H.B. 109

1

AMENDMENTS TO THE INSURANCE LAW
2 2001 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: John E. Swallow
5 This act modifies provisions of the Insurance Code by recodifying the Utah Life and
6 Disability Insurance Guaranty Association Act. The act amends the purpose and coverage
7 of the act and makes technical changes. The act clarifies the rules of construction. The act
8 modifies definitions. The act addresses membership in the association and the board of
9 directors of the association. The act modifies the powers and duties of the association. The
10 act addresses assessments made on member insurers. The act addresses the plan of
11 operation of the association. The act modifies the powers and duties of the commissioner.
12 The act addresses prevention of insolvencies. The act modifies miscellaneous provisions.
13 The act modifies the requirements for examinations, annual reports, and summary
14 documents. The act addresses advertisements. The act addresses prospective application.
15 This act affects sections of Utah Code Annotated 1953 as follows:
16 AMENDS:
17 31A-28-102, as last amended by Chapter 316, Laws of Utah 1994
18 31A-28-103, as last amended by Chapter 316, Laws of Utah 1994
19 31A-28-104, as repealed and reenacted by Chapter 211, Laws of Utah 1991
20 31A-28-105, as last amended by Chapter 9, Laws of Utah 1996, Second Special Session
21 31A-28-106, as repealed and reenacted by Chapter 211, Laws of Utah 1991
22 31A-28-107, as last amended by Chapter 10, Laws of Utah 1997
23 31A-28-108, as last amended by Chapter 344, Laws of Utah 1995
24 31A-28-109, as repealed and reenacted by Chapter 211, Laws of Utah 1991
25 31A-28-110, as repealed and reenacted by Chapter 211, Laws of Utah 1991
26 31A-28-111, as repealed and reenacted by Chapter 211, Laws of Utah 1991
27 31A-28-112, as enacted by Chapter 211, Laws of Utah 1991

28 31A-28-113, as repealed and reenacted by Chapter 211, Laws of Utah 1991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30 31A-28-115, as repealed and reenacted by Chapter 211, Laws of Utah 1991
31 31A-28-117, as repealed and reenacted by Chapter 211, Laws of Utah 1991
32 31A-28-119, as repealed and reenacted by Chapter 211, Laws of Utah 1991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

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

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

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

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

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

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

245 (i) Subsection (3)(b)(i)(A);
246 (ii) Subsection (3)(b)(i)(B);
247 (iii) Subsection (3)(b)(ii); or
248 (iv) Subsection (3)(b)(iii);
249 (b) $5,000,000 in benefits for one owner of multiple nongroup policies of life 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, regardless of the number of contracts held by the contract owner
254 or plan sponsor, for:
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;
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 for any covered
277 policy, the association may not be obligated to provide benefits to the extent that the benefits are
278 based on an interest rate, crediting rate, or similar factor determined by use of an index or other
279 external reference stated in the policy or contract employed in calculating returns or changes in
280 value if the interest rate, crediting rate, or similar factor exceeds the rate of interest determined by
281 subtracting three percentage points from Moody's Corporate Bond Yield Average as most recently
282 available on each date on 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, perform, or cause to be guaranteed,
285 assumed, reinsured, or performed a contractual obligation of the insolvent or impaired insurer
286 under a covered policy or contract that does not materially affect the economic values or economic
287 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 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 in 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) a 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; or
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; or
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 are 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) is an insurer [licensed or holding]; and
349 (ii) holds a certificate of authority to transact in this state any kind of insurance for which
350 coverage is provided under [Sections] Section 31A-28-103 [and 31A-28-202 ]. [The term]
351 (b) "Member insurer" includes an insurer whose license or certificate of authority in this
352 state may have been:
353 (i) suspended[,];
354 (ii) revoked[,];
355 (iii) not renewed[,]; or
356 (iv) voluntarily withdrawn.
357 [(b)] (c) "Member insurer" does not include:
358 [(i) a limited health plan;]
359 [(ii)] (i) a health maintenance organization;
360 [(iii)] (ii) a fraternal benefit society;
361 [(iv)] (iii) a mandatory state pooling plan;
362 [(v)] (iv) a mutual assessment company or [any entity] other person that operates on an
363 assessment basis; [or]
364 (v) an insurance exchange; or
365 (vi) [any] an entity similar to [any of the above] an entity described in Subsections
366 (12)(c)(i) through (v).
367 [(8)] (13) "Moody's Corporate Bond Yield Average" means the Monthly Average
368 Corporates as published by Moody's [Investment] Investors Service, Inc., or any successor

