percentage points from Moody's Corporate Bond Yield Average
             142      averaged for that same four-year period or for the corresponding lesser period if the policy or
             143      contract was issued less than four years before the association became obligated; [and]
             144          [(B) on or after the date on which the association becomes obligated with respect to the
             145      policy or contract, exceeds the rate of interest determined by subtracting three percentage points
             146      from Moody's Corporate Bond Yield Average as most recently available;]
             147          (iv) [any] a portion of a policy or contract issued to a plan or program of an employer,
             148      association, or [similar entity] other person to provide life, [disability] health, or annuity benefits
             149      to its employees [or], members, or others, to the extent that the plan or program is self-funded or
             150      uninsured, including benefits payable by an employer, association, or [similar entity] other person
             151      under:


             152          (A) a multiple employer welfare arrangement as defined in [Section 514 of the Employee
             153      Retirement Income Security Act of 1974, as amended] 29 U.S.C. Sec. 1144;
             154          (B) a minimum premium group insurance plan;
             155          (C) a stop-loss group insurance plan; or
             156          (D) an administrative services only contract;
             157          (v) [any] a portion of a policy or contract to the extent that it provides [dividends or
             158      experience rating credits, or provides that any fees or allowances be paid to any person, including
             159      the policy or contract holder, in connection with the service to or administration of the policy or
             160      contract;]:
             161          (A) a dividend;
             162          (B) an experience rating credit;
             163          (C) voting rights; or
             164          (D) payment of a fee or allowance to any person, including the policy or contract owner,
             165      in connection with the service to or administration of the policy or contract;
             166          (vi) [any] a policy or contract issued in this state by a member insurer at a time when:
             167          (A) it was not licensed; or
             168          (B) did not have a certificate of authority to issue the policy or contract in this state;
             169          (vii) [any] an unallocated annuity contract issued to [an employee] or in connection with
             170      a benefit plan protected under the federal Pension Benefit Guaranty Corporation, regardless of
             171      whether the federal Pension Benefit Guaranty Corporation has yet become liable to make any
             172      payment with respect to the benefit plan; [and]
             173          (viii) [any] a portion of [any] an unallocated annuity contract [which] that is not issued to
             174      or in connection with:
             175          (A) a specific [employee,] benefit plan of:
             176          (I) employees;
             177          (II) a union[,]; or
             178          (III) an association of natural persons [benefit plan]; or
             179          (B) a government lottery[.];
             180          (ix) a portion of a policy or contract to the extent that the assessment required by Section
             181      31A-28-109 with respect to the policy or contract is preempted by federal or state law;
             182          (x) an obligation that does not arise under the express written terms of the policy or


             183      contract issued by an insurer to the contract owner or policy owner, including:
             184          (A) a claim based on marketing materials;
             185          (B) a claim based on documents that are issued by the insurer without meeting applicable
             186      policy form filing or approval requirements;
             187          (C) a misrepresentation regarding a policy benefit;
             188          (D) an extra-contractual claim;
             189          (E) a claim for penalties; or
             190          (F) a claim for consequential or incidental damages;
             191          (xi) a contract that establishes the member insurer's obligations to provide a book value
             192      accounting guaranty for defined contribution benefit plan participants by reference to a portfolio
             193      of assets that is owned by a person that is:
             194          (A) (I) the benefit plan; or
             195          (II) the benefit plan's trustee; and
             196          (B) not an affiliate of the member insurer; and
             197          (xii) a portion of a policy or contract to the extent it provides for interest or other changes
             198      in value:
             199          (A) to be determined by the use of an index or other external reference stated in the policy
             200      or contract; and
             201          (B) (I) that have not been credited to the policy or contract; or
             202          (II) as to which the policy or contract owner's rights are subject to forfeiture as of the date
             203      the member insurer becomes an impaired or insolvent insurer under this part.
             204          [(c) The] (3) Subject to Subsection (4), the benefits for which the association may become
             205      liable [shall in no event] may not exceed the lesser of:
             206          [(i)] (a) the contractual obligations for which the insurer is liable or would have been liable
             207      if it were not an impaired or insolvent insurer; [or]
             208          [(ii) (A)] (b) with respect to [any] one life, regardless of the number of policies or
             209      contracts:
             210          [(I) $300,000 in life insurance death benefits, but not more than $100,000 in net cash
             211      surrender and net cash withdrawal values for life insurance;]
             212          [(II) $100,000 in disability insurance benefits, including any net cash surrender and net
             213      cash withdrawal values;]


             214          [(III) $100,000 in the present value of annuity benefits, including net cash surrender and
             215      net cash withdrawal values;]
             216          (i) for a life insurance policy:
             217          (A) if the insured died before the coverage date, $500,000 of the death benefit;
             218          (B) if the insurer received a valid request for cash surrender before the coverage date but
             219      has not paid the cash surrender value before the coverage date, $200,000 of cash surrender
             220      benefits; or
             221          (C) if neither Subsection (3)(b)(i)(A) nor (B) apply, the covered portion of each benefit
             222      provided under the policy;
             223          (ii) for an annuity contract, the covered portion of each benefit provided under the contract;
             224          (iii) for a disability policy:
             225          (A) classified as basic hospital and medical or major medical, $500,000; or
             226          (B) not classified as basic hospital and medical or major medical, the covered portion of
             227      each benefit provided under the policy;
             228          [(B)] (c) with respect to [each] an individual, or a beneficiary of that individual if the
             229      individual is deceased, participating in a governmental retirement plan established under Section
             230      [401(k)] 401, 403(b), or 457 [of the], Internal Revenue Code, covered by an unallocated annuity
             231      contract [or the beneficiaries of each such individual if deceased], in the aggregate[, $100,000]
             232      $200,000 in present value of annuity benefits, including:
             233          (i) net cash surrender; and
             234          (ii) net cash withdrawal values; or
             235          (d) with respect to a payee of a structured settlement annuity or a beneficiary of the payee
             236      if the payee is deceased, the limits set forth in Subsection (3)(b).
             237          [(C)] (4) [however, in no event shall] Notwithstanding Subsections (3)(a) through (d), the
             238      association [be liable to expend more than $300,000 in the aggregate with respect to any one
             239      individual under Subsections (2)(c)(ii)(A) and (ii)(B);] may not be obligated to cover more than:
             240          [(iii) with respect to any one contract holder covered by any unallocated annuity contract
             241      not included in Subsection (2)(c)(ii)(B), $5,000,000 in benefits, irrespective of the number of
             242      contracts held by that contract holder.]
             243          (a) an aggregate of $500,000 in benefits with respect to any one life under:
             244          (i) Subsection (3)(b)(i)(A);


             245          (ii) Subsection (3)(b)(i)(B);
             246          (iii) Subsection (3)(b)(ii); or
             247          (iv) Subsection (3)(b)(iii);
             248          (b) $5,000,000 in benefits with respect to one owner of multiple nongroup policies of life
             249      insurance:
             250          (i) whether the policy owner is an individual, firm, corporation, or other person;
             251          (ii) whether the persons insured are officers, managers, employees, or other persons; and
             252          (iii) regardless of the number of policies and contracts held by the owner; and
             253          (c) $5,000,000 in benefits, irrespective of the number of contracts with respect to the
             254      contract owner or plan sponsor, with respect to:
             255          (i) one contract owner provided coverage under Subsection (1)(b)(ii)(B); or
             256          (ii) one plan sponsor whose plans own, directly or in trust, one or more unallocated annuity
             257      contracts not included in Subsection (3)(b)(ii).
             258          (5) (a) Notwithstanding Subsection (4)(c) and except as provided in Subsection (5)(b), the
             259      association shall provide coverage if one or more unallocated annuity contracts are:
             260          (i) covered contracts under this part; and
             261          (ii) owned by a trust or other entity for the benefit of two or more plan sponsors; and
             262          (iii) the largest interest in the trust or entity owning the contract or contracts is held by a
             263      plan sponsor whose principal place of business is in the state.
             264          (b) Notwithstanding Subsection (5)(a) the association may not be obligated to cover more
             265      than $5,000,000 in benefits with respect to all unallocated contracts described in Subsection (5)(a).
             266          (6) (a) The limitations set forth in Subsections (3) and (4) are limitations on the benefits
             267      for which the association is obligated before taking into account:
             268          (i) the association's subrogation and assignment rights; or
             269          (ii) the extent to which those benefits could be provided out of the assets of the impaired
             270      or insolvent insurer attributable to covered policies.
             271          (b) The costs of the association's obligations under this part may be met by the use of
             272      assets:
             273          (i) attributable to covered policies; or
             274          (ii) reimbursed to the association pursuant to the association's subrogation and assignment
             275      rights.


             276          (c) On and after the date on which the association becomes obligated with respect to any
             277      covered policy, the association may not be obligated to provide benefits to the extent that the
             278      benefits are based on an interest rate, crediting rate, or similar factor determined by use of an index
             279      or other external reference stated in the policy or contract employed in calculating returns or
             280      changes in value which exceeds the rate of interest determined by subtracting three percentage
             281      points from Moody's Corporate Bond Yield Average as most recently available on each date on
             282      which interest is credited or attributed to the covered policy.
             283          (d) In performing its obligations to provide coverage under Section 31A-28-108 , the
             284      association may not be required to guarantee, assume, reinsure, or perform, or cause to be
             285      guaranteed, assumed, reinsured, or performed a contractual obligation of the insolvent or impaired
             286      insurer under a covered policy or contract that does not materially affect the economic values or
             287      economic benefits of the covered policy or contract.
             288          Section 3. Section 31A-28-104 is amended to read:
             289           31A-28-104. Construction.
             290          This part shall be [liberally] construed to effect the purposes under Section 31A-28-102
             291      [constituting an aid and guide to interpretation of this part].
             292          Section 4. Section 31A-28-105 is amended to read:
             293           31A-28-105. Definitions.
             294          As used in this [chapter] part:
             295          [(1) "Account" means any of the two accounts created under Section 31A-28-106 .]
             296          [(2)] (1) "Association" means the Utah Life and Disability Insurance Guaranty Association
             297      continued under Section 31A-28-106 .
             298          (2) (a) "Authorized assessment" or "authorized," when used in the context of assessments,
             299      means that the board of directors passed a resolution whereby an assessment will be called
             300      immediately or in the future from member insurers for an amount as set forth in the resolution.
             301          (b) An assessment is authorized when the resolution is passed.
             302          (3) "Benefit plan" means a specific benefit plan of:
             303          (a) employees;
             304          (b) a union; or
             305          (c) an association of natural persons.
             306          (4) (a) "Called assessment" or "called," when used in the context of assessments, means


