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S.B. 162






Sponsor: John L. Valentine

             7      LONG TITLE
             8      General Description:
             9              This bill amends the Insurance Title to enact the Interstate Insurance Product
             10      Regulation Compact.
             11      Highlighted Provisions:
             12          This bill:
             13          .    provides a purpose statement;
             14          .    provides definitions;
             15          .    establishes the Interstate Insurance Product Regulation Commission and venue for
             16      proceedings by or against the commission;
             17          .    establishes the powers of the commission;
             18          .    addresses the organization of the commission;
             19          .    addresses meetings and acts of the commission;
             20          .    provides for rulemaking by the commission including establishing uniform
             21      standards from which a state can opt out;
             22          .    addresses commission records and enforcement;
             23          .    provides for dispute resolution;
             24          .    provides for product filing and approval;
             25          .    addresses the finances of the commission;
             26          .    provides for compacting states, effective date, and amendment;
             27          .    provides for withdrawal, default, and termination;

             28          .    provides for severability and construction of the compact; and
             29          .    addresses binding effect of the compact and other laws.
             30      Monies Appropriated in this Bill:
             31          None
             32      Other Special Clauses:
             33          This bill takes effect on May 3, 2004, except that the compact provides that it takes
             34      effect upon legislative enactment by two Compacting States and the Commission
             35      becomes effective for certain purposes only after 26 states are Compacting States or
             36      states representing greater than 40% of premium volume for life insurance, annuity,
             37      disability income, and long-term care insurance products enact the compact.
             38      Utah Code Sections Affected:
             39      ENACTS:
             40          31A-38-101, Utah Code Annotated 1953
             42      Be it enacted by the Legislature of the state of Utah:
             43          Section 1. Section 31A-38-101 is enacted to read:

             45          31A-38-101. Interstate Insurance Product Regulation Compact.
             46          Pursuant to the terms and conditions of this Act, the State of Utah seeks to join with
             47      other States and establish the Interstate Insurance Product Regulation Compact, and thus
             48      become a member of the Interstate Insurance Product Regulation Commission. Utah's
             49      insurance commissioner is hereby designated to serve as the representative of this State to the
             50      Commission.

             52      The purposes of this Compact are, through means of joint and cooperative action among the
             53      Compacting States:
             54          1. To promote and protect the interest of consumers of individual and group annuity,
             55      life insurance, disability income and long-term care insurance products;
             56          2. To develop uniform standards for insurance products covered under the Compact;
             57          3. To establish a central clearinghouse to receive and provide prompt review of
             58      insurance products covered under the Compact and in certain cases, advertisements related

             59      thereto, submitted by insurers authorized to do business in one or more Compacting States;
             60          4. To give appropriate regulatory approval to those product filings and advertisements
             61      satisfying the applicable uniform standard;
             62          5. To improve coordination of regulatory resources and expertise between state
             63      insurance departments regarding the setting of uniform standards and review of insurance
             64      products covered under the Compact;
             65          6. To create the Interstate Insurance Product Regulation Commission; and
             66          7. To perform these and such other related functions as may be consistent with the state
             67      regulation of the business of insurance.

             69      For purposes of this Compact:
             70          1. "Advertisement" means any material designed to create public interest in a Product,
             71      or induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace or
             72      retain a policy, as more specifically defined in the Rules and Operating Procedures of the
             73      Commission.
             74          2. "Bylaws" mean those bylaws established by the Commission for its governance, or
             75      for directing or controlling the Commission's actions or conduct.
             76          3. "Compacting State" means any State which has enacted this Compact legislation and
             77      which has not withdrawn pursuant to Article XIV, Section 1, or been terminated pursuant to
             78      Article XIV, Section 2.
             79          4. "Commission" means the "Interstate Insurance Product Regulation Commission"
             80      established by this Compact.
             81          5. "Commissioner" means the chief insurance regulatory official of a State including,
             82      but not limited to commissioner, superintendent, director or administrator.
             83          6. "Domiciliary State" means the state in which an Insurer is incorporated or organized;
             84      or, in the case of an alien Insurer, its state of entry.
             85          7. "Insurer" means any entity licensed by a State to issue contracts of insurance for any
             86      of the lines of insurance covered by this Act.
             87          8. "Member" means the person chosen by a Compacting State as its representative to
             88      the Commission, or his or her designee.
             89          9. "Non-compacting State" means any State which is not at the time a Compacting