369 [thereto] to Moody's Investors Service, Inc.
370 (14) (a) "Owner" of a policy or contract, "policy owner," or "contract owner" means the
371 person who:
372 (i) is identified as the legal owner under the terms of the policy or contract; or
373 (ii) is otherwise vested with legal title to the policy or contract through a valid assignment:
374 (A) completed in accordance with the terms of the policy or contract; and
375 (B) properly recorded as the owner on the books of the insurer.
376 (b) "Owner," "policy owner," or "contract owner" does not include a person with only a
377 beneficial interest in a policy or contract.
378 [(9)] (15) "Person" means any:
379 (a) individual[,];
380 (b) corporation[,];
381 (c) limited liability company;
382 (d) partnership[,];
383 (e) association[,];
384 (f) governmental body or entity; or
385 (g) voluntary organization.
386 (16) "Plan sponsor" means:
387 (a) the employer, in the case of a benefit plan established or maintained by a single
388 employer;
389 (b) the employee organization, in the case of a benefit plan established or maintained by
390 an employee organization; or
391 (c) the association, committee, joint board of trustees, or other similar group of
392 representatives of the parties who establish or maintain a benefit plan, in the case of a benefit plan
393 established or maintained by:
394 (i) two or more employers; or
395 (ii) jointly by:
396 (A) one or more employers; and
397 (B) one or more employee organizations.
398 [(10)] (17) (a) "Premiums" means [amounts] an amount or consideration received [in any
399 calendar year] on covered policies or contracts, less:

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

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

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

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

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

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

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

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

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

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

710 amounts needed to assure full and prompt performance of the association's duties under this
711 [chapter,] part; or [that]
712 (ii) the economic or financial conditions as they affect member insurers are sufficiently
713 adverse to render the imposition of the permanent policy or contract liens to be in the public
714 interest;
715 (b) impose temporary moratoriums or liens on payments of cash values and policy loans,
716 or any other right to withdraw funds held in conjunction with policies or contracts, in addition to
717 any contractual provisions for deferral of cash or policy loan value[.]; and
718 (c) if the receivership court imposes a temporary moratorium or moratorium charge on
719 payment of cash values or policy loans, or on any other right to withdraw funds held in conjunction
720 with policies or contracts, out of the assets of the impaired or insolvent insurer, defer the payment
721 of cash values, policy loans, or other rights by the association for the period of the moratorium or
722 moratorium charge imposed by the receivership court, except for claims covered by the association
723 to be paid in accordance with a hardship procedure:
724 (i) established by the liquidator or rehabilitator; and
725 (ii) approved by the receivership court.
726 (10) (a) A deposit in this state held pursuant to law or required by the commissioner for
727 the benefit of creditors, including policy owners, that is not turned over to the domiciliary
728 liquidator upon the entry of a final order of liquidation or order approving a rehabilitation plan of
729 an insurer domiciled in this state or in a reciprocal state, defined in Subsection 31A-27-102 (1)(p),
730 shall be promptly paid to the association.
731 (b) Any amount paid under Subsection (10)(a) to the association less the amount retained
732 by the association shall be treated as a distribution of estate assets pursuant to Subsection
733 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 the persons necessary or the 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 the association's obligations under this part with respect to the person;
817 (viii) take other necessary or appropriate action to discharge the association's duties and
818 obligations under this part or to exercise the association's 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 may not:
874 (A) terminate the reinsurance agreements, to the extent 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 the association will not exercise the election referred to in Subsections
890 (17)(a) 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) Member liability for an assessment is established as of the coverage date.
924 (c) Subject to Subsection (1)(d), a called assessment:
925 (i) is due not less than 30 days after prior written notice to the member [insurers. Class
926 B assessments, described in Subsection (2)(b),] insurer; and

927 (ii) shall accrue interest at 10% per annum on and after the due date.
928 (d) Notwithstanding Subsection (1)(c), the association may:
929 (i) assess the association's members as of the coverage date; and
930 (ii) defer the collection of the assessment described in Subsection (1)(d)(ii).
931 (e) An assessment:
932 (i) has the force and effect of a judgment lien against the member insurer; and
933 (ii) may not be extinguished until paid.
934 (2) [There are] The two classes of assessment[:] are described in Subsections (2)(a) and
935 (2)(b).
936 (a) A Class A [assessments] assessment shall be [made] authorized and called for the
937 purpose of meeting administrative and legal costs and other expenses [and examinations conducted
938 under the authority of Subsection 31A-28-112 (5)]. A Class A [assessments] assessment may be
939 [made] authorized and called whether or not related to a particular impaired or insolvent insurer.
940 (b) A Class B [assessments] assessment shall be [made] authorized and called to the extent
941 necessary to carry out the powers and duties of the association under Section 31A-28-108 with
942 regard to an impaired or an insolvent insurer.
943 (3) (a) (i) The amount of [any] a Class A assessment:
944 (A) shall be determined by the board of directors; and
945 (B) may be [made] authorized and called on a pro rata or non-pro rata basis.
946 (ii) If the Class A assessment is pro rata, the board of directors may credit the assessment
947 against future Class B assessments. [A]
948 (iii) The total of all non-pro rata [assessment] assessments may not exceed [$150] $300
949 per member insurer in any one calendar year.
950 (b) The amount of [any] a Class B assessment shall be allocated for assessment purposes
951 among [the accounts] subclasses pursuant to an allocation formula [which] that may be based on:
952 (i) the premiums or reserves of the impaired or insolvent insurer; or [based on]
953 (ii) any other standard determined by the board of directors in [its] the board of directors'
954 sole discretion [to be] as being fair and reasonable under the circumstances.
955 (c) (i) A Class B [assessments] assessment against a member [insurers] insurer for [each
956 account and subaccount] the life insurance subclass, the annuity subclass, and the unallocated
957 annuity subclass shall be in the proportion that the premiums received on business in this state by