             307      that the association issued a notice to member insurers requiring that an authorized assessment be
             308      paid within the time frame set forth within the notice.
             309          (b) All or part of an authorized assessment becomes a called assessment when notice is
             310      mailed by the association to member insurers.
             311          [(3)] (5) "Contractual obligation" means an obligation under any [obligation under] of the
             312      following for which coverage is provided under Section 31A-28-103 :
             313          (a) a policy or contract[, or];
             314          (b) a certificate under a group policy or contract[,]; or
             315          (c) a portion of [the] a policy or contract [for which coverage is provided under Section
             316      31A-28-103 ].
             317          (6) "Coverage date" means the date on which the association becomes responsible for the
             318      obligations of a member insurer.
             319          [(4)] (7) "Covered policy" means any of the following for which coverage is provided in
             320      Section 31A-28-103 :
             321          (a) a policy or contract [within the scope of this chapter under Section 31A-28-103 ]; or
             322          (b) portion of a policy or contract.
             323          (8) (a) "Covered portion" means:
             324          (i) for any covered policy that has a cash surrender value, a fraction obtained by dividing:
             325          (A) the lesser of:
             326          (I) $200,000; and
             327          (II) the cash surrender value of the policy; by
             328          (B) the cash surrender value of the policy; and
             329          (ii) for any covered policy that does not have a cash surrender value, a fraction obtained
             330      by dividing:
             331          (A) the lesser of:
             332          (I) $200,000; and
             333          (II) the policy's minimum statutory reserve; by
             334          (B) the policy's minimum statutory reserve.
             335          (b) The cash surrender value and the minimum statutory reserve is determined as of the
             336      coverage date in accordance with the exclusions in Subsection 31A-28-103 (2)(b)(iii).
             337          (9) "Extra-contractual claim" includes a claim relating to:


             338          (a) bad faith in the payment of a claim;
             339          (b) punitive or exemplary damages; or
             340          (c) attorneys' fees and costs.
             341          [(5)] (10) "Impaired insurer" means a member insurer that is not an insolvent insurer and:
             342          (a) is considered by the commissioner to be hazardous pursuant to this title; or
             343          (b) is placed under an order of rehabilitation or conservation by a court of competent
             344      jurisdiction.
             345          [(6)] (11) "Insolvent insurer" means a member insurer [which] that is placed under an
             346      order of liquidation by a court of competent jurisdiction with a finding of insolvency.
             347          [(7)] (12) (a) "Member insurer" means a person that:
             348          (i) (A) is an insurer; or
             349          (B) a licensed [or holding] hospital or medical service organization, whether profit or
             350      nonprofit; and
             351          (ii) that holds a certificate of authority to transact in this state any kind of insurance for
             352      which coverage is provided under [Sections] Section 31A-28-103 [and 31A-28-202 ]. [The term]
             353          (b) "Member insurer" includes an insurer whose license or certificate of authority in this
             354      state may have been:
             355          (i) suspended[,];
             356          (ii) revoked[,];
             357          (iii) not renewed[,]; or
             358          (iv) voluntarily withdrawn.
             359          [(b)] (c) "Member insurer" does not include:
             360          [(i) a limited health plan;]
             361          [(ii)] (i) a health maintenance organization;
             362          [(iii)] (ii) a fraternal benefit society;
             363          [(iv)] (iii) a mandatory state pooling plan;
             364          [(v)] (iv) a mutual assessment company or [any entity] other person that operates on an
             365      assessment basis; [or]
             366          (v) an insurance exchange; or
             367          (vi) [any] an entity similar to [any of the above] an entity described in Subsections
             368      (12)(c)(i) through (v).


             369          [(8)] (13) "Moody's Corporate Bond Yield Average" means the Monthly Average
             370      Corporates as published by Moody's [Investment] Investors Service, Inc., or any successor
             371      [thereto] to Moody's Investors Service, Inc.
             372          (14) (a) "Owner" of a policy or contract, "policy owner," or "contract owner" means the
             373      person who:
             374          (i) is identified as the legal owner under the terms of the policy or contract; or
             375          (ii) is otherwise vested with legal title to the policy or contract through a valid assignment:
             376          (A) completed in accordance with the terms of the policy or contract; and
             377          (B) properly recorded as the owner on the books of the insurer.
             378          (b) "Owner," "policy owner," or "contract owner" does not include a person with only a
             379      beneficial interest in a policy or contract.
             380          [(9)] (15) "Person" means any:
             381          (a) individual[,];
             382          (b) corporation[,];
             383          (c) limited liability company;
             384          (d) partnership[,];
             385          (e) association[,];
             386          (f) governmental body or entity; or
             387          (g) voluntary organization.
             388          (16) "Plan sponsor" means:
             389          (a) the employer, in the case of a benefit plan established or maintained by a single
             390      employer;
             391          (b) the employee organization, in the case of a benefit plan established or maintained by
             392      an employee organization; or
             393          (c) the association, committee, joint board of trustees, or other similar group of
             394      representatives of the parties who establish or maintain a benefit plan, in the case of a benefit plan
             395      established or maintained by:
             396          (i) two or more employers; or
             397          (ii) jointly by:
             398          (A) one or more employers; and
             399          (B) one or more employee organizations.


             400          [(10)] (17) (a) "Premiums" means [amounts] an amount or consideration received [in any
             401      calendar year] on covered policies or contracts, less:
             402          (i) returned:
             403          (A) premiums[,];
             404          (B) considerations[,] and
             405          (C) deposits [returned]; and
             406          (ii) dividends and experience credits [on the amounts].
             407          (b) (i) "Premiums" does not include [any amounts] an amount or consideration received
             408      for [any policies or contracts or for]:
             409          (A) a policy or contract for which coverage is not provided under Subsection
             410      31A-28-103 (2); or
             411          (B) the [portions] portion of [any] [policies or contracts] a policy or contract for which
             412      coverage is not provided under Subsection 31A-28-103 (2)[, except that assessable premiums].
             413          (ii) Notwithstanding Subsection (17)(b)(i), an assessable premium may not be reduced on
             414      account of:
             415          (A) Subsection 31A-28-103 (2)(b)(iii) relating to interest limitations; and
             416          (B) Subsection 31A-28-103 [(2)(c)](3) relating to limitations with respect to [any]:
             417          (I) one individual[,];
             418          (II) any one participant[,]; and
             419          (III) any one contract [holder] owner.
             420          (c) "Premiums" may not include any premiums in excess of $5,000,000:
             421          (i) on any unallocated annuity contract not issued under a governmental retirement plan
             422      established under Section [401(k)] 401, 403(b), or 457 [of the], Internal Revenue Code[.]; or
             423          (ii) with respect to multiple nongroup policies of life insurance owned by one owner:
             424          (A) whether the policy owner is an individual, firm, corporation, or other person;
             425          (B) whether the persons insured are officers, managers, employees, or other persons; and
             426          (C) regardless of the number of policies or contracts held by the owner.
             427          (18) (a) Except as provided in Subsection (18)(b), "principal place of business" of a plan
             428      sponsor or a person other than a natural person means the single state:
             429          (i) in which the natural persons who establish policy for the direction, control, and
             430      coordination of the operations of the entity as a whole primarily exercise the function; and


             431          (ii) determined by the association in its reasonable judgment by considering the following
             432      factors:
             433          (A) the state in which the primary executive and administrative headquarters of the entity
             434      is located;
             435          (B) the state in which the principal office of the chief executive officer of the entity is
             436      located;
             437          (C) the state in which the board of directors, or similar governing person or persons, of the
             438      entity conducts the majority of its meetings;
             439          (D) the state in which the executive or management committee of the board of directors,
             440      or similar governing person, of the entity conducts the majority of its meetings;
             441          (E) the state from which the management of the overall operations of the entity is directed;
             442      and
             443          (F) in the case of a benefit plan sponsored by affiliated companies comprising a
             444      consolidated corporation, the state in which the holding company or controlling affiliate has its
             445      principal place of business as determined using the factors described in Subsections (18)(a)(ii)(A)
             446      through (E).
             447          (b) Notwithstanding Subsection (18)(a), in the case of a plan sponsor, if more than 50%
             448      of the participants in the benefit plan are employed in a single state, the state where more than 50%
             449      of the participants are employed is considered to be the principal place of business of the plan
             450      sponsor.
             451          (c) (i) The principal place of business of a plan sponsor of a benefit plan described in
             452      Subsection (3) is considered to be the principal place of business of the association, committee,
             453      joint board of trustees, or other similar group of representatives of the parties who establish or
             454      maintain the benefit plan.
             455          (ii) If for a benefit plan described in Subsection (3) there is not a specific or clear
             456      designation of a principal place of business under Subsection (18)(c)(i), the principal place of
             457      business is considered to be the principal place of business of the employer or employee
             458      organization that has the largest investment in the benefit plan.
             459          (19) "Receivership court" means the court in the insolvent or impaired insurer's state
             460      having jurisdiction over the conservation, rehabilitation, or liquidation of the insurer.
             461          [(11)] (20) (a) "Resident" means [any] a person:


             462          (i) to whom a contractual obligation is owed; and
             463          (ii) who resides in this state [at the time] on the earlier of the date a member insurer is
             464      [determined to be] an:
             465          (A) impaired insurer; or
             466          (B) insolvent insurer [and to whom a contractual obligation is owed].
             467          (b) A person may be a resident of only one state, which in the case of a person other than
             468      a natural person shall be [the state in which] its principal place of business [is located].
             469          (c) A citizen of the United States that is either a resident of a foreign country or a resident
             470      of United States possession, territory, or protectorate that does not have an association similar to
             471      the association created by this part, is considered a resident of the state of domicile of the insurer
             472      that issued the policy or contract.
             473          (21) "State" means:
             474          (a) a state;
             475          (b) the District of Columbia;
             476          (c) Puerto Rico; and
             477          (d) a United States possession, territory, or protectorate.
             478          (22) "Structured settlement annuity" means an annuity purchased to fund periodic
             479      payments for a plaintiff or other claimant in payment for or with respect to personal injury suffered
             480      by the plaintiff or other claimant.
             481          [(12)] (23) "Supplemental contract" means [any] a written agreement entered into for the
             482      distribution of [policy or contract] proceeds under a policy or contract for:
             483          (a) life;
             484          (b) health; or
             485          (c) annuity.
             486          [(13)] (24) "Unallocated annuity contract" means [any] an annuity contract or group
             487      annuity certificate [which] that is not issued to and owned by an individual, except to the extent
             488      of any annuity benefits guaranteed to an individual by an insurer under [such] the contract or
             489      certificate.
             490          Section 5. Section 31A-28-106 is amended to read:
             491           31A-28-106. Continuation of the association.
             492          (1) (a) There is continued under this [chapter] part the nonprofit legal entity known as the


