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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:
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20 31A-28-104, as repealed and reenacted by Chapter 211, Laws of Utah 1991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
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 [
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 [
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 [
55 of where [
56 under a group [
58 or [
59 structured settlement annuity, [
60 owner or certificate holder is:
64 contract is domiciled in this state;
66 in which the [
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.
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 [
111 persons specified in Subsection (1) for:
112 (A) a direct, nongroup life, disability, annuity [
113 (B) a supplemental [
114 described in Subsection (2)(a)(i)(A);
115 (C) a certificate under a direct group [
116 (D) an unallocated annuity [
118 (ii) For purposes of Subsection (2)(a)(i), an annuity contract and [
119 under a group annuity [
120 (A) a guaranteed investment [
121 (B) a deposit administration [
122 (C) an unallocated funding [
123 (D) a structured settlement [
124 (E) an annuity issued to or in connection with a government lottery; and [
125 (F) an immediate or deferred annuity [
126 (b) This part does not provide coverage for:
127 (i) [
128 (A) not guaranteed by the insurer[
129 (B) under which the risk is borne by the policy or contract [
130 (ii) [
131 (A) an assumption [
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) [
136 it is based[
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), [
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; [
147 (iv) [
148 association, or [
149 to its employees [
150 uninsured, including benefits payable by an employer, association, or [
152 (A) a multiple employer welfare arrangement as defined in [
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) [
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) [
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) [
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; [
173 (viii) [
174 or in connection with:
175 (A) a specific [
176 (I) employees;
177 (II) a union[
178 (III) an association of natural persons [
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.
205 liable [
207 if it were not an impaired or insolvent insurer; [
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;
229 individual is deceased, participating in a governmental retirement plan established under Section
231 contract [
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).
238 association [
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
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
273 (i) attributable to covered policies; or
274 (ii) reimbursed to the association pursuant to the association's subrogation and assignment
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 [
292 Section 4. Section 31A-28-105 is amended to read:
293 31A-28-105. Definitions.
294 As used in this [
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.
312 following for which coverage is provided under Section 31A-28-103 :
313 (a) a policy or contract[
314 (b) a certificate under a group policy or contract[
315 (c) a portion of [
317 (6) "Coverage date" means the date on which the association becomes responsible for the
318 obligations of a member insurer.
320 Section 31A-28-103 :
321 (a) a policy or contract [
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.
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
346 order of liquidation by a court of competent jurisdiction with a finding of insolvency.
348 (i) (A) is an insurer; or
349 (B) a licensed [
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 [
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[
358 (iv) voluntarily withdrawn.
365 assessment basis; [
366 (v) an insurance exchange; or
367 (vi) [
368 (12)(c)(i) through (v).
370 Corporates as published by Moody's [
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.
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
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.
402 (i) returned:
403 (A) premiums[
404 (B) considerations[
405 (C) deposits [
406 (ii) dividends and experience credits [
407 (b) (i) "Premiums" does not include [
408 for [
409 (A) a policy or contract for which coverage is not provided under Subsection
410 31A-28-103 (2); or
411 (B) the [
412 coverage is not provided under Subsection 31A-28-103 (2)[
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 [
417 (I) one individual[
418 (II) any one participant[
419 (III) any one contract [
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 [
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
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
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;
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
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.
462 (i) to whom a contractual obligation is owed; and
463 (ii) who resides in this state [
465 (A) impaired insurer; or
466 (B) insolvent insurer [
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 [
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.
482 distribution of [
483 (a) life;
484 (b) health; or
485 (c) annuity.
487 annuity certificate [
488 of any annuity benefits guaranteed to an individual by an insurer under [
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 [
493 Utah Life and Disability Insurance Guaranty Association created under former provisions of this
495 (b) All member insurers shall be and remain members of the association as a condition of
496 their authority to transact [
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 [
500 (ii) exercise its powers through a board of directors established under [
501 Section 31A-28-107 . [
502 (d) The association shall [
503 following classes or subclasses:
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
513 Sections [
515 (2) (a) The association shall:
516 (i) come under the immediate supervision of the commissioner; and [
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 [
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,
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
533 (d) Notwithstanding [
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 [
537 (2) (a) [
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.
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 [
549 contractual obligations of the impaired insurer [
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).
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 [
598 necessary to discharge such duties; or
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 [
609 (I) not later than the earlier of the next renewal date under the policies or contracts or 45
611 (II) in no event less than 30 days[
614 (I) not later than the earlier of the next renewal date, if any, under the policies or contracts
615 or one year[
616 (II) in no event less than 30 days[
619 benefits provided to:
620 (A) all known insureds[
621 (B) group [
624 available substitute coverage on an individual basis, in accordance with [
625 Subsection (4)[
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
630 (A) convert coverage to individual coverage; or [
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.