958 [each assessed] the member insurer on policies or contracts included in the subclass for the three
959 most recent calendar years for which information is available preceding the year which includes
960 the coverage date bears to the premiums received on business in this state for the same [calendar
961 years] period by all assessed member insurers.
962 (ii) ["Premiums received" is based] A Class B assessment against a member insurer for
963 a disability insurance subclass shall be in the proportion that the premiums received on business
964 in this state by each assessed member insurer on policies or contracts included in the subclass for
965 the most recent calendar year for which information is available preceding the year in which the
966 assessment is made bears to the premiums received on business in this state on policies or
967 contracts [covered by each account] included in the subclass for [the three most recent calendar
968 years for which information is available, which precede the year in which the insurer became
969 impaired or insolvent] that calendar year by all assessed member insurers.
970 (d) Assessments for funds to meet the requirements of the association with respect to an
971 impaired or insolvent insurer may not be [made] authorized or called until necessary to implement
972 the purposes of this [chapter] part.
973 (e) Classification of assessments and premiums under Subsection (3)(b) and computation
974 of assessments under this Subsection (3) shall be made with a reasonable degree of accuracy,
975 recognizing that exact determinations may not always be possible.
976 (4) (a) The association may abate or defer, in whole or in part, the assessment of a member
977 insurer if, in the opinion of the board of directors, payment of the assessment would endanger the
978 ability of the member insurer to fulfill its contractual obligations. [ In the event]
979 (b) If an assessment against a member insurer is abated or deferred in whole or in part
980 under Subsection (4)(a), the amount by which the assessment is abated or deferred may be assessed
981 against the other member insurers in a manner consistent with the basis for assessments set forth
982 in this section.
983 (c) Once a condition that caused a deferral is removed or rectified, the member insurer
984 shall pay all assessments that were deferred pursuant to a repayment plan approved by the
985 association.
986 (5) (a) (i) [The] Subject to Subsection (5)(b), the total of all assessments [upon] authorized
987 by the association on a member insurer for [the life and annuity account, and for each subaccount,
988 may not in any one calendar year exceed 2% and the disability account] each subclass may not in

989 any one calendar year exceed 2% [of the insurer's yearly average premiums received in this state
990 on the policies and contracts covered by the account during the three calendar years preceding the
991 year in which the insurer became an impaired or insolvent insurer. If the maximum assessment,
992 together with the other assets of the association in any account, does not provide in any one year
993 in either account an amount sufficient to carry out the responsibilities of the association, the
994 necessary additional funds shall be assessed as soon as permitted by this chapter] of that member's
995 total average annual assessable premium in that subclass as defined in Subsection (3).
996 (ii) If two or more assessments are authorized in one calendar year with respect to one or
997 more insurers that become impaired or insolvent in different calendar years, the average annual
998 premiums for purposes of the aggregate assessment percentage limitation in Subsection (5)(a)(i)
999 shall be equal and limited to the highest of the total average annual assessable premiums of the
1000 different calendar year periods involved in the assessment or assessments.
1001 (iii) If the maximum assessment together with the other assets of the association do not
1002 provide in one year an amount sufficient to carry out the responsibilities of the association, the
1003 necessary additional funds shall be assessed as soon after as permitted by this part.
1004 (b) The board of directors may provide in the plan of operation a method of allocating
1005 funds among claims, whether relating to one or more impaired or insolvent insurers, when the
1006 maximum assessment will be insufficient to cover anticipated claims.
1007 (c) If [a 1%] the maximum assessment for [any subaccount of] the life insurance [and] or
1008 annuity [account] subclass in any one year does not provide an amount sufficient to carry out the
1009 responsibilities of the association, the board of directors shall assess [all subaccounts] the other
1010 of the subclasses of the life insurance and annuity [account] class for the necessary additional
1011 amount:
1012 (i) pursuant to Subsection (3)(b)[,]; and
1013 (ii) subject to the maximum stated in Subsection (5)(a).
1014 (6) (a) The board of directors may, by an equitable method established in the plan of
1015 operation, refund to member insurers in proportion to the contribution of each insurer to that
1016 [account] subclass the amount by which the assets of the [account] subclass exceed the amount the
1017 board of directors finds is necessary to carry out [during the coming year] the obligations of the
1018 association with regard to that [account] subclass, including assets accruing from:
1019 (i) assignment[,];