             493      Utah Life and Disability Insurance Guaranty Association created under former provisions of this
             494      title.
             495          (b) All member insurers shall be and remain members of the association as a condition of
             496      their authority to transact [business] insurance in this state.
             497          (c) The association shall:
             498          (i) perform its functions under the plan of operation established and approved under
             499      Section 31A-28-110 ; and [shall]
             500          (ii) exercise its powers through a board of directors established under [the provisions of]
             501      Section 31A-28-107 . [For purposes of administration and assessment the]
             502          (d) The association shall [maintain two accounts] allocate assessments among the
             503      following classes or subclasses:
             504          [(a)] (i) the life insurance and annuity [account] class, which includes the following
             505      [subaccounts] subclasses:
             506          [(i)] (A) the life insurance [Account] subclass;
             507          [(ii)] (B) the annuity [Account] subclass:
             508          (I) which includes annuity contracts owned by a governmental retirement plan, or its
             509      trustee, established under Section 401, 403(b), or 457, United States Internal Revenue Code; and
             510          (II) otherwise excludes unallocated annuities; and
             511          [(iii)] (C) the unallocated annuity [account] subclass, which [includes] excludes contracts
             512      [qualified] owned by a governmental retirement benefit plan, or its trustee, established under
             513      Sections [401(k)] 401, 403(b), or 457 [of the], Internal Revenue Code; and
             514          [(b)] (ii) the disability insurance [account] class.
             515          (2) (a) The association shall:
             516          (i) come under the immediate supervision of the commissioner; and [shall]
             517          (ii) be subject to the applicable provisions of the insurance laws of this state.
             518          (b) Meetings or records of the association may be opened to the public upon majority vote
             519      of the board of directors of the association.
             520          Section 6. Section 31A-28-107 is amended to read:
             521           31A-28-107. Board of directors.
             522          (1) (a) The board of directors of the association shall consist of at least five but not more
             523      than nine member insurers serving terms [of four years each] as established in the plan of


             524      operation.
             525          (b) (i) The members of the board of directors shall be selected by member insurers, subject
             526      to the approval of the commissioner.
             527          (ii) When a vacancy occurs in the membership of the board of directors for any reason,
             528      [the] a replacement [shall] may be elected for the unexpired term by a majority vote of the
             529      remaining board members, subject to the approval of the commissioner.
             530          (c) In approving selections or in appointing members to the board of directors, the
             531      commissioner shall consider, among other things, whether all member insurers are fairly
             532      represented.
             533          (d) Notwithstanding [the requirements of] Subsection (1)(a), the commissioner shall, at
             534      the time of election or reelection, adjust the length of terms to ensure that the terms of board
             535      members are staggered so that approximately half of the board of directors is selected [every two
             536      years] during any two-year period.
             537          (2) (a) [Members shall receive no compensation or benefits for their services, but may
             538      receive per diem and expenses incurred in the performance of the member's official duties at the
             539      rates established by the Division of Finance under Sections 63A-3-106 and 63A-3-107 from the
             540      assets of the association] A member of the board of directors may be reimbursed from the assets
             541      of the association for expenses incurred by the member as a member of the board of directors.
             542          (b) Except as provided in Subsection (2)(a), a member of the board of directors may not
             543      be compensated by the association for the member's services.
             544          [(b) Members may decline to receive per diem and expenses for their service.]
             545          Section 7. Section 31A-28-108 is amended to read:
             546           31A-28-108. Powers and duties of the association.
             547          (1) (a) If a member insurer is an impaired [domestic] insurer, [the association in its
             548      discretion and] subject to any conditions imposed by the association that do not impair the
             549      contractual obligations of the impaired insurer [that are approved by the commissioner, and also
             550      by the impaired insurer, except in cases of court-ordered conservation or rehabilitation, may:], the
             551      association may elect to provide the protections provided by this part to the policyholders of the
             552      impaired insurer.
             553          (b) If the association makes the election described in Subsection (1)(a), the association
             554      may proceed under one or more of the options described in Subsection (3).


             555          [(a) guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, any
             556      or all of the policies or contracts of the impaired insurer;]
             557          [(b) provide the necessary monies, pledges, notes, guarantees or other means to effectuate
             558      Subsection (1)(a) and assure payment of the contractual obligations of the impaired insurer
             559      pending action under Subsection (1)(a); or]
             560          [(c) loan money to the impaired insurer.]
             561          [(2) (a) If a member insurer is an impaired insurer, whether domestic, foreign, or alien, and
             562      the insurer is not paying claims timely, the association shall in its discretion and subject to the
             563      preconditions specified in Subsection (2)(b), either:]
             564          [(i) take any of the actions specified in Subsection (1), subject to the conditions specified
             565      in Subsection (1); or]
             566          [(ii) provide substitute benefits in lieu of the contractual obligations of the impaired insurer
             567      solely for disability claims, periodic annuity benefit payments, death benefits, supplemental
             568      benefits, and cash withdrawals for policy or contract owners who petition for such benefits under
             569      claims of emergency or hardship in accordance with the standards proposed by the association and
             570      approved by the commissioner.]
             571          [(b) The association is subject to the requirements of Subsection (2)(a) only if:]
             572          [(i) the laws of the impaired insurer's state of domicile provide that until all payments of,
             573      or an account of, the impaired insurer's contractual obligations by all guaranty associations, along
             574      with all expenses of the obligation and interest on all such payments and expenses, have been
             575      repaid to the guaranty associations or a plan of repayment by the impaired insurer has been
             576      approved by the guaranty associations:]
             577          [(A) the delinquency proceeding shall not be dismissed;]
             578          [(B) neither the impaired insurer nor its assets shall be returned to the control of its
             579      shareholders or private management;]
             580          [(C) it shall not be permitted to solicit or accept new business or have any suspended or
             581      revoked license restored; and]
             582          [(ii) (A) if the impaired insurer is a domestic insurer, it has been placed under an order of
             583      rehabilitation by a court of competent jurisdiction in this state; or]
             584          [(B) if the impaired insurer is a foreign or alien insurer:]
             585          [(I) it has been prohibited from soliciting or accepting new business in this state;]


             586          [(II) its certificate of authority has been suspended or revoked in this state; and]
             587          [(III) a petition for rehabilitation or liquidation has been filed in a court of competent
             588      jurisdiction in its state of domicile by the commissioner of the state.]
             589          [(3)] (2) If a member insurer is an insolvent insurer, the association [in its discretion] shall
             590      [either:] provide the protections provided by this part to the policyholders of the insolvent insurer
             591      by electing in its discretion to proceed under one or more of the options in Subsection (3).
             592          (3) With respect to the covered portions of covered policies of an impaired or insolvent
             593      insurer, the association may:
             594          (a) (i) (A) guaranty, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured,
             595      the policies or contracts of the [insolvent] insurer; or
             596          [(ii)] (B) assure payment of the contractual obligations of the insolvent insurer; and
             597          [(iii)] (ii) provide such monies, pledges, guarantees, or other means as are reasonably
             598      necessary to discharge such duties; or
             599          [(b) with respect only to disability insurance policies, provide benefits and coverages in
             600      accordance with Subsection (4).]
             601          [(4) When proceeding under Subsections (2)(a)(ii) or (3)(b), with respect only to disability
             602      insurance policies, the association shall:]
             603          (b) provide benefits and coverages in accordance with Subsection (4).
             604          (4) (a) In accordance with Subsection (3)(b), the association may:
             605          (i) assure payment of benefits for premiums identical to the premiums and benefits, except
             606      for terms of conversion and renewability, that would have been payable under the policies or
             607      contracts of the [insolvent] insurer, for claims incurred:
             608          [(i)] (A) with respect to group policies[,]:
             609          (I) not later than the earlier of the next renewal date under the policies or contracts or 45
             610      days[, but] after the coverage date; and
             611          (II) in no event less than 30 days[,] after the coverage date [on which the association
             612      becomes obligated with respect to the policies]; or
             613          [(ii)] (B) with respect to [individual] nongroup policies[,] or contracts:
             614          (I) not later than the earlier of the next renewal date, if any, under the policies or contracts
             615      or one year[, but] from the coverage date; and
             616          (II) in no event less than 30 days[,] from the coverage date [on which the association


             617      becomes obligated with respect to the policies];
             618          [(b)] (ii) make diligent efforts to provide 30 days' notice of [the] any termination of the
             619      benefits provided to:
             620          (A) all known insureds[,] or annuitants for nongroup policies and contracts; or
             621          (B) group [policyholders with respect to] policy owners for group policies and contracts;
             622      and
             623          [(c)] (iii) with respect to nongroup life and health insurance policies and annuities, make
             624      available substitute coverage on an individual basis, in accordance with [the provisions of]
             625      Subsection (4)[(d)] (b), to each known insured, annuitant, or owner [under an individual policy,]
             626      and to each individual formerly insured or formerly an annuitant under a group policy who is not
             627      eligible for replacement group coverage on an individual basis in accordance with Subsection
             628      (4)(b), if the insured or annuitant had a right under law or the terminated policy or annuity contract
             629      to:
             630          (A) convert coverage to individual coverage; or [to]
             631          (B) continue an individual policy in force until a specified age or for a specified time
             632      during which the insurer:
             633          (I) had no right unilaterally to make changes in any provision of the policy; or
             634          (II) had a right only to make changes in premium by class.
             635          [(d) (i)] (b) (i) In providing the substitute coverage required under Subsection
             636      (4)[(c)](a)(iii), the association may offer [either] to:
             637          (A) reissue the terminated coverage; or [to]
             638          (B) issue an alternative policy.
             639          (ii) [Alternate] An alternative or reissued [policies] policy under Subsection (4)(b)(i):
             640          (A) shall be offered without requiring evidence of insurability[,]; and [shall]
             641          (B) may not provide for any waiting period or exclusion that would not have applied under
             642      the terminated policy.
             643          (iii) The association may reinsure any alternative or reissued policy.
             644          [(e)] (c) (i) [Alternative policies] An alternative policy adopted by the association shall be
             645      subject to the approval of the commissioner.
             646          (ii) The association may adopt alternative policies of various types for future issuance
             647      without regard to any particular impairment or insolvency.