             90      State.
             91          10. "Operating Procedures" mean procedures promulgated by the Commission
             92      implementing a Rule, Uniform Standard or a provision of this Compact.
             93          11. "Product" means the form of a policy or contract, including any application,
             94      endorsement, or related form which is attached to and made a part of the policy or contract, and
             95      any evidence of coverage or certificate, for an individual or group annuity, life insurance,
             96      disability income or long-term care insurance product that an Insurer is authorized to issue.
             97          12. "Rule" means a statement of general or particular applicability and future effect
             98      promulgated by the Commission, including a Uniform Standard developed pursuant to Article
             99      VII of this Compact, designed to implement, interpret, or prescribe law or policy or describing
             100      the organization, procedure, or practice requirements of the Commission, which shall have the
             101      force and effect of law in the Compacting States.
             102          13. "State" means any state, district or territory of the United States of America.
             103          14. "Third-Party Filer" means an entity that submits a Product filing to the Commission
             104      on behalf of an Insurer.
             105          15. "Uniform Standard" means a standard adopted by the Commission for a Product
             106      line, pursuant to Article VII of this Compact, and shall include all of the Product requirements
             107      in aggregate; provided, that each Uniform Standard shall be construed, whether express or
             108      implied, to prohibit the use of any inconsistent, misleading or ambiguous provisions in a
             109      Product and the form of the Product made available to the public shall not be unfair,
             110      inequitable or against public policy as determined by the Commission.

             112          1. The Compacting States hereby create and establish a joint public agency known as
             113      the "Interstate Insurance Product Regulation Commission." Pursuant to Article IV, the
             114      Commission will have the power to develop Uniform Standards for Product lines, receive and
             115      provide prompt review of Products filed therewith, and give approval to those Product filings
             116      satisfying applicable Uniform Standards; provided, it is not intended for the Commission to be
             117      the exclusive entity for receipt and review of insurance product filings. Nothing herein shall
             118      prohibit any Insurer from filing its product in any State wherein the Insurer is licensed to
             119      conduct the business of insurance; and any such filing shall be subject to the laws of the State
             120      where filed.

             121          2. The Commission is a body corporate and politic, and an instrumentality of the
             122      Compacting States.
             123          3. The Commission is solely responsible for its liabilities except as otherwise
             124      specifically provided in this Compact.
             125          4. Venue is proper and judicial proceedings by or against the Commission shall be
             126      brought solely and exclusively in a Court of competent jurisdiction where the principal office
             127      of the Commission is located.

             129      The Commission shall have the following powers:
             130          1. To promulgate Rules, pursuant to Article VII of this Compact, which shall have the
             131      force and effect of law and shall be binding in the Compacting States to the extent and in the
             132      manner provided in this Compact;
             133          2. To exercise its rulemaking authority and establish reasonable Uniform Standards for
             134      Products covered under the Compact, and Advertisement related thereto, which shall have the
             135      force and effect of law and shall be binding in the Compacting States, but only for those
             136      Products filed with the Commission, provided, that a Compacting State shall have the right to
             137      opt out of such Uniform Standard pursuant to Article VII, to the extent and in the manner
             138      provided in this Compact, and, provided further, that any Uniform Standard established by the
             139      Commission for long-term care insurance products may provide the same or greater protections
             140      for consumers as, but shall not provide less than, those protections set forth in the National
             141      Association of Insurance Commissioners' Long-Term Care Insurance Model Act and
             142      Long-Term Care Insurance Model Regulation, respectively, adopted as of 2001. The
             143      Commission shall consider whether any subsequent amendments to the NAIC Long-Term Care
             144      Insurance Model Act or Long-Term Care Insurance Model Regulation adopted by the NAIC
             145      require amending of the Uniform Standards established by the Commission for long-term care
             146      insurance products;
             147          3. To receive and review in an expeditious manner Products filed with the
             148      Commission, and rate filings for disability income and long-term care insurance Products, and
             149      give approval of those Products and rate filings that satisfy the applicable Uniform Standard,
             150      where such approval shall have the force and effect of law and be binding on the Compacting
             151      States to the extent and in the manner provided in the Compact;