1020 (ii) subrogation[,];
1021 (iii) net realized gains[,]; and
1022 (iv) income from investments. [A]
1023 (b) Notwithstanding Subsection (6)(a), a reasonable amount may be retained [in any
1024 account] to provide funds for the continuing expenses of the association and for future losses.
1025 (7) [It shall be proper for any] A member insurer, in determining its premium rates and
1026 policyowner dividends as to any kind of insurance within the scope of this [chapter] part, [to] may
1027 consider the amount reasonably necessary to meet its assessment obligations under this [chapter]
1028 part.
1029 (8) (a) The association shall issue to each insurer paying an assessment under this [chapter]
1030 part, other than a Class A assessment, a certificate of contribution, in a form approved by the
1031 commissioner, for the amount of the assessment [so] paid.
1032 (b) All outstanding certificates described in Subsection (8)(a) shall be of equal dignity and
1033 priority without reference to amounts or dates of issue.
1034 (c) (i) A certificate of contribution described in Subsection (8)(a) may be shown by the
1035 insurer in its financial statement as an asset [in such form and for such amount, if any, and period
1036 of time as the commissioner may approve] in the amount of the certificate of contribution less the
1037 amount by which the insurer's premium taxes have already been reduced with respect to the
1038 certificate.
1039 (ii) For good cause shown, the commissioner may order the insurer to show a different
1040 amount in its financial statement than the amount under Subsection (8)(c)(i).
1041 Section 9. Section 31A-28-110 is amended to read:
1042 31A-28-110. Plan of operation.
1043 (1) (a) The association shall submit to the commissioner a plan of operation and any
1044 amendments to the plan necessary or suitable to assure the fair, reasonable, and equitable
1045 administration of the association.
1046 (b) The plan of operation and any amendments become effective:
1047 (i) upon the commissioner's written approval; or
1048 (ii) after 30 days from the date the plan of operation or amendment is submitted to the
1049 commissioner if [he] the commissioner has not disapproved [it] the plan or amendment.
1050 [(b)] (c) (i) If the association fails to submit a suitable amendment to the plan [of operation

1051 prior to November 1, 1991, or if at any time after November 1, 1991, the association fails to submit
1052 suitable amendments to the plan], the commissioner, after notice and hearing, shall adopt
1053 reasonable rules [which] that are necessary or advisable to effectuate the provisions of this part.
1054 [These]
1055 (ii) The rules described in Subsection (1)(c)(i) shall continue in force until:
1056 (A) modified by the commissioner; or
1057 (B) superseded by [a] an amendment to the plan:
1058 (I) submitted by the association; and
1059 (II) approved by the commissioner.
1060 (2) All member insurers shall comply with the plan of operation.
1061 (3) The plan of operation shall, in addition to [requirements enumerated elsewhere] any
1062 other requirement in this part:
1063 (a) establish procedures for handling the assets of the association;
1064 (b) establish the amount and method of reimbursing members of the board of directors
1065 under Section 31A-28-107 ;
1066 (c) establish regular places and times for meetings of the board of directors, including
1067 telephone conference calls;
1068 (d) establish procedures for records to be kept of all financial transactions of:
1069 (i) the association[, its];
1070 (ii) the association's agents[,]; and
1071 (iii) the board of directors;
1072 (e) subject to Section 31A-28-107 , establish the procedures [whereby selections] to be
1073 followed for [the]:
1074 (i) selecting members to the board of directors [will be made]; and [submitted]
1075 (ii) submitting the selected members to the commissioner for approval;
1076 (f) establish any additional procedures for assessments under Section 31A-28-109 ; and
1077 (g) contain additional provisions necessary or proper for the execution of the powers and
1078 duties of the association.
1079 (4) (a) The plan of operation may provide that any or all powers and duties of the
1080 association, except those under Subsection 31A-28-108 [(13)(c)](14)(d) and Section 31A-28-109 ,
1081 are delegated to a corporation, association, or other organization [which] that will perform

1082 functions similar to those of the association, or its equivalent, in two or more states. [Such a]
1083 (b) A corporation, association, or organization described in Subsection (4)(a) shall be:
1084 (i) reimbursed for any payments made on behalf of the association; and [shall be]
1085 (ii) paid for its performance of any function of the association.
1086 (c) A delegation under this Subsection (4):
1087 (i) shall take effect only with the approval of [both]:
1088 (A) the board of directors; and
1089 (B) the commissioner[,]; and
1090 (ii) may be made only to a corporation, association, or organization [which] that extends
1091 protection not substantially less favorable and effective than that provided by this [chapter] part.
1092 Section 10. Section 31A-28-111 is amended to read:
1093 31A-28-111. Duties and powers under this part.
1094 In addition to the duties and powers enumerated elsewhere in this [chapter:] part, the
1095 persons listed in this section have the duties and powers described in Subsections (1) through (6).
1096 (1) The commissioner shall:
1097 (a) upon request of the board of directors, provide the association with a statement of the
1098 premiums [in this state] for each member insurer [upon request of the board of directors;]:
1099 (i) in this state; and
1100 (ii) any other appropriate state;
1101 (b) if an impairment is declared and the amount of the impairment is determined, serve a
1102 demand upon the impaired insurer to make good the impairment within a reasonable time [after
1103 an impairment is declared and the amount of the impairment is determined:]; and
1104 [(i) notice to the impaired insurer shall constitute notice to its shareholders, if any;]
1105 [(ii) the failure of the insurer to promptly comply with the commissioner's demand does
1106 not excuse the association from the performance of its powers and duties under this part;]
1107 (c) in a liquidation or rehabilitation proceeding involving a domestic insurer, be appointed
1108 as the liquidator or rehabilitator [in any liquidation or rehabilitation proceeding involving a
1109 domestic insurer].
1110 (2) Notice to the impaired insurer under Subsection (1)(b) shall constitute notice to the
1111 shareholders of the impaired insurer if the impaired insurer has shareholders.
1112 (3) The failure of the insurer to promptly comply with the commissioner's demand under