             648          [(ii) Alternative policies]
             649          (iii) An alternative policy:
             650          (A) shall contain at least the minimum statutory provisions required in this state; and
             651          (B) provide benefits that are not unreasonable in relation to the premium charged.
             652          (iv) The association shall set the premium for an alternative policy in accordance with [its]
             653      a table of [adopted] rates that it adopts. The premium shall reflect:
             654          (A) the amount of insurance to be provided; and
             655          (B) the age and class of risk of each insured.
             656          (v) For an alternative [policies] policy issued [to insureds] under an individual [policies]
             657      policy of the impaired or insolvent insurer[,]:
             658          (A) age shall be determined in accordance with the original policy provisions; and
             659          (B) class of risk shall be the class of risk under the original policy.
             660          (vi) For an alternative [policies] policy issued to individuals insured under a group
             661      policy[,]:
             662          (A) age and class of risk shall be determined by the association in accordance with the
             663      alternative policy provisions and risk classification standards approved by the commissioner[.
             664      However,]; and
             665          (B) the premium may not reflect any changes in the health of the insured after the original
             666      policy was last underwritten.
             667          [(iii)] (vii) Any alternative policy issued by the association shall provide coverage of a type
             668      similar to that of the policy issued by the impaired or insolvent insurer, as determined by the
             669      association.
             670          [(f)] (d) If the association elects to reissue terminated coverage at a premium rate different
             671      from that charged under the terminated policy, the premium shall be set by the association in
             672      accordance with the amount of insurance provided and the age and class of risk, subject to the
             673      approval of the commissioner or by a court of competent jurisdiction.
             674          [(g)] (e) The association's obligations with respect to coverage under any policy of the
             675      impaired or insolvent insurer or under any reissued or alternative policy shall cease on the date the
             676      coverage or policy is replaced by another similar policy by:
             677          (i) the policyholder[,];
             678          (ii) the insured[,]; or


             679          (iii) the association.
             680          [(h)] (f) (i) With respect to [claims] a claim unpaid as of the coverage date [of insolvency]
             681      and [claims] a claim incurred during the period defined in Subsection (4)(a)(i), a provider of health
             682      care services, by accepting a payment from the association upon a claim of the provider against
             683      an insured whose health care insurer is an insolvent member insurer, agrees to forgive the insured
             684      of 20% of the debt which otherwise would be paid by the insurer had it not been insolvent, subject
             685      to a maximum of [$4,000] $8,000 being required to be forgiven by any one provider as to each
             686      claimant.
             687          (ii) The obligations of a solvent [insurers] insurer to pay all or part of the covered claim
             688      are not diminished by the forgiveness provided for in this section.
             689          (5) When proceeding under Subsection [(2)(a)(ii) or] (3)(b) with respect to any policy or
             690      contract carrying guaranteed minimum interest rates, the association shall assure the payment or
             691      crediting of a rate of interest consistent with Subsection 31A-28-103 (2)(b)(iii).
             692          (6) Nonpayment of premiums within 31 days after the date required under the terms of any
             693      guaranteed, assumed, alternative, or reissued policy or contract or substitute coverage shall
             694      terminate the association's obligations under the policy or coverage under this [chapter] part with
             695      respect to the policy or coverage, except with respect to any claims incurred or any net cash
             696      surrender value [which] that may be due in accordance with [the provisions of] this [chapter] part.
             697          (7) (a) Premiums due [for coverage after entry of an order of liquidation of an] after the
             698      coverage date with respect to the covered portion of a policy or contract of an impaired or
             699      insolvent insurer shall belong to and be payable at the direction of the association[, and the].
             700          (b) The association [shall be] is liable to the policy or contract owners for unearned
             701      premiums due to policy or contract owners [of the insurer after the entry of the order] arising after
             702      the coverage date with respect to the covered portion of the policy or contract.
             703          (8) The protection provided by this [chapter] part does not apply if any guaranty protection
             704      is provided to residents of this state by laws of the domiciliary state or jurisdiction of the impaired
             705      or insolvent insurer other than this state.
             706          (9) In carrying out its duties under [this subsection and] Subsections [(2)] (1) and [(3)] (2),
             707      and subject to approval by [the] a court in this state, the association may:
             708          (a) impose permanent policy or contract liens in connection with [any] a guarantee,
             709      assumption, or reinsurance agreement, if the association finds that:


             710          (i) the amounts [which] that can be assessed under this [chapter] part are less than the
             711      amounts needed to assure full and prompt performance of the association's duties under this
             712      [chapter,] part; or [that]
             713          (ii) the economic or financial conditions as they affect member insurers are sufficiently
             714      adverse to render the imposition of the permanent policy or contract liens to be in the public
             715      interest;
             716          (b) impose temporary moratoriums or liens on payments of cash values and policy loans,
             717      or any other right to withdraw funds held in conjunction with policies or contracts, in addition to
             718      any contractual provisions for deferral of cash or policy loan value[.]; and
             719          (c) if the receivership court imposes a temporary moratorium or moratorium charge on
             720      payment of cash values or policy loans, or on any other right to withdraw funds held in conjunction
             721      with policies or contracts, out of the assets of the impaired or insolvent insurer, defer the payment
             722      of cash values, policy loans, or other rights by the association for the period of the moratorium or
             723      moratorium charge imposed by the receivership court, except for claims covered by the association
             724      to be paid in accordance with a hardship procedure:
             725          (i) established by the liquidator or rehabilitator; and
             726          (ii) approved by the receivership court.
             727          (10) (a) A deposit in this state held pursuant to law or required by the commissioner for
             728      the benefit of creditors, including policy owners, that is not turned over to the domiciliary
             729      liquidator upon the entry of a final order of liquidation or order approving a rehabilitation plan of
             730      an insurer domiciled in this state or in a reciprocal state, pursuant to Subsection 31A-27-102 (1)(p),
             731      shall be promptly paid to the association.
             732          (b) Any amount paid under Subsection (10)(a) to the association less the amount retained
             733      by it shall be treated as a distribution of estate assets pursuant to Subsection 31A-27-337 (2).
             734          [(10)] (11) If the association fails to act within a reasonable period of time as provided in
             735      [Subsections (2)(a)(ii), (3), and (4)] this section, the commissioner shall have the powers and
             736      duties of the association under this [chapter] part with respect to an impaired or insolvent
             737      [insurers] insurer.
             738          [(11)] (12) The association may render assistance and advice to the commissioner, upon
             739      [his] the commissioner's request, concerning:
             740          (a) rehabilitation[,];


             741          (b) payment of claims[,];
             742          (c) continuance of coverage[,]; or
             743          (d) the performance of other contractual obligations of any impaired or insolvent insurer.
             744          [(12)] (13) (a) The association has standing to appear or intervene before [any] a court or
             745      agency in this state with jurisdiction over:
             746          (i) an impaired or insolvent insurer concerning which the association is or may become
             747      obligated under this [chapter] part; or
             748          (ii) any person or property against which the association may have rights through
             749      subrogation or otherwise. [Standing]
             750          (b) The standing referred to in Subsection (13)(a) extends to all matters germane to the
             751      powers and duties of the association, including:
             752          (i) proposals for reinsuring, modifying, or guaranteeing the policies or contracts of the
             753      impaired or insolvent insurer; and
             754          (ii) the determination of the policies or contracts and contractual obligations.
             755          (c) The association [also] has the right to appear or intervene before a court in another state
             756      with jurisdiction over:
             757          (i) an impaired or insolvent insurer for which the association is or may become obligated;
             758      or [with jurisdiction over a third party]
             759          (ii) any person or property against [whom] which the association may have rights through
             760      subrogation of the insurer's policyholders.
             761          [(13)] (14) (a) Any person receiving benefits under this [chapter] part shall be considered
             762      to have assigned the rights under, and any causes of action against any person for losses arising
             763      under, resulting from, or otherwise relating to the covered policy or contract to the association to
             764      the extent of the benefits received because of this [chapter] part, whether the benefits are payments
             765      of, or on account of[,]:
             766          (i) contractual obligations[,];
             767          (ii) continuation of coverage[,]; or
             768          (iii) provision of substitute or alternative coverages. [The]
             769          (b) As a condition precedent to the receipt of any right or benefits conferred by this part
             770      upon that person, the association may require an assignment to it of [these] the rights and causes
             771      of action described in Subsection (14)(a) by any:


             772          (i) payee[,];
             773          (ii) policy or contract owner[,];
             774          (iii) beneficiary[,];
             775          (iv) insured[,]; or
             776          (v) annuitant [as a condition precedent to the receipt of any right or benefits conferred by
             777      this chapter upon that person].
             778          [(b)] (c) The subrogation rights obtained by the association under this [subsection become
             779      third class claims under Section 31A-27-335 ] Subsection (14) shall have the same priority against
             780      the assets of the impaired or insolvent insurer as that possessed by the person entitled to receive
             781      benefits under this part.
             782          [(c)] (d) In addition to Subsections [(13)] (14)(a) [and (b)] through (c), the association has
             783      all common law rights of subrogation and any other equitable or legal remedy [which] that would
             784      have been available to the impaired or insolvent insurer or [holder] owner, beneficiary, or payee
             785      of a policy or contract with respect to the policy or contract, including in the case of a structured
             786      settlement annuity any rights of the owner, beneficiary, or payee of the annuity to the extent of
             787      benefits received pursuant to this part against a person originally or by succession responsible for
             788      the losses arising from the personal injury relating to the annuity or payment of the annuity.
             789          (e) If a provision of this Subsection (14) is invalid or ineffective with respect to any person
             790      or claim for any reason, the amount payable by the association with respect to the related covered
             791      obligations shall be reduced by the amount realized by any other person with respect to the person
             792      or claim that is attributable to the policies, or portion of the policies, covered by the association.
             793          (f) If the association has provided benefits with respect to a covered policy and a person
             794      recovers amounts as to which the association has rights as described in this Subsection (14), the
             795      person shall pay to the association the portion of the recovery attributable to the covered policies.
             796          [(14)] (15) (a) [The] In addition to the rights and powers elsewhere in this part, the
             797      association may:
             798          [(a)] (i) enter into contracts [which] that are necessary or proper to carry out the provisions
             799      and purposes of this [chapter] part;
             800          [(b)] (ii) sue or be sued, including taking any legal actions necessary or proper to:
             801          (A) recover any unpaid assessments under Section 31A-28-109 ; and [to]
             802          (B) settle claims or potential claims against [it] the association;