637 (A) reissue the terminated coverage; or [
638 (B) issue an alternative policy.
639 (ii) [
640 (A) shall be offered without requiring evidence of insurability[
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.
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.
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 [
653 a table of [
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 [
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 [
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[
665 (B) the premium may not reflect any changes in the health of the insured after the original
666 policy was last underwritten.
668 similar to that of the policy issued by the impaired or insolvent insurer, as determined by the
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.
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[
679 (iii) the association.
681 and [
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 [
687 (ii) The obligations of a solvent [
688 are not diminished by the forgiveness provided for in this section.
689 (5) When proceeding under Subsection [
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 [
695 respect to the policy or coverage, except with respect to any claims incurred or any net cash
696 surrender value [
697 (7) (a) Premiums due [
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[
700 (b) The association [
701 premiums due to policy or contract owners [
702 the coverage date with respect to the covered portion of the policy or contract.
703 (8) The protection provided by this [
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 [
707 and subject to approval by [
708 (a) impose permanent policy or contract liens in connection with [
709 assumption, or reinsurance agreement, if the association finds that:
710 (i) the amounts [
711 amounts needed to assure full and prompt performance of the association's duties under this
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
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[
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).
736 duties of the association under this [
740 (a) rehabilitation[
741 (b) payment of claims[
742 (c) continuance of coverage[
743 (d) the performance of other contractual obligations of any impaired or insolvent insurer.
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 [
748 (ii) any person or property against which the association may have rights through
749 subrogation or otherwise. [
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 [
756 with jurisdiction over:
757 (i) an impaired or insolvent insurer for which the association is or may become obligated;
758 or [
759 (ii) any person or property against [
760 subrogation of the insurer's policyholders.
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 [
765 of, or on account of[
766 (i) contractual obligations[
767 (ii) continuation of coverage[
768 (iii) provision of substitute or alternative coverages. [
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 [
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[
776 (v) annuitant [
780 the assets of the impaired or insolvent insurer as that possessed by the person entitled to receive
781 benefits under this part.
783 all common law rights of subrogation and any other equitable or legal remedy [
784 have been available to the impaired or insolvent insurer or [
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.
797 association may:
799 and purposes of this [
801 (A) recover any unpaid assessments under Section 31A-28-109 ; and [
802 (B) settle claims or potential claims against [
807 (A) handle the financial transactions of the association[
808 (B) perform other functions as become necessary or proper under this [
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 [
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
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).
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
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
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
922 necessary. [
923 (b) A called assessment:
924 (i) is due not less than 30 days after prior written notice to the member [
926 (ii) shall accrue interest at 10% per annum on and after the due date.
927 (2) [
929 (a) A Class A [
930 purpose of meeting administrative and legal costs and other expenses [
933 (b) A Class B [
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 [
937 directors and may be [
938 (ii) If the Class A assessment is pro rata, the board of directors may credit the assessment
939 against future Class B assessments. [
940 (iii) The total of all non-pro rata [
941 per member insurer in any one calendar year.
942 (b) The amount of [
943 among h [
943a that may be based on:
944 (i) the premiums or reserves of the impaired or insolvent insurer; or [
945 (ii) any other standard determined by the board of directors in its sole discretion [
946 as being fair and reasonable under the circumstances.
947 (c) (i) A Class B [
947a THE h
948a the proportion that the
949 premiums received on business in this state by [
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 [
953 (ii) [
954 a disability insurance h [
954a on business in this
955 state by each assessed member insurer on policies or contracts included in the 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 [
961 (d) Assessments for funds to meet the requirements of the association with respect to an
962 impaired or insolvent insurer may not be [
963 the purposes of this [
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. [
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
977 (5) (a) (i) [
978 by the association on a member insurer for h [
978a h [
980 h [
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 [
1000 h [
1000a sufficient to carry out the
1001 responsibilities of the association, the board of directors shall assess [
1001a THE h
1002 subclasses of the life insurance and annuity [
1003 (i) pursuant to Subsection (3)(b)[
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
1007a SUBCLASS h exceed the amount the board
1008 of directors finds is necessary to carry out [
1009 association with regard to that [
1010 (i) assignment[
1011 (ii) subrogation[
1012 (iii) net realized gains[
1013 (iv) income from investments. [
1014 (b) Notwithstanding Subsection (6)(a), a reasonable amount may be retained [
1016 (7) [
1017 policyowner dividends as to any kind of insurance within the scope of this [
1018 consider the amount reasonably necessary to meet its assessment obligations under this [
1020 (8) (a) The association shall issue to each insurer paying an assessment under this [
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 [
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 [
1028 amount by which the insurer's premium taxes have already been reduced with respect to the
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 [
1044 reasonable rules [
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 [
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 [
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[
1061 (ii) the association's agents[
1062 (iii) the board of directors;
1063 (e) establish the procedures [
1064 members to the board of directors [
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 [
1071 are delegated to a corporation, association, or other organization [
1072 functions similar to those of the association, or its equivalent, in two or more states. [
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 [
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 [
1078 (A) the board of directors; and
1079 (B) the commissioner[
1080 (ii) may be made only to a corporation, association, or organization [
1081 protection not substantially less favorable and effective than that provided by this [
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 [
1085 (1) The commissioner shall:
1086 (a) upon request of the board of directors, provide the association with a statement of the
1087 premiums [
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 [
1096 (c) in a liquidation or rehabilitation proceeding involving a domestic insurer, be appointed
1097 as the liquidator or rehabilitator [
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
1105 certificate of authority to transact insurance in this state of any member insurer [
1107 (i) pay an assessment when due; or [
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 [
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[
1115 (B) may not be less than $100 per month.