1113 Subsection (1)(b) does not excuse the association from the performance of its powers and duties
1114 under this part.
1115 [(2)] (4) (a) After notice and hearing, the commissioner may suspend or revoke the
1116 certificate of authority to transact insurance in this state of any member insurer [which] that fails
1117 to:
1118 (i) pay an assessment when due; or [which fails to]
1119 (ii) comply with the plan of operation.
1120 (b) (i) As an alternative to suspending or revoking a certificate of authority under
1121 Subsection (4)(a), the commissioner may levy a forfeiture on any member insurer [which] that fails
1122 to pay an assessment when due.
1123 (ii) A forfeiture described in Subsection (4)(b)(i):
1124 (A) may not exceed 5% of the unpaid assessment per month[. However, no forfeiture
1125 shall]; and
1126 (B) may not be less than $100 per month.
1127 [(3)] (5) (a) [Any] A final action of the board of directors or the association may be
1128 appealed to the commissioner by any member insurer if appeal is taken within 60 days of the date
1129 the member insurer received notice of the final action being appealed.
1130 (b) If a member [company] insurer is appealing an assessment, the amount assessed shall
1131 be:
1132 (i) paid to the association; and [shall be]
1133 (ii) made available to meet association obligations during the pendency of an appeal.
1134 (c) If the appeal on the assessment described in Subsection (5)(b) is upheld, the amount
1135 paid in error or excess shall be returned to the member [company] insurer.
1136 (d) Any final action or order of the commissioner shall be subject to judicial review in a
1137 court of competent jurisdiction in accordance with the laws of this state that apply to the actions
1138 or orders of the commissioner.
1139 [(4)] (6) The liquidator, rehabilitator, or conservator of any impaired insurer shall notify
1140 all interested persons of the effect of this [chapter] part.
1141 Section 11. Section 31A-28-112 is amended to read:
1142 31A-28-112. Prevention of insolvencies.
1143 [To] (1) The purpose of this section is to aid in the detection and prevention of insurer

1144 insolvencies or impairments[:].
1145 [(1)] (2) [It is the duty of the] The commissioner shall:
1146 (a) [to] notify the [commissioners] commissioner of every state[, the territories of the
1147 United States, and the District of Columbia] within 30 days following the action taken or the date
1148 the action occurs, when [he] the commissioner takes [either of] the following actions against a
1149 member insurer:
1150 (i) revokes its license; [or]
1151 (ii) suspends its license[.]; or
1152 [(b) Such notice shall be mailed to all commissioners within 30 days following the action
1153 taken or the date on which the action occurs.]
1154 (iii) makes a formal order that the member insurer:
1155 (A) restrict its premium writing;
1156 (B) obtain additional contributions to surplus;
1157 (C) withdraw from the state;
1158 (D) reinsure all or any part of its business; or
1159 (E) increase capital, surplus, or any other account for the security of policy owners or
1160 creditors.
1161 [(c) To] (b) report to the board of directors when [he] the commissioner has:
1162 (i) taken any of the actions set forth in Subsection (2)(a); or [has]
1163 (ii) received a report from any other commissioner indicating that [any such] an action
1164 described in Subsection (2)(a) has been taken in another state[. The];
1165 (c) include in the report to the board of directors [shall contain] required by Subsection
1166 (2)(b):
1167 (i) all significant details of the action taken; or
1168 (ii) the report received from another commissioner[.];
1169 (d) [To] promptly report to the board of directors when [he] the commissioner has
1170 reasonable cause to believe from [any] an examination of any member [company] insurer, whether
1171 completed or in process, that the [company] insurer may be an impaired or insolvent insurer[.]; and
1172 (e) [To] furnish to the board of directors the National Association of Insurance
1173 Commissioners [(NAIC)] Insurance Regulatory Information System [(IRIS)] ratios and listings of
1174 companies not included in the ratios developed by [NAIC] the National Association of Insurance

1175 Commissioners.
1176 (3) (a) The board of directors may use the information contained [therein] in the ratios and
1177 listings described in Subsection (2)(e) in carrying out [its] the board of directors' duties and
1178 responsibilities under this section. [Such]
1179 (b) The report and the information contained in the ratios and listings shall be kept
1180 confidential by the board of directors until the commissioner or other lawful authority publishes
1181 the information.
1182 [(2)] (4) The commissioner may seek the advice and recommendations of the board of
1183 directors concerning any matter affecting [his] the commissioner's duties and responsibilities
1184 regarding the financial condition of member insurers and companies seeking admission to transact
1185 insurance business in this state.
1186 [(3)] (5) (a) The board of directors may[, upon majority vote,] make reports and
1187 recommendations to the commissioner upon any matter germane to:
1188 (i) the solvency, liquidation, rehabilitation, or conservation of any member insurer; or
1189 [germane to]
1190 (ii) the solvency of any company seeking to do an insurance business in this state.
1191 (b) The reports and recommendations of the board of directors described in Subsection
1192 (5)(a) may not be considered public documents.
1193 [(4) It is the duty of the]
1194 (6) The board of directors may, upon majority vote, [to] notify the commissioner of any
1195 information indicating [any] a member insurer may be an impaired or insolvent insurer.
1196 [(5) (a)] (7) The board of directors may[, upon majority vote, request that the
1197 commissioner order an examination of any member insurer which the board in good faith believes
1198 may be an impaired or insolvent insurer. Within 30 days of the receipt of the request the
1199 commissioner shall begin the examination. The examination may be conducted as a NAIC
1200 examination or may be conducted by any person designated by the commissioner. The cost of the
1201 examination shall be paid by the association. The examination report shall be treated as are other
1202 examination reports. Subject to the commissioner's compliance with Subsection (1), the
1203 examination report may not be released to the board of directors prior to its release to the public]
1204 make recommendations to the commissioner for the detection and prevention of insurer
1205 insolvencies.