             803          [(c)] (iii) borrow money to effect the purposes of this [chapter, and any notes or other
             804      evidence or indebtedness of the association not in default shall be legal investments for domestic
             805      insurers and may be carried as admitted assets] part;
             806          [(d)] (iv) employ or retain such persons as are necessary or appropriate staff members to:
             807          (A) handle the financial transactions of the association[,]; and [to]
             808          (B) perform other functions as become necessary or proper under this [chapter] part;
             809          [(e)] (v) take necessary or appropriate legal action to avoid or recover payment of improper
             810      claims;
             811          [(f)] (vi) exercise, for the purposes of this [chapter] part and to the extent approved by the
             812      commissioner, the powers of a domestic life or health insurer, but in no case may the association
             813      issue insurance policies or annuity contracts other than those issued to perform its obligation under
             814      this [chapter] part; [or]
             815          (vii) request information from a person seeking coverage from the association to aid the
             816      association in determining its obligations under this part with respect to the person;
             817          (viii) take other necessary or appropriate action to discharge its duties and obligations
             818      under this part or to exercise its powers under this part; and
             819          [(g)] (ix) act as a special deputy liquidator if appointed by the commissioner.
             820          (b) Any note or other evidence of indebtedness of the association under Subsection
             821      (15)(a)(iii) that is not in default:
             822          (i) is a legal investment for a domestic insurer; and
             823          (ii) may be carried as admitted assets.
             824          (c) A person seeking coverage from the association shall promptly comply with a request
             825      for information by the association under Subsection (15)(a)(vii).
             826          [(15)] (16) The association may join an organization of one or more other state
             827      associations of similar purposes to further the purposes and administer the powers and duties of
             828      the association.
             829          (17) (a) Except as provided in Subsection (17)(b), at any time within one year after the
             830      coverage date, the association may elect to succeed to the rights and obligations of the member
             831      insurer that:
             832          (i) accrue on or after the coverage date; and
             833          (ii) relate to covered policies under any one or more indemnity reinsurance agreements


             834      entered into by the member insurer as a ceding insurer and selected by the association.
             835          (b) Notwithstanding Subsection (17)(a), the association may not exercise an election with
             836      respect to a reinsurance agreement if the receiver, rehabilitator, or liquidator of the member insurer
             837      has previously and expressly disaffirmed the reinsurance agreement.
             838          (c) The election described in Subsection (17)(a) shall be effected by a notice to:
             839          (i) (A) the receiver;
             840          (B) rehabilitator; or
             841          (C) liquidator; and
             842          (ii) the affected reinsurers.
             843          (d) If the association makes an election under Subsection (17)(a), the association shall
             844      comply with Subsections (17)(d)(i) through (vi) with respect to the agreements selected by the
             845      association:
             846          (i) For contracts covered, in whole or in part, by the association, the association shall be
             847      responsible for:
             848          (A) all unpaid premiums due under the agreements for periods both before and after the
             849      coverage date; and
             850          (B) the performance of all other obligations to be performed after the coverage date.
             851          (ii) The association may charge contracts covered in part by the association the costs for
             852      reinsurance in excess of the obligations of the association, through reasonable allocation methods.
             853          (iii) The association is entitled to any amounts payable by the reinsurer under the
             854      agreements with respect to losses or events that:
             855          (A) occur in periods after the coverage date; and
             856          (B) relate to contracts covered by the association, in whole or in part.
             857          (iv) On receipt of any amounts under Subsection (17)(d)(iii), the association shall pay to
             858      the beneficiary under the policy or contract on account of which the amounts were paid an amount
             859      equal to the excess of the amount received by the association over the benefits paid or payable by
             860      the association on account of the policy or contract.
             861          (v) (A) Within 30 days following the association's election, the association and each
             862      indemnity reinsurer shall calculate the net balance due to or from the association under each
             863      reinsurance agreement as of the date of the association's election, giving full credit to all items paid
             864      by either the member insurer, or its receiver, rehabilitator, or liquidator, or the indemnity reinsurer


             865      during the period between the coverage date and the date of the association's election.
             866          (B) Either the association or indemnity reinsurer shall pay the net balance due the other
             867      within five days of the completion of the calculation under Subsection (17)(d)(v)(A).
             868          (C) If the receiver, rehabilitator, or liquidator has received any amounts due the association
             869      pursuant to Subsection (17)(d)(iii), the receiver, rehabilitator, or liquidator shall remit the same to
             870      the association as promptly as practicable.
             871          (vi) If the association, within 60 days of the election, pays the premiums due for periods
             872      both before and after the coverage date that relate to contracts covered by the association, in whole
             873      or in part, the reinsurer is not entitled to:
             874          (A) terminate the reinsurance agreements, insofar as the agreements relate to contracts
             875      covered by the association, in whole or in part; and
             876          (B) set off any unpaid premium due for periods prior to the coverage date against amounts
             877      due the association.
             878          (e) An insurer other than the association shall succeed to the rights and obligations of the
             879      association under Subsections (17)(a) through (d) effective as of the date agreed upon by the
             880      association and the other insurer and regardless of whether the association has made the election
             881      referred to in Subsections (17)(a) through (d) provided that:
             882          (i) the association transfers its obligations to the other insurer;
             883          (ii) the association and the other insurer agree to the transfer;
             884          (iii) the indemnity reinsurance agreements automatically terminate for new reinsurance
             885      unless the indemnity reinsurer and the other insurer agree to the contrary;
             886          (iv) the obligations described in Subsection (17)(c)(iv) may not apply on and after the date
             887      the indemnity reinsurance agreement is transferred to the third party insurer; and
             888          (v) this Subsection (17)(e) may not apply if the association has previously expressly
             889      determined in writing that it will not exercise the election referred to in Subsections (17)(a)
             890      through (d).
             891          (f) (i) This Subsection (17) supersedes the provisions of any law of this state or of any
             892      affected reinsurance agreement that provides for or requires any payment of reinsurance proceeds
             893      on account of losses or events that occur in periods after the coverage date, to the receiver,
             894      liquidator, or rehabilitator of an insolvent member insurer.
             895          (ii) The receiver, rehabilitator, or liquidator shall remain entitled to any amounts payable


             896      by the reinsurer under the reinsurance agreement with respect to losses or events that occur in
             897      periods prior to the coverage date, subject to applicable setoff provisions.
             898          (g) Except as otherwise expressly provided in Subsections (17)(a) through (f), this
             899      Subsection (17) does not:
             900          (i) alter or modify the terms and conditions of the indemnity reinsurance agreements of
             901      the insolvent member insurer;
             902          (ii) abrogate or limit any rights of any reinsurer to claim that it is entitled to rescind a
             903      reinsurance agreement; or
             904          (iii) give a policy owner or beneficiary an independent cause of action against an indemnity
             905      reinsurer that is not otherwise set forth in the indemnity reinsurance agreement.
             906          (18) The board of directors of the association shall have discretion and may exercise
             907      reasonable business judgment to determine the means by which the association is to provide the
             908      benefits of this part in an economical and efficient manner.
             909          (19) If the association has arranged or offered to provide the benefits of this part to a
             910      covered person under a plan or arrangement that fulfills the association's obligations under this
             911      part, the person is not entitled to benefits from the association in addition to or other than those
             912      provided under the plan or arrangement.
             913          (20) (a) Venue in a suit against the association arising under this part shall be in Salt Lake
             914      County.
             915          (b) The association may not be required to give an appeal bond in an appeal that relates
             916      to a cause of action arising under this part.
             917          Section 8. Section 31A-28-109 is amended to read:
             918           31A-28-109. Assessments.
             919          (1) (a) For the purpose of providing the funds necessary to carry out the powers and duties
             920      of the association, the board of directors shall assess the member insurers, separately for each
             921      [account] class or subclass, at the time and for the amounts that the board of directors finds
             922      necessary. [Assessments are]
             923          (b) A called assessment:
             924          (i) is due not less than 30 days after prior written notice to the member [insurers. Class
             925      B assessments, described in Subsection (2)(b),] insurer; and
             926          (ii) shall accrue interest at 10% per annum on and after the due date.


             927          (2) [There are] The two classes of assessment[:] are described in Subsections (2)(a) and
             928      (2)(b).
             929          (a) A Class A [assessments] assessment shall be [made] authorized and called for the
             930      purpose of meeting administrative and legal costs and other expenses [and examinations conducted
             931      under the authority of Subsection 31A-28-112 (5)]. A Class A [assessments] assessment may be
             932      [made] authorized and called whether or not related to a particular impaired or insolvent insurer.
             933          (b) A Class B [assessments] assessment shall be [made] authorized and called to the extent
             934      necessary to carry out the powers and duties of the association under Section 31A-28-108 with
             935      regard to an impaired or an insolvent insurer.
             936          (3) (a) (i) The amount of [any] a Class A assessment shall be determined by the board of
             937      directors and may be [made] authorized and called on a pro rata or non-pro rata basis.
             938          (ii) If the Class A assessment is pro rata, the board of directors may credit the assessment
             939      against future Class B assessments. [A]
             940          (iii) The total of all non-pro rata [assessment] assessments may not exceed [$150] $300
             941      per member insurer in any one calendar year.
             942          (b) The amount of [any] a Class B assessment shall be allocated for assessment purposes
             943      among h [ the ] h [accounts] h [ classes ] SUBCLASSES h pursuant to an allocation formula [which]
             943a      that may be based on:
             944          (i) the premiums or reserves of the impaired or insolvent insurer; or [based on]
             945          (ii) any other standard determined by the board of directors in its sole discretion [to be]
             946      as being fair and reasonable under the circumstances.
             947          (c) (i) A Class B [assessments] assessment against a member [insurers] insurer for h [ each ]
             947a      THE h
             948      [account and subaccount] life insurance h SUBCLASS h and h THE h annuity subclass shall be in
             948a      the proportion that the
             949      premiums received on business in this state by [each assessed] the member insurer on policies or
             950      contracts included in the subclass for the three most recent calendar years for which information
             951      is available preceding the year which includes the coverage date bears to the premiums received
             952      on business in this state for the same [calendar years] period by all assessed member insurers.
             953          (ii) ["Premiums received" is based] A Class B assessment against a member insurer for
             954      a disability insurance h [ class ] SUBCLASS h shall be in the proportion that the premiums received
             954a      on business in this
             955      state by each assessed member insurer on policies or contracts included in the h [ class ] SUBCLASS h
             955a      for the most
             956      recent calendar year for which information is available preceding the year in which the assessment
             957      is made bears to the premiums received on business in this state on policies or contracts [covered