             152          4. To receive and review in an expeditious manner Advertisement relating to long-term
             153      care insurance products for which Uniform Standards have been adopted by the Commission,
             154      and give approval to all Advertisement that satisfies the applicable Uniform Standard. For any
             155      product covered under this Compact, other than long-term care insurance products, the
             156      Commission shall have the authority to require an insurer to submit all or any part of its
             157      Advertisement with respect to that product for review or approval prior to use, if the
             158      Commission determines that the nature of the product is such that an Advertisement of the
             159      product could have the capacity or tendency to mislead the public . The actions of Commission
             160      as provided in this section shall have the force and effect of law and shall be binding in the
             161      Compacting States to the extent and in the manner provided in the Compact;
             162          5. To exercise its rulemaking authority and designate Products and Advertisement that
             163      may be subject to a self-certification process without the need for prior approval by the
             164      Commission;
             165          6. To promulgate Operating Procedures, pursuant to Article VII of this Compact, which
             166      shall be binding in the Compacting States to the extent and in the manner provided in this
             167      Compact;
             168          7. To bring and prosecute legal proceedings or actions in its name as the Commission;
             169      provided, that the standing of any state insurance department to sue or be sued under applicable
             170      law shall not be affected;
             171          8. To issue subpoenas requiring the attendance and testimony of witnesses and the
             172      production of evidence;
             173          9. To establish and maintain offices;
             174          10. To purchase and maintain insurance and bonds;
             175          11. To borrow, accept or contract for services of personnel, including, but not limited
             176      to, employees of a Compacting State;
             177          12. To hire employees, professionals or specialists, and elect or appoint officers, and to
             178      fix their compensation, define their duties and give them appropriate authority to carry out the
             179      purposes of the Compact, and determine their qualifications; and to establish the Commission's
             180      personnel policies and programs relating to, among other things, conflicts of interest, rates of
             181      compensation and qualifications of personnel;
             182          13. To accept any and all appropriate donations and grants of money, equipment,

             183      supplies, materials and services, and to receive, utilize and dispose of the same; provided that
             184      at all times the Commission shall strive to avoid any appearance of impropriety;
             185          14. To lease, purchase, accept appropriate gifts or donations of, or otherwise to own,
             186      hold, improve or use, any property, real, personal or mixed; provided that at all times the
             187      Commission shall strive to avoid any appearance of impropriety;
             188          15. To sell, convey, mortgage, pledge, lease, exchange, abandon or otherwise dispose
             189      of any property, real, personal or mixed;
             190          16. To remit filing fees to Compacting States as may be set forth in the Bylaws, Rules
             191      or Operating Procedures;
             192          17. To enforce compliance by Compacting States with Rules, Uniform Standards,
             193      Operating Procedures and Bylaws;
             194          18. To provide for dispute resolution among Compacting States;
             195          19. To advise Compacting States on issues relating to Insurers domiciled or doing
             196      business in Non-compacting jurisdictions, consistent with the purposes of this Compact;
             197          20. To provide advice and training to those personnel in state insurance departments
             198      responsible for product review, and to be a resource for state insurance departments;
             199          21. To establish a budget and make expenditures;
             200          22. To borrow money;
             201          23. To appoint committees, including advisory committees comprising Members, state
             202      insurance regulators, state legislators or their representatives, insurance industry and consumer
             203      representatives, and such other interested persons as may be designated in the Bylaws;
             204          24. To provide and receive information from, and to cooperate with law enforcement
             205      agencies;
             206          25. To adopt and use a corporate seal; and
             207          26. To perform such other functions as may be necessary or appropriate to achieve the
             208      purposes of this Compact consistent with the state regulation of the business of insurance.