1206 [(b) The commissioner shall notify the board of directors when the examination is
1207 completed. The request for an examination shall be kept on file by the commissioner and may not
1208 be open to public inspection prior to the release of the examination report to the public.]
1209 [(6) The board of directors may, upon majority vote, make recommendations to the
1210 commissioner for the detection and prevention of insurer insolvencies.]
1211 [(7)] (8) (a) At the conclusion of any insurer insolvency in which the association was
1212 obligated to pay covered claims, the board of directors shall prepare a report to the commissioner
1213 containing the information the board of directors has in its possession bearing on the history and
1214 causes of the insolvency. [The board shall cooperate with the boards of directors of guaranty
1215 associations in other states in]
1216 (b) In preparing a report on the history and causes of insolvency of a particular insurer,
1217 [and] the board of directors may cooperate with:
1218 (i) the board of directors of a guaranty association in another state; or
1219 (ii) an organization described in Subsection 31A-28-108 (16).
1220 (c) The board of directors may adopt by reference any report prepared by [other]:
1221 (i) a guaranty association in another state [associations.]; or
1222 (ii) an organization described in Subsection 31A-28-108 (16).
1223 Section 12. Section 31A-28-113 is amended to read:
1224 31A-28-113. Credit for assessments paid.
1225 (1) (a) A member insurer may offset against its premium tax liability to this state an
1226 assessment described in Subsection 31A-28-109 (2)(b) to the extent of 20% of the amount of the
1227 assessment for each of the five calendar years following the year in which the assessment was paid.
1228 (b) To the extent [these] that the offsets described in Subsection (1)(a) exceed premium
1229 tax liability, [they] the offsets may be carried forward and used to offset premium tax liability in
1230 future years. [In the event]
1231 (c) If a member insurer ceases doing business, all uncredited assessments may be credited
1232 against its premium tax liability for the year it ceases doing business.
1233 (2) (a) [Any sums which] Monies shall be paid by the insurers to the state in a manner
1234 required by the State Tax Commission if the monies:
1235 (i) are acquired by refund [from the association by member insurers under] in accordance
1236 with Subsection 31A-28-109 (6)[,] from the association by member insurers; and [which]

1237 (ii) have been offset against premium taxes as provided in Subsection (1)[, shall be paid
1238 by the insurers to the state in a manner required by the State Tax Commission].
1239 (b) The association shall notify the commissioner that the refunds described in Subsection
1240 (2)(a) have been made.
1241 Section 13. Section 31A-28-114 is amended to read:
1242 31A-28-114. Miscellaneous provisions.
1243 (1) Nothing in this [chapter] part shall be construed to reduce the liability for unpaid
1244 assessments of the insureds of an impaired or insolvent insurer operating under a plan with
1245 assessment liability.
1246 (2) (a) Records shall be kept of all [negotiations and] meetings [in which the association
1247 or its representatives are involved] of the board of directors to discuss the activities of the
1248 association in carrying out it powers and duties under Section 31A-28-108 .
1249 (b) Records of [such negotiations or meetings shall be made public only upon the
1250 termination of a liquidation, rehabilitation, or conservation proceeding involving the impaired or
1251 insolvent insurer, upon the termination of] the association with respect to an impaired or insolvent
1252 insurer may not be disclosed before the earlier of:
1253 (i) the termination of a liquidation, rehabilitation, or conservation proceeding involving
1254 the impaired or insolvent insurer;
1255 (ii) the termination of the impairment or insolvency of the insurer[,]; or
1256 (iii) upon the order of a court of competent jurisdiction.
1257 (c) Nothing in this Subsection (2) shall limit the duty of the association to render a report
1258 of its activities under Section 31A-28-115 .
1259 (3) (a) For the purpose of carrying out its obligations under this [chapter] part, the
1260 association shall be considered to be a creditor of [the] an impaired or insolvent insurer to the
1261 extent of assets attributable to covered policies reduced by any amounts to which the association
1262 is entitled as subrogee pursuant to Subsection 31A-28-108 [(13)](14).
1263 (b) Assets of the impaired or insolvent insurer attributable to covered policies shall be used
1264 to continue all covered policies and pay all contractual obligations of the impaired or insolvent
1265 insurer as required by this [chapter] part.
1266 [(b)] (c) As used in this Subsection (3), assets attributable to covered policies are that
1267 proportion of the assets which the reserves that should have been established for covered policies