             958      by each account] included in the h [ clas s] SUBCLAS S h for [the three most recent calendar years
             958a      for which
             959      information is available, which precede the year in which the insurer became impaired or
             960      insolvent] that calendar year by all assessed member insurers.
             961          (d) Assessments for funds to meet the requirements of the association with respect to an
             962      impaired or insolvent insurer may not be [made] authorized or called until necessary to implement
             963      the purposes of this [chapter] part.
             964          (e) Classification of assessments and premiums under Subsection (3)(b) and computation
             965      of assessments under this Subsection (3) shall be made with a reasonable degree of accuracy,
             966      recognizing that exact determinations may not always be possible.
             967          (4) (a) The association may abate or defer, in whole or in part, the assessment of a member
             968      insurer if, in the opinion of the board of directors, payment of the assessment would endanger the
             969      ability of the member insurer to fulfill its contractual obligations. [ In the event]
             970          (b) If an assessment against a member insurer is abated or deferred in whole or in part
             971      under Subsection (4)(a), the amount by which the assessment is abated or deferred may be assessed
             972      against the other member insurers in a manner consistent with the basis for assessments set forth
             973      in this section.
             974          (c) Once a condition that caused a deferral is removed or rectified, the member insurer
             975      shall pay all assessments that were deferred pursuant to a repayment plan approved by the
             976      association.
             977          (5) (a) (i) [The] Subject to Subsection (5)(b), the total of all assessments [upon] authorized
             978      by the association on a member insurer for h [ the life insurance and annuity ] h [account]
             978a      h [ subclasses, and
             979      for
] h
[each subaccount, may not in any one calendar year exceed 2% and] h [ the disability ] h
             979a      [account]
             980      h [ insurance class ] EACH SUBCLASS h may not in any one calendar year exceed 2% [of the insurer's
             980a      yearly average
             981      premiums received in this state on the policies and contracts covered by the account during the
             982      three calendar years preceding the year in which the insurer became an impaired or insolvent
             983      insurer. If the maximum assessment, together with the other assets of the association in any
             984      account, does not provide in any one year in either account an amount sufficient to carry out the
             985      responsibilities of the association, the necessary additional funds shall be assessed as soon as
             986      permitted by this chapter] of that member's total average annual assessable premium h IN THAT
             986a      SUBCLASS, h as defined
             987      in Subsection (3).
             988          (ii) If two or more assessments are authorized in one calendar year with respect to one or


             989      more insurers that become impaired or insolvent in different calendar years, the average annual
             990      premiums for purposes of the aggregate assessment percentage limitation in Subsection (5)(a)(i)
             991      shall be equal and limited to the highest of the total average annual assessable premiums of the
             992      different calendar year periods involved in the assessment or assessments.
             993          (iii) If the maximum assessment together with the other assets of the association do not
             994      provide in one year an amount sufficient to carry out the responsibilities of the association, the
             995      necessary additional funds shall be assessed as soon after as permitted by this part.
             996          (b) The board of directors may provide in the plan of operation a method of allocating
             997      funds among claims, whether relating to one or more impaired or insolvent insurers, when the
             998      maximum assessment will be insufficient to cover anticipated claims.
             999          (c) If [a 1%] the maximum assessment for [any subaccount] h [ a subclass of ] h the life
             999a      insurance
             1000      h [ and ] OR h annuity [account] h [ class ] SUBCLASS h in any one year does not provide an amount
             1000a      sufficient to carry out the
             1001      responsibilities of the association, the board of directors shall assess [all subaccounts] the other h OF
             1001a      THE h
             1002      subclasses of the life insurance and annuity [account] class for the necessary additional amount:
             1003          (i) pursuant to Subsection (3)(b)[,]; and
             1004          (ii) subject to the maximum stated in Subsection (5)(a).
             1005          (6) (a) The board of directors may, by an equitable method established in the plan of
             1006      operation, refund to member insurers in proportion to the contribution of each insurer to that
             1007      [account] h [ class ] SUBCLASS h the amount by which the assets of the [account] h [ class ]
             1007a      SUBCLASS h exceed the amount the board
             1008      of directors finds is necessary to carry out [during the coming year] the obligations of the
             1009      association with regard to that [account] h [ class ] SUBCLASS h , including assets accruing from:
             1010          (i) assignment[,];
             1011          (ii) subrogation[,];
             1012          (iii) net realized gains[,]; and
             1013          (iv) income from investments. [A]
             1014          (b) Notwithstanding Subsection (6)(a), a reasonable amount may be retained [in any
             1015      account] to provide funds for the continuing expenses of the association and for future losses.
             1016          (7) [It shall be proper for any] A member insurer, in determining its premium rates and
             1017      policyowner dividends as to any kind of insurance within the scope of this [chapter] part, [to] may
             1018      consider the amount reasonably necessary to meet its assessment obligations under this [chapter]
             1019      part.


             1020          (8) (a) The association shall issue to each insurer paying an assessment under this [chapter]
             1021      part, other than a Class A assessment, a certificate of contribution, in a form approved by the
             1022      commissioner, for the amount of the assessment [so] paid.
             1023          (b) All outstanding certificates described in Subsection (8)(a) shall be of equal dignity and
             1024      priority without reference to amounts or dates of issue.
             1025          (c) (i) A certificate of contribution described in Subsection (8)(a) may be shown by the
             1026      insurer in its financial statement as an asset [in such form and for such amount, if any, and period
             1027      of time as the commissioner may approve] in the amount of the certificate of contribution less the
             1028      amount by which the insurer's premium taxes have already been reduced with respect to the
             1029      certificate.
             1030          (ii) For good cause shown, the commissioner may order the insurer to show a different
             1031      amount in its financial statement than the amount under Subsection (8)(c)(i).
             1032          Section 9. Section 31A-28-110 is amended to read:
             1033           31A-28-110. Plan of operation.
             1034          (1) (a) The association shall submit to the commissioner a plan of operation and any
             1035      amendments to the plan necessary or suitable to assure the fair, reasonable, and equitable
             1036      administration of the association.
             1037          (b) The plan of operation and any amendments become effective:
             1038          (i) upon the commissioner's written approval; or
             1039          (ii) after 30 days from the date the plan of operation or amendment is submitted to the
             1040      commissioner if [he] the commissioner has not disapproved [it] the plan or amendment.
             1041          [(b)] (c) (i) If the association fails to submit a suitable amendment to the plan [of operation
             1042      prior to November 1, 1991, or if at any time after November 1, 1991, the association fails to submit
             1043      suitable amendments to the plan], the commissioner, after notice and hearing, shall adopt
             1044      reasonable rules [which] that are necessary or advisable to effectuate the provisions of this part.
             1045      [These]
             1046          (ii) The rules described in Subsection (1)(c)(i) shall continue in force until:
             1047          (A) modified by the commissioner; or
             1048          (B) superseded by [a] an amendment to the plan:
             1049          (I) submitted by the association; and
             1050          (II) approved by the commissioner.


             1051          (2) All member insurers shall comply with the plan of operation.
             1052          (3) The plan of operation shall, in addition to [requirements enumerated elsewhere] any
             1053      other requirement in this part:
             1054          (a) establish procedures for handling the assets of the association;
             1055          (b) establish the amount and method of reimbursing members of the board of directors
             1056      under Section 31A-28-107 ;
             1057          (c) establish regular places and times for meetings of the board of directors, including
             1058      telephone conference calls;
             1059          (d) establish procedures for records to be kept of all financial transactions of:
             1060          (i) the association[, its];
             1061          (ii) the association's agents[,]; and
             1062          (iii) the board of directors;
             1063          (e) establish the procedures [whereby selections] to be followed for [the] selecting
             1064      members to the board of directors [will be made] and [submitted] submitting them to the
             1065      commissioner;
             1066          (f) establish any additional procedures for assessments under Section 31A-28-109 ; and
             1067          (g) contain additional provisions necessary or proper for the execution of the powers and
             1068      duties of the association.
             1069          (4) (a) The plan of operation may provide that any or all powers and duties of the
             1070      association, except those under Subsection 31A-28-108 [(13)(c)](14)(d) and Section 31A-28-109 ,
             1071      are delegated to a corporation, association, or other organization [which] that will perform
             1072      functions similar to those of the association, or its equivalent, in two or more states. [Such a]
             1073          (b) A corporation, association, or organization described in Subsection (4)(a) shall be:
             1074          (i) reimbursed for any payments made on behalf of the association; and [shall be]
             1075          (ii) paid for its performance of any function of the association.
             1076          (c) A delegation under this Subsection (4):
             1077          (i) shall take effect only with the approval of [both]:
             1078          (A) the board of directors; and
             1079          (B) the commissioner[,]; and
             1080          (ii) may be made only to a corporation, association, or organization [which] that extends
             1081      protection not substantially less favorable and effective than that provided by this [chapter] part.