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 [
1121 (i) paid to the association; and [
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 [
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.
1129 all interested persons of the effect of this [
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 [
1136 action occurs, when [
1138 (i) revokes its license; [
1139 (ii) suspends its license[
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
1150 (i) taken any of the actions set forth in Subsection (1)(a); or [
1151 (ii) received a report from any other commissioner indicating that [
1152 described in Subsection (1)(a) has been taken in another state[
1153 (c) to include in the report to the board of directors [
1155 (i) all significant details of the action taken; or
1156 (ii) the report received from another commissioner[
1157 (d) [
1158 reasonable cause to believe from [
1159 completed or in process, that the [
1160 (e) [
1161 Commissioners [
1162 companies not included in the ratios developed by [
1164 (2) (a) The board of directors may use the information contained [
1165 listings described in Subsection (1)(e) in carrying out its duties and responsibilities under this
1166 section. [
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.
1171 directors concerning any matter affecting [
1172 regarding the financial condition of member insurers and companies seeking admission to transact
1173 insurance business in this state.
1175 recommendations to the commissioner upon any matter germane to:
1176 (i) the solvency, liquidation, rehabilitation, or conservation of any member insurer; or
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.
1182 (5) The board of directors may, upon majority vote, [
1183 information indicating [
1192 make recommendations to the commissioner for the detection and prevention of insurer
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
1203 (b) The board of directors shall cooperate with the [
1205 causes of insolvency of a particular insurer[
1206 (c) The board of directors may adopt by reference any report prepared by [
1207 state [
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 [
1214 tax liability, [
1215 future years. [
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 [
1220 insurers, and [
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 [
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 [
1231 association in carrying out it powers and duties under Section 31A-28-108 .
1232 (b) Records of [
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[
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 [
1243 association shall be considered to be a creditor of [
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 [
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 [
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.
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.
1265 proceeding, the court may take into consideration the contributions of the respective parties,
1267 (i) the association[
1268 (ii) the shareholders[
1269 (iii) policyowners of the insolvent insurer[
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 [
1273 (5)(a), the court shall consider the welfare of the policyholders of the continuing or successor
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
1285 (b) A distribution described in Subsection (6)(a) may not be recovered if the insurer shows
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) [
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 [
1318 (b) a member insurer's agents or employees[
1319 (c) the association [
1320 (d) the association's:
1321 (i) agents or employees[
1322 (ii) members of the board of directors [
1323 (e) representatives[
1324 (f) the commissioner; or [
1325 (g) the commissioner's representatives [
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 [
1330 (b) any [
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) [
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
1342 (b) Notwithstanding Subsection (1)(a), this section does not apply to:
1343 (i) the association; or
1344 (ii) any other entity [
1345 (2) (a) Prior to January 1, [
1346 (i) prepare a summary document describing the general purposes and current limitations
1347 of this [
1348 (ii) submit the summary document described in Subsection (2)(a)(i) to the commissioner
1349 for approval.
1350 (b) Sixty days after [
1351 commissioner approves the summary document described in Subsection (2)(a), [
1352 not deliver a policy or contract [
1354 owner prior to, or at the time of, delivery of the policy or contract[
1356 (c) The summary document shall [
1357 policy owner.
1360 the policy or contract [
1361 member insurer.
1363 part may require.
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[
1372 (A) the association; and
1373 (B) the insurance department;
1375 (A) the association may not cover the policy; or[
1376 (B) if coverage is available, [
1377 (I) subject to substantial limitations [
1378 (II) conditioned on continued residence in the state;
1379 (iii) state the types of policies for which the association will provide coverage;
1381 of the association for the purpose of sales, solicitation, or inducement to purchase any form of
1384 coverage under the association when selecting an insurer; [
1385 (vi) explain the rights available and procedures for filing a complaint to allege a violation
1386 of this part; and
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) [
1392 31A-28-103 (2)(a) and excluded under Subsection 31A-28-103 (2)(b)(i) from coverage under this
1394 contract holder a separate written notice [
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.