1268 bear to the reserves that should have been established for all policies of insurance written by the
1269 impaired or insolvent insurer.
1270 [(c) The creditor status obtained by the association under Subsection (3)(a) entitles it to
1271 file a third class claim under Section 31A-27-335 .]
1272 (4) (a) As a creditor of the impaired or insolvent insurer under Subsection (3) and
1273 consistent with Section 31A-27-335 , the association and any other similar association are entitled
1274 to receive a disbursement of assets out of the marshaled assets, from time to time as the assets
1275 become available to reimburse the association and any other similar association.
1276 (b) If, within 120 days of a final determination of insolvency of an insurer by the
1277 receivership court, the liquidator has not made an application to the court for the approval of a
1278 proposal to disburse assets out of marshaled assets to all guaranty associations having obligations
1279 because of the insolvency, the association is entitled to make application to the receivership court
1280 for approval of the association's proposal for disbursement of these assets.
1281 [(4)] (5) (a) Prior to the termination of any liquidation, rehabilitation, or conservation
1282 proceeding, the court may take into consideration the contributions of the respective parties,
1283 including:
1284 (i) the association[,];
1285 (ii) the shareholders[,];
1286 (iii) policyowners of the insolvent insurer[,]; and
1287 (iv) any other party with a bona fide interest in making an equitable distribution of the
1288 ownership rights of the insolvent insurer.
1289 (b) In making [such] a determination[, consideration shall be given to] under Subsection
1290 (5)(a), the court shall consider the welfare of the policyholders of the continuing or successor
1291 insurer.
1292 [(b)] (c) A distribution to any stockholder of an impaired or insolvent insurer may not be
1293 made until and unless the total amount of valid claims of the association with interest has been
1294 fully recovered by the association for funds expended in carrying out its powers and duties under
1295 Section 31A-28-108 with respect to the insurer.
1296 (6) (a) If an order for liquidation or rehabilitation of an insurer domiciled in this state has
1297 been entered, the receiver appointed under the order shall have a right to recover on behalf of the
1298 insurer, from any affiliate that controlled the insurer, the amount of distributions, other than stock

1299 dividends paid by the insurer on its capital stock, made at any time during the five years preceding
1300 the petition for liquidation or rehabilitation subject to the limitations of Subsections (6)(b) through
1301 (d).
1302 (b) A distribution described in Subsection (6)(a) may not be recovered if the insurer shows
1303 that:
1304 (i) when paid the distribution was lawful and reasonable; and
1305 (ii) the insurer did not know and could not reasonably have known that the distribution
1306 might adversely affect the ability of the insurer to fulfill its contractual obligations.
1307 (c) (i) A person that was an affiliate that controlled the insurer at the time the distributions
1308 were paid shall be liable up to the amount of distributions received.
1309 (ii) A person that was an affiliate that controlled the insurer at the time the distributions
1310 were declared shall be liable up to the amount of distributions that would have been received if
1311 they had been paid immediately.
1312 (iii) If two or more persons are liable with respect to the same distributions, they shall be
1313 jointly and severally liable.
1314 (d) The maximum amount recoverable under this Subsection (6) shall be the amount
1315 needed in excess of all other available assets of the insolvent insurer to pay the contractual
1316 obligations of the insolvent insurer.
1317 (e) If any person liable under Subsection (6)(c) is insolvent, all of its affiliates that
1318 controlled it at the time the distribution was paid shall be jointly and severally liable for any
1319 resulting deficiency in the amount recovered from the insolvent affiliate.
1320 Section 14. Section 31A-28-115 is amended to read:
1321 31A-28-115. Examination of the association -- Annual report.
1322 (1) The association shall be subject to examination and regulation by the commissioner.
1323 (2) The board of directors shall submit to the commissioner each year, not later than 120
1324 days after the association's fiscal year[,]:
1325 (a) a financial report in a form approved by the commissioner; and
1326 (b) a report of its activities during the preceding fiscal year.
1327 (3) At the request of a member insurer, the association shall provide the member insurer
1328 with a copy of a report submitted under Subsection (2).
1329 Section 15. Section 31A-28-117 is amended to read:

1330 31A-28-117. Immunity.
1331 (1) [There shall be] For any action or omission committed in the performance of their
1332 powers and duties under this part, there is no liability on the part of, and no cause of action of any
1333 nature shall arise against[,]:
1334 (a) any member insurer [or its];
1335 (b) a member insurer's agents or employees[,];
1336 (c) the association [or its];
1337 (d) the association's:
1338 (i) agents or employees[,]; or
1339 (ii) members of the board of directors [or their];
1340 (e) representatives[, or] of persons described in Subsections (1)(a) through (e);
1341 (f) the commissioner; or [his]
1342 (g) the commissioner's representatives [for any action or omission committed in the
1343 performance of their powers and duties under this chapter. This].
1344 (2) The immunity described in Subsection (1) extends to:
1345 (a) the participation in any organization of one or more other state associations of similar
1346 purposes; and [to any such]
1347 (b) an organization described in Subsection (2)(a); and [its]
1348 (c) the agents or employees of an organization described in Subsection (2)(a).
1349 Section 16. Section 31A-28-119 is amended to read:
1350 31A-28-119. Prohibited advertisement of the association -- Notice to policyholders.
1351 (1) (a) [A] Except as provided in Subsection (1)(b), a person, including an insurer, agent,
1352 or affiliate of an insurer may not make, publish, disseminate, circulate, or place before the public,
1353 or cause directly or indirectly to be made, published, disseminated, circulated, or placed before the
1354 public, in any newspaper, magazine, or other publication, or in the form of a notice, circular,
1355 pamphlet, letter, or poster, or over any radio station or television station, or in any other way, any
1356 advertisement, announcement, or statement written or oral, which uses the existence of the
1357 association for the purpose of sales, solicitation, or inducement to purchase any form of insurance
1358 [covered by the association under this chapter. However,].
1359 (b) Notwithstanding Subsection (1)(a), this section does not apply to:
1360 (i) the association; or