             210          1. Membership, Voting and Bylaws
             211          a. Each Compacting State shall have and be limited to one Member. Each Member
             212      shall be qualified to serve in that capacity pursuant to applicable law of the Compacting State.
             213      Any Member may be removed or suspended from office as provided by the law of the State

             214      from which he or she shall be appointed. Any vacancy occurring in the Commission shall be
             215      filled in accordance with the laws of the Compacting State wherein the vacancy exists. Nothing
             216      herein shall be construed to affect the manner in which a Compacting State determines the
             217      election or appointment and qualification of its own Commissioner.
             218          b. Each Member shall be entitled to one vote and shall have an opportunity to
             219      participate in the governance of the Commission in accordance with the Bylaws.
             220      Notwithstanding any provision herein to the contrary, no action of the Commission with
             221      respect to the promulgation of a Uniform Standard shall be effective unless two-thirds (2/3) of
             222      the Members vote in favor thereof.
             223          c. The Commission shall, by a majority of the Members, prescribe Bylaws to govern its
             224      conduct as may be necessary or appropriate to carry out the purposes, and exercise the powers,
             225      of the Compact, including, but not limited to:
             226          i. establishing the fiscal year of the Commission;
             227          ii. providing reasonable procedures for appointing and electing members, as well as
             228      holding meetings, of the Management Committee;
             229          iii. providing reasonable standards and procedures: (i) for the establishment and
             230      meetings of other committees, and (ii) governing any general or specific delegation of any
             231      authority or function of the Commission;
             232          iv. providing reasonable procedures for calling and conducting meetings of the
             233      Commission that consists of a majority of Commission members, ensuring reasonable advance
             234      notice of each such meeting, and providing for the right of citizens to attend each such meeting
             235      with enumerated exceptions designed to protect the public's interest, the privacy of individuals,
             236      and insurers' proprietary information, including trade secrets. The Commission may meet in
             237      camera only after a majority of the entire membership votes to close a meeting en toto or in
             238      part. As soon as practicable, the Commission must make public (i) a copy of the vote to close
             239      the meeting revealing the vote of each Member with no proxy votes allowed, and (ii) votes
             240      taken during such meeting;
             241          v. establishing the titles, duties and authority and reasonable procedures for the election
             242      of the officers of the Commission;
             243          vi. providing reasonable standards and procedures for the establishment of the
             244      personnel policies and programs of the Commission. Notwithstanding any civil service or other

             245      similar laws of any Compacting State, the Bylaws shall exclusively govern the personnel
             246      policies and programs of the Commission;
             247          vii. promulgating a code of ethics to address permissible and prohibited activities of
             248      commission members and employees; and
             249          viii. providing a mechanism for winding up the operations of the Commission and the
             250      equitable disposition of any surplus funds that may exist after the termination of the Compact
             251      after the payment and/or reserving of all of its debts and obligations.
             252          d. The Commission shall publish its bylaws in a convenient form and file a copy
             253      thereof and a copy of any amendment thereto, with the appropriate agency or officer in each of
             254      the Compacting States.
             255          2. Management Committee, Officers and Personnel
             256          a. A Management Committee comprising no more than fourteen (14) members shall be
             257      established as follows:
             258          (i) One (1) member from each of the six (6) Compacting States with the largest
             259      premium volume for individual and group annuities, life, disability income and long-term care
             260      insurance products, determined from the records of the NAIC for the prior year;
             261          (ii) Four (4) members from those Compacting States with at least two percent (2%) of
             262      the market based on the premium volume described above, other than the six (6) Compacting
             263      States with the largest premium volume, selected on a rotating basis as provided in the Bylaws,
             264      and;
             265          (iii) Four (4) members from those Compacting States with less than two percent (2%)
             266      of the market, based on the premium volume described above, with one (1) selected from each
             267      of the four (4) zone regions of the NAIC as provided in the Bylaws.
             268          b. The Management Committee shall have such authority and duties as may be set forth
             269      in the Bylaws, including but not limited to:
             270          i. managing the affairs of the Commission in a manner consistent with the Bylaws and
             271      purposes of the Commission;
             272          ii. establishing and overseeing an organizational structure within, and appropriate
             273      procedures for, the Commission to provide for the creation of Uniform Standards and other
             274      Rules, receipt and review of product filings, administrative and technical support functions,
             275      review of decisions regarding the disapproval of a product filing, and the review of elections