             1082          Section 10. Section 31A-28-111 is amended to read:
             1083           31A-28-111. Duties and powers of the commissioner.
             1084          In addition to the duties and powers enumerated elsewhere in this [chapter] part:
             1085          (1) The commissioner shall:
             1086          (a) upon request of the board of directors, provide the association with a statement of the
             1087      premiums [in this state] for each member insurer [upon request of the board of directors;]:
             1088          (i) in this state; and
             1089          (ii) any other appropriate state;
             1090          (b) if an impairment is declared and the amount of the impairment is determined, serve a
             1091      demand upon the impaired insurer to make good the impairment within a reasonable time [after
             1092      an impairment is declared and the amount of the impairment is determined:]; and
             1093          [(i) notice to the impaired insurer shall constitute notice to its shareholders, if any;]
             1094          [(ii) the failure of the insurer to promptly comply with the commissioner's demand does
             1095      not excuse the association from the performance of its powers and duties under this part;]
             1096          (c) in a liquidation or rehabilitation proceeding involving a domestic insurer, be appointed
             1097      as the liquidator or rehabilitator [in any liquidation or rehabilitation proceeding involving a
             1098      domestic insurer].
             1099          (2) Notice to the impaired insurer under Subsection (1)(b) shall constitute notice to the
             1100      shareholders of the impaired insurer if the impaired insurer has shareholders.
             1101          (3) The failure of the insurer to promptly comply with the commissioner's demand under
             1102      Subsection (1)(b) does not excuse the association from the performance of its powers and duties
             1103      under this part; and
             1104          [(2)] (4) (a) After notice and hearing, the commissioner may suspend or revoke the
             1105      certificate of authority to transact insurance in this state of any member insurer [which] that fails
             1106      to:
             1107          (i) pay an assessment when due; or [which fails to]
             1108          (ii) comply with the plan of operation.
             1109          (b) (i) As an alternative to suspending or revoking a certificate of authority under
             1110      Subsection (4)(a), the commissioner may levy a forfeiture on any member insurer [which] that fails
             1111      to pay an assessment when due.
             1112          (ii) A forfeiture described in Subsection (4)(b)(i):


             1113          (A) may not exceed 5% of the unpaid assessment per month[. However, no forfeiture
             1114      shall]; and
             1115          (B) may not be less than $100 per month.
             1116          [(3)] (5) (a) [Any] A final action of the board of directors or the association may be
             1117      appealed to the commissioner by any member insurer if appeal is taken within 60 days of the date
             1118      the member insurer received notice of the final action being appealed.
             1119          (b) If a member [company] insurer is appealing an assessment, the amount assessed shall
             1120      be:
             1121          (i) paid to the association; and [shall be]
             1122          (ii) made available to meet association obligations during the pendency of an appeal.
             1123          (c) If the appeal on the assessment described in Subsection (5)(b) is upheld, the amount
             1124      paid in error or excess shall be returned to the member [company] insurer.
             1125          (d) Any final action or order of the commissioner shall be subject to judicial review in a
             1126      court of competent jurisdiction in accordance with the laws of this state that apply to the actions
             1127      or orders of the commissioner.
             1128          [(4)] (6) The liquidator, rehabilitator, or conservator of any impaired insurer shall notify
             1129      all interested persons of the effect of this [chapter] part.
             1130          Section 11. Section 31A-28-112 is amended to read:
             1131           31A-28-112. Prevention of insolvencies.
             1132          To aid in the detection and prevention of insurer insolvencies or impairments:
             1133          (1) It is the duty of the commissioner:
             1134          (a) to notify the [commissioners] commissioner of every state[, the territories of the United
             1135      States, and the District of Columbia] within 30 days following the action taken or the date the
             1136      action occurs, when [he] the commissioner takes [either of] the following actions against a member
             1137      insurer:
             1138          (i) revokes its license; [or]
             1139          (ii) suspends its license[.]; or
             1140          [(b) Such notice shall be mailed to all commissioners within 30 days following the action
             1141      taken or the date on which the action occurs.]
             1142          (iii) makes a formal order that the member insurer:
             1143          (A) restrict its premium writing;


             1144          (B) obtain additional contributions to surplus;
             1145          (C) withdraw from the state;
             1146          (D) reinsure all or any part of its business; or
             1147          (E) increase capital, surplus, or any other account for the security of policy owners or
             1148      creditors.
             1149          [(c) To] (b) to report to the board of directors when [he] the commissioner has:
             1150          (i) taken any of the actions set forth in Subsection (1)(a); or [has]
             1151          (ii) received a report from any other commissioner indicating that [any such] an action
             1152      described in Subsection (1)(a) has been taken in another state[. The];
             1153          (c) to include in the report to the board of directors [shall contain] required by Subsection
             1154      (1)(b):
             1155          (i) all significant details of the action taken; or
             1156          (ii) the report received from another commissioner[.];
             1157          (d) [To] to promptly report to the board of directors when [he] the commissioner has
             1158      reasonable cause to believe from [any] an examination of any member [company] insurer, whether
             1159      completed or in process, that the [company] insurer may be an impaired or insolvent insurer[.]; and
             1160          (e) [To] to furnish to the board of directors the National Association of Insurance
             1161      Commissioners [(NAIC)] Insurance Regulatory Information System [(IRIS)] ratios and listings of
             1162      companies not included in the ratios developed by [NAIC] the National Association of Insurance
             1163      Commissioners.
             1164          (2) (a) The board of directors may use the information contained [therein] in the ratios and
             1165      listings described in Subsection (1)(e) in carrying out its duties and responsibilities under this
             1166      section. [Such]
             1167          (b) The report and the information contained in the ratios and listings shall be kept
             1168      confidential by the board of directors until the commissioner or other lawful authority publishes
             1169      the information.
             1170          [(2)] (3) The commissioner may seek the advice and recommendations of the board of
             1171      directors concerning any matter affecting [his] the commissioner's duties and responsibilities
             1172      regarding the financial condition of member insurers and companies seeking admission to transact
             1173      insurance business in this state.
             1174          [(3)] (4) (a) The board of directors may[, upon majority vote,] make reports and


             1175      recommendations to the commissioner upon any matter germane to:
             1176          (i) the solvency, liquidation, rehabilitation, or conservation of any member insurer; or
             1177      [germane to]
             1178          (ii) the solvency of any company seeking to do an insurance business in this state.
             1179          (b) The reports and recommendations of the board of directors described in Subsection
             1180      (4)(a) may not be considered public documents.
             1181          [(4) It is the duty of the]
             1182           (5) The board of directors may, upon majority vote, [to] notify the commissioner of any
             1183      information indicating [any] a member insurer may be an impaired or insolvent insurer.
             1184          [(5) (a)] (6) The board of directors may[, upon majority vote, request that the
             1185      commissioner order an examination of any member insurer which the board in good faith believes
             1186      may be an impaired or insolvent insurer. Within 30 days of the receipt of the request the
             1187      commissioner shall begin the examination. The examination may be conducted as a NAIC
             1188      examination or may be conducted by any person designated by the commissioner. The cost of the
             1189      examination shall be paid by the association. The examination report shall be treated as are other
             1190      examination reports. Subject to the commissioner's compliance with Subsection (1), the
             1191      examination report may not be released to the board of directors prior to its release to the public]
             1192      make recommendations to the commissioner for the detection and prevention of insurer
             1193      insolvencies.
             1194          [(b) The commissioner shall notify the board of directors when the examination is
             1195      completed. The request for an examination shall be kept on file by the commissioner and may not
             1196      be open to public inspection prior to the release of the examination report to the public.]
             1197          [(6) The board of directors may, upon majority vote, make recommendations to the
             1198      commissioner for the detection and prevention of insurer insolvencies.]
             1199          (7) (a) At the conclusion of any insurer insolvency in which the association was obligated
             1200      to pay covered claims, the board of directors shall prepare a report to the commissioner containing
             1201      the information the board of directors has in its possession bearing on the history and causes of the
             1202      insolvency.
             1203          (b) The board of directors shall cooperate with the [boards] board of directors of a guaranty
             1204      [associations] association in [other states] another state in preparing a report on the history and
             1205      causes of insolvency of a particular insurer[, and].


             1206          (c) The board of directors may adopt by reference any report prepared by [other] another
             1207      state [associations] association.
             1208          Section 12. Section 31A-28-113 is amended to read:
             1209           31A-28-113. Credit for assessments paid.
             1210          (1) (a) A member insurer may offset against its premium tax liability to this state an
             1211      assessment described in Subsection 31A-28-109 (2)(b) to the extent of 20% of the amount of the
             1212      assessment for each of the five calendar years following the year in which the assessment was paid.
             1213          (b) To the extent [these] that the offsets described in Subsection (1)(a) exceed premium
             1214      tax liability, [they] the offsets may be carried forward and used to offset premium tax liability in
             1215      future years. [In the event]
             1216          (c) If a member insurer ceases doing business, all uncredited assessments may be credited
             1217      against its premium tax liability for the year it ceases doing business.
             1218          (2) (a) Any sums [which] that are acquired by refund [from the association by member
             1219      insurers under] in accordance with Subsection 31A-28-109 (6) from the association by member
             1220      insurers, and [which] that have been offset against premium taxes as provided in Subsection (1),
             1221      shall be paid by the insurers to the state in a manner required by the State Tax Commission.
             1222          (b) The association shall notify the commissioner that the refunds described in Subsection
             1223      (2)(a) have been made.
             1224          Section 13. Section 31A-28-114 is amended to read:
             1225           31A-28-114. Miscellaneous provisions.
             1226          (1) Nothing in this [chapter] part shall be construed to reduce the liability for unpaid
             1227      assessments of the insureds of an impaired or insolvent insurer operating under a plan with
             1228      assessment liability.
             1229          (2) (a) Records shall be kept of all [negotiations and] meetings [in which the association
             1230      or its representatives are involved] of the board of directors to discuss the activities of the
             1231      association in carrying out it powers and duties under Section 31A-28-108 .
             1232          (b) Records of [such negotiations or meetings shall be made public only upon the
             1233      termination of a liquidation, rehabilitation, or conservation proceeding involving the impaired or
             1234      insolvent insurer, upon the termination of] the association with respect to an impaired or insolvent
             1235      insurer may not be disclosed before the earlier of:
             1236          (i) the termination of a liquidation, rehabilitation, or conservation proceeding involving