1361 (ii) any other entity [which] that does not sell or solicit insurance.
1362 (2) (a) Prior to January 1, [1992] 2002, the association shall:
1363 (i) prepare a summary document describing the general purposes and current limitations
1364 of this [chapter] part that complies with Subsection (3)[. The summary shall be submitted]; and
1365 (ii) submit the summary document described in Subsection (2)(a)(i) to the commissioner
1366 for approval.
1367 (b) Sixty days after [receiving] the [commissioner's approval] day on which the
1368 commissioner approves the summary document described in Subsection (2)(a), [no] an insurer may
1369 not deliver a policy or contract [described in Subsection 31A-28-103 (2)(a)] to a policy or contract
1370 [holder] owner unless the summary document is also delivered to the policy or contract [holder]
1371 owner prior to, or at the time of, delivery of the policy or contract[, except as provided in
1372 Subsection (4)].
1373 (c) The summary document shall [also] be available upon request by a [policyholder]
1374 policy owner.
1375 [(c)] (d) The distribution, delivery, or contents or interpretation of the summary [may not
1376 state] document does not guarantee that:
1377 (i) the policy or the contract is covered in the event of the impairment or insolvency of a
1378 member insurer; or
1379 (ii) the [holder] owner of the policy or contract [would be] is covered in the event of the
1380 impairment or insolvency of a member insurer.
1381 [(d)] (e) The summary document shall be revised by the association as amendments to this
1382 part may require.
1383 [(e)] (f) Failure to receive the summary document as required in Subsection (2)(b) does
1384 not give the policyholder, contract holder, certificate holder, or insured any greater rights than
1385 those stated in this part.
1386 (3) (a) The summary document prepared under Subsection (2) shall contain a clear and
1387 conspicuous disclaimer on its face.
1388 (b) The commissioner shall, by rule, establish the form and content of the disclaimer[.
1389 The] described in Subsection (3)(a), except that the disclaimer shall:
1390 [(a)] (i) state the name and address of:
1391 (A) the association; and

1392 (B) the insurance department;
1393 [(b)] (ii) prominently warn the policy or contract [holder] owner that:
1394 (A) the association may not cover the policy; or[,]
1395 (B) if coverage is available, [that] it [may be] is:
1396 (I) subject to substantial limitations [or] and exclusions; and
1397 (II) conditioned on continued residence in the state;
1398 (iii) state the types of policies for which the association will provide coverage;
1399 [(c)] (iv) state that the insurer and its agents are prohibited by law from using the existence
1400 of the association for the purpose of sales, solicitation, or inducement to purchase any form of
1401 insurance;
1402 [(d) emphasize] (v) state that the policy or contract [holder] owner should not rely on
1403 coverage under the association when selecting an insurer; [and]
1404 (vi) explain the rights available and procedures for filing a complaint to allege a violation
1405 of this part; and
1406 [(e)] (vii) provide other information as directed by the commissioner including sources for
1407 information about the financial condition of insurers provided that the information:
1408 (A) is not proprietary; and
1409 (B) is subject to disclosure under public records laws.
1410 (4) [No] An insurer or agent may not deliver a policy or contract described in Subsection
1411 31A-28-103 (2)(a) and excluded under Subsection 31A-28-103 (2)(b)(i) from coverage under this
1412 [chapter] part unless the insurer or agent, prior to or at the time of delivery, gives the policy or
1413 contract holder a separate written notice [which] that clearly and conspicuously discloses that the
1414 policy or contract is not covered by the association.
1415 (b) The commissioner shall by rule specify the form and content of the notice required by
1416 Subsection (4)(a).
1417 (5) A member insurer shall retain evidence of compliance with Subsection (2) for as long
1418 as the policy or contract for which the notice is given remains in effect.
1419 Section 17. Section 31A-28-120 is enacted to read:
1420 31A-28-120. Prospective application.
1421 Notwithstanding any prior or subsequent law, the provisions of this part that are in effect
1422 on the date on which the association first becomes obligated for the policies or contracts of an

1423 insolvent or impaired member shall govern the association's rights and obligations to the
1424 policyholders of the insolvent or impaired member.




Legislative Review Note
as of 1-17-01 4:55 PM

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

Office of Legislative Research and General Counsel