             276      made by a Compacting State to opt out of a Uniform Standard; provided that a Uniform
             277      Standard shall not be submitted to the Compacting States for adoption unless approved by
             278      two-thirds (2/3) of the members of the Management Committee;
             279          iii. overseeing the offices of the Commission; and
             280          iv. planning, implementing, and coordinating communications and activities with other
             281      state, federal and local government organizations in order to advance the goals of the
             282      Commission.
             283          c. The Commission shall elect annually officers from the Management Committee,
             284      with each having such authority and duties, as may be specified in the Bylaws.
             285          d. The Management Committee may, subject to the approval of the Commission,
             286      appoint or retain an executive director for such period, upon such terms and conditions and for
             287      such compensation as the Commission may deem appropriate. The executive director shall
             288      serve as secretary to the Commission, but shall not be a Member of the Commission. The
             289      executive director shall hire and supervise such other staff as may be authorized by the
             290      Commission.
             291          3. Legislative and Advisory Committees
             292          a. A legislative committee comprising state legislators or their designees shall be
             293      established to monitor the operations of, and make recommendations to, the Commission,
             294      including the Management Committee; provided that the manner of selection and term of any
             295      legislative committee member shall be as set forth in the Bylaws. Prior to the adoption by the
             296      Commission of any Uniform Standard, revision to the Bylaws, annual budget or other
             297      significant matter as may be provided in the Bylaws, the Management Committee shall consult
             298      with and report to the legislative committee.
             299          b. The Commission shall establish two (2) advisory committees, one of which shall
             300      comprise consumer representatives independent of the insurance industry, and the other
             301      comprising insurance industry representatives.
             302          c. The Commission may establish additional advisory committees as its Bylaws may
             303      provide for the carrying out of its functions.
             304          4. Corporate Records of the Commission
             305          The Commission shall maintain its corporate books and records in accordance with the
             306      Bylaws.

             307          5. Qualified Immunity, Defense and Indemnification
             308          a. The Members, officers, executive director, employees and representatives of the
             309      Commission shall be immune from suit and liability, either personally or in their official
             310      capacity, for any claim for damage to or loss of property or personal injury or other civil
             311      liability caused by or arising out of any actual or alleged act, error or omission that occurred, or
             312      that the person against whom the claim is made had a reasonable basis for believing occurred
             313      within the scope of Commission employment, duties or responsibilities; provided, that nothing
             314      in this paragraph shall be construed to protect any such person from suit and/or liability for any
             315      damage, loss, injury or liability caused by the intentional or willful and wanton misconduct of
             316      that person.
             317          b. The Commission shall defend any Member, officer, executive director, employee or
             318      representative of the Commission in any civil action seeking to impose liability arising out of
             319      any actual or alleged act, error or omission that occurred within the scope of Commission
             320      employment, duties or responsibilities, or that the person against whom the claim is made had a
             321      reasonable basis for believing occurred within the scope of Commission employment, duties or
             322      responsibilities; provided, that nothing herein shall be construed to prohibit that person from
             323      retaining his or her own counsel; and provided further, that the actual or alleged act, error or
             324      omission did not result from that person's intentional or willful and wanton misconduct.
             325          c. The Commission shall indemnify and hold harmless any Member, officer, executive
             326      director, employee or representative of the Commission for the amount of any settlement or
             327      judgment obtained against that person arising out of any actual or alleged act, error or omission
             328      that occurred within the scope of Commission employment, duties or responsibilities, or that
             329      such person had a reasonable basis for believing occurred within the scope of Commission
             330      employment, duties or responsibilities, provided, that the actual or alleged act, error or
             331      omission did not result from the intentional or willful and wanton misconduct of that person.