             1237      the impaired or insolvent insurer;
             1238          (ii) the termination of the impairment or insolvency of the insurer[,]; or
             1239          (iii) upon the order of a court of competent jurisdiction.
             1240          (c) Nothing in this Subsection (2) shall limit the duty of the association to render a report
             1241      of its activities under Section 31A-28-115 .
             1242          (3) (a) For the purpose of carrying out its obligations under this [chapter] part, the
             1243      association shall be considered to be a creditor of [the] an impaired or insolvent insurer to the
             1244      extent of assets attributable to covered policies reduced by any amounts to which the association
             1245      is entitled as subrogee pursuant to Subsection 31A-28-108 [(13)](14).
             1246          (b) Assets of the impaired or insolvent insurer attributable to covered policies shall be used
             1247      to continue all covered policies and pay all contractual obligations of the impaired or insolvent
             1248      insurer as required by this [chapter] part.
             1249          [(b)] (c) As used in this Subsection (3), assets attributable to covered policies are that
             1250      proportion of the assets which the reserves that should have been established for covered policies
             1251      bear to the reserves that should have been established for all policies of insurance written by the
             1252      impaired or insolvent insurer.
             1253          [(c) The creditor status obtained by the association under Subsection (3)(a) entitles it to
             1254      file a third class claim under Section 31A-27-335 .]
             1255          (4) (a) As a creditor of the impaired or insolvent insurer under Subsection (3) and
             1256      consistent with Section 31A-27-335 , the association and any other similar association are entitled
             1257      to receive a disbursement of assets out of the marshaled assets, from time to time as the assets
             1258      become available to reimburse it.
             1259          (b) If, within 120 days of a final determination of insolvency of an insurer by the
             1260      receivership court, the liquidator has not made an application to the court for the approval of a
             1261      proposal to disburse assets out of marshaled assets to all guaranty associations having obligations
             1262      because of the insolvency, the association is entitled to make application to the receivership court
             1263      for approval of the association's proposal for disbursement of these assets.
             1264          [(4)] (5) (a) Prior to the termination of any liquidation, rehabilitation, or conservation
             1265      proceeding, the court may take into consideration the contributions of the respective parties,
             1266      including:
             1267          (i) the association[,];


             1268          (ii) the shareholders[,];
             1269          (iii) policyowners of the insolvent insurer[,]; and
             1270          (iv) any other party with a bona fide interest in making an equitable distribution of the
             1271      ownership rights of the insolvent insurer.
             1272          (b) In making [such] a determination[, consideration shall be given to] under Subsection
             1273      (5)(a), the court shall consider the welfare of the policyholders of the continuing or successor
             1274      insurer.
             1275          [(b)] (c) A distribution to any stockholder of an impaired or insolvent insurer may not be
             1276      made until and unless the total amount of valid claims of the association with interest has been
             1277      fully recovered by the association for funds expended in carrying out its powers and duties under
             1278      Section 31A-28-108 with respect to the insurer.
             1279          (6) (a) If an order for liquidation or rehabilitation of an insurer domiciled in this state has
             1280      been entered, the receiver appointed under the order shall have a right to recover on behalf of the
             1281      insurer, from any affiliate that controlled the insurer, the amount of distributions, other than stock
             1282      dividends paid by the insurer on its capital stock, made at any time during the five years preceding
             1283      the petition for liquidation or rehabilitation subject to the limitations of Subsections (6)(b) through
             1284      (d).
             1285          (b) A distribution described in Subsection (6)(a) may not be recovered if the insurer shows
             1286      that:
             1287          (i) when paid the distribution was lawful and reasonable; and
             1288          (ii) the insurer did not know and could not reasonably have known that the distribution
             1289      might adversely affect the ability of the insurer to fulfill its contractual obligations.
             1290          (c) (i) A person that was an affiliate that controlled the insurer at the time the distributions
             1291      were paid shall be liable up to the amount of distributions received.
             1292          (ii) A person that was an affiliate that controlled the insurer at the time the distributions
             1293      were declared, shall be liable up to the amount of distributions that would have been received if
             1294      they had been paid immediately.
             1295          (iii) If two or more persons are liable with respect to the same distributions, they shall be
             1296      jointly and severally liable.
             1297          (d) The maximum amount recoverable under this Subsection (6) shall be the amount
             1298      needed in excess of all other available assets of the insolvent insurer to pay the contractual


             1299      obligations of the insolvent insurer.
             1300          (e) If any person liable under Subsection (6)(c) is insolvent, all of its affiliates that
             1301      controlled it at the time the distribution was paid shall be jointly and severally liable for any
             1302      resulting deficiency in the amount recovered from the insolvent affiliate.
             1303          Section 14. Section 31A-28-115 is amended to read:
             1304           31A-28-115. Examination of the association -- Annual report.
             1305          (1) The association shall be subject to examination and regulation by the commissioner.
             1306          (2) The board of directors shall submit to the commissioner each year, not later than 120
             1307      days after the association's fiscal year[,]:
             1308          (a) a financial report in a form approved by the commissioner; and
             1309          (b) a report of its activities during the preceding fiscal year.
             1310          (3) At the request of a member insurer, the association shall provide the member insurer
             1311      with a copy of a report submitted under Subsection (2).
             1312          Section 15. Section 31A-28-117 is amended to read:
             1313           31A-28-117. Immunity.
             1314          (1) [There shall be] For any action or omission committed in the performance of their
             1315      powers and duties under this part, there is no liability on the part of, and no cause of action of any
             1316      nature shall arise against[,]:
             1317          (a) any member insurer [or its];
             1318          (b) a member insurer's agents or employees[,];
             1319          (c) the association [or its];
             1320          (d) the association's:
             1321          (i) agents or employees[,]; or
             1322          (ii) members of the board of directors [or their];
             1323          (e) representatives[, or] of persons described in Subsections (1)(a) through (e);
             1324          (f) the commissioner; or [his]
             1325          (g) the commissioner's representatives [for any action or omission committed in the
             1326      performance of their powers and duties under this chapter. This].
             1327          (2) The immunity described in Subsection (1) extends to:
             1328          (a) the participation in any organization of one or more other state associations of similar
             1329      purposes; and [to]


             1330          (b) any [such] organization described in Subsection (2)(a) and its agents or employees.
             1331          Section 16. Section 31A-28-119 is amended to read:
             1332           31A-28-119. Prohibited advertisement of Insurance Guaranty Association Act in
             1333      Insurance Sales -- Notice to policyholders.
             1334          (1) (a) [A] Except as provided in Subsection (1)(b), a person, including an insurer, agent,
             1335      or affiliate of an insurer may not make, publish, disseminate, circulate, or place before the public,
             1336      or cause directly or indirectly to be made, published, disseminated, circulated, or placed before the
             1337      public, in any newspaper, magazine, or other publication, or in the form of a notice, circular,
             1338      pamphlet, letter, or poster, or over any radio station or television station, or in any other way, any
             1339      advertisement, announcement, or statement written or oral, which uses the existence of the
             1340      association for the purpose of sales, solicitation, or inducement to purchase any form of insurance
             1341      [covered by the association under this chapter. However,].
             1342          (b) Notwithstanding Subsection (1)(a), this section does not apply to:
             1343          (i) the association; or
             1344          (ii) any other entity [which] that does not sell or solicit insurance.
             1345          (2) (a) Prior to January 1, [1992] 2001, the association shall:
             1346          (i) prepare a summary document describing the general purposes and current limitations
             1347      of this [chapter] part that complies with Subsection (3)[. The summary shall be submitted]; and
             1348          (ii) submit the summary document described in Subsection (2)(a)(i) to the commissioner
             1349      for approval.
             1350          (b) Sixty days after [receiving] the [commissioner's approval] day on which the
             1351      commissioner approves the summary document described in Subsection (2)(a), [no] an insurer may
             1352      not deliver a policy or contract [described in Subsection 31A-28-103 (2)(a)] to a policy or contract
             1353      [holder] owner unless the summary document is also delivered to the policy or contract [holder]
             1354      owner prior to, or at the time of, delivery of the policy or contract[, except as provided in
             1355      Subsection (4)].
             1356          (c) The summary document shall [also] be available upon request by a [policyholder]
             1357      policy owner.
             1358          [(c)] (d) The distribution, delivery, or contents or interpretation of the summary [may not
             1359      state] document does not guarantee that either the policy or the contract or the [holder] owner of
             1360      the policy or contract [would be] is covered in the event of the impairment or insolvency of a


             1361      member insurer.
             1362          [(d)] (e) The summary document shall be revised by the association as amendments to this
             1363      part may require.
             1364          [(e)] (f) Failure to receive the summary document as required in Subsection (2)(b) does
             1365      not give the policyholder, contract holder, certificate holder, or insured any greater rights than
             1366      those stated in this part.
             1367          (3) (a) The summary document prepared under Subsection (2) shall contain a clear and
             1368      conspicuous disclaimer on its face.
             1369          (b) The commissioner shall, by rule, establish the form and content of the disclaimer[.
             1370      The] described in Subsection (3)(a), except that the disclaimer shall:
             1371          [(a)] (i) state the name and address of:
             1372          (A) the association; and
             1373          (B) the insurance department;
             1374          [(b)] (ii) prominently warn the policy or contract [holder] owner that:
             1375          (A) the association may not cover the policy; or[,]
             1376          (B) if coverage is available, [that] it [may be] is:
             1377          (I) subject to substantial limitations [or] and exclusions; and
             1378          (II) conditioned on continued residence in the state;
             1379          (iii) state the types of policies for which the association will provide coverage;
             1380          [(c)] (iv) state that the insurer and its agents are prohibited by law from using the existence
             1381      of the association for the purpose of sales, solicitation, or inducement to purchase any form of
             1382      insurance;
             1383          [(d) emphasize] (v) state that the policy or contract [holder] owner should not rely on
             1384      coverage under the association when selecting an insurer; [and]
             1385          (vi) explain the rights available and procedures for filing a complaint to allege a violation
             1386      of this part; and
             1387          [(e)] (vii) provide other information as directed by the commissioner including sources for
             1388      information about the financial condition of insurers provided that the information:
             1389          (A) is not proprietary; and
             1390          (B) is subject to disclosure under public records laws.
             1391          (4) [No] An insurer or agent may not deliver a policy or contract described in Subsection


             1392      31A-28-103 (2)(a) and excluded under Subsection 31A-28-103 (2)(b)(i) from coverage under this
             1393      [chapter] part unless the insurer or agent, prior to or at the time of delivery, gives the policy or
             1394      contract holder a separate written notice [which] that clearly and conspicuously discloses that the
             1395      policy or contract is not covered by the association.
             1396          (b) The commissioner shall by rule specify the form and content of the notice required by
             1397      Subsection (4)(a).
             1398          (5) A member insurer shall retain evidence of compliance with Subsection (2) for as long
             1399      as the policy or contract for which the notice is given remains in effect.
             1400          Section 17. Section 31A-28-120 is enacted to read:
             1401          31A-28-120. Prospective application.
             1402          Notwithstanding any prior or subsequent law, the provisions of this part that are in effect
             1403      on the date on which the association first becomes obligated for the policies or contracts of an
             1404      insolvent or impaired member shall govern the association's rights and obligations with respect to
             1405      the policyholders of the insolvent or impaired member.




Legislative Review Note
    as of 2-3-00 1:04 PM


A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel


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