             333          1. The Commission shall meet and take such actions as are consistent with the
             334      provisions of this Compact and the Bylaws.
             335          2. Each Member of the Commission shall have the right and power to cast a vote to
             336      which that Compacting State is entitled and to participate in the business and affairs of the
             337      Commission. A Member shall vote in person or by such other means as provided in the

             338      Bylaws. The Bylaws may provide for Members' participation in meetings by telephone or other
             339      means of communication.
             340          3. The Commission shall meet at least once during each calendar year. Additional
             341      meetings shall be held as set forth in the Bylaws.


             344          1. Rulemaking Authority. The Commission shall promulgate reasonable Rules,
             345      including Uniform Standards, and Operating Procedures in order to effectively and efficiently
             346      achieve the purposes of this Compact. Notwithstanding the foregoing, in the event the
             347      Commission exercises its rulemaking authority in a manner that is beyond the scope of the
             348      purposes of this Act, or the powers granted hereunder, then such an action by the Commission
             349      shall be invalid and have no force and effect.
             350          2. Rulemaking Procedure. Rules and Operating Procedures shall be made pursuant to a
             351      rulemaking process that conforms to the Model State Administrative Procedure Act of 1981 as
             352      amended, as may be appropriate to the operations of the Commission. Before the Commission
             353      adopts a Uniform Standard, the Commission shall give written notice to the relevant state
             354      legislative committee(s) in each Compacting State responsible for insurance issues of its
             355      intention to adopt the Uniform Standard. The Commission in adopting a Uniform Standard
             356      shall consider fully all submitted materials and issue a concise explanation of its decision.
             357          3. Effective Date and Opt Out of a Uniform Standard. A Uniform Standard shall
             358      become effective ninety (90) days after its promulgation by the Commission or such later date
             359      as the Commission may determine; provided, however, that a Compacting State may opt out of
             360      a Uniform Standard as provided in this Article. "Opt out" shall be defined as any action by a
             361      Compacting State to decline to adopt or participate in a promulgated Uniform Standard. All
             362      other Rules and Operating Procedures, and amendments thereto, shall become effective as of
             363      the date specified in each Rule, Operating Procedure or amendment.
             364          4. Opt Out Procedure. A Compacting State may opt out of a Uniform Standard, either
             365      by legislation or regulation duly promulgated by the Insurance Department under the
             366      Compacting State's Administrative Procedure Act. If a Compacting State elects to opt out of a
             367      Uniform Standard by regulation, it must (a) give written notice to the Commission no later than
             368      ten (10) business days after the Uniform Standard is promulgated, or at the time the State

             369      becomes a Compacting State and (b) find that the Uniform Standard does not provide
             370      reasonable protections to the citizens of the State, given the conditions in the State. The
             371      Commissioner shall make specific findings of fact and conclusions of law, based on a
             372      preponderance of the evidence, detailing the conditions in the State which warrant a departure
             373      from the Uniform Standard and determining that the Uniform Standard would not reasonably
             374      protect the citizens of the State. The Commissioner must consider and balance the following
             375      factors and find that the conditions in the State and needs of the citizens of the State outweigh:
             376      (i) the intent of the legislature to participate in, and the benefits of, an interstate agreement to
             377      establish national uniform consumer protections for the Products subject to this Act; and (ii)
             378      the presumption that a Uniform Standard adopted by the Commission provides reasonable
             379      protections to consumers of the relevant Product.
             380          Notwithstanding the foregoing, a Compacting State may, at the time of its enactment of
             381      this Compact, prospectively opt out of all Uniform Standards involving long-term care
             382      insurance products by expressly providing for such opt out in the enacted Compact, and such
             383      an opt out shall not be treated as a material variance in the offer or acceptance of any State to
             384      participate in this Compact. Such an opt out shall be effective at the time of enactment of this
             385      Compact by the Compacting State and shall apply to all existing Uniform Standards involving
             386      long-term care insurance products and those subsequently promulgated.
             387          5. Effect of Opt Out. If a Compacting State elects to opt out of a Uniform Standard,
             388      the Uniform Standard shall remain applicable in the Compacting State electing to opt out until
             389      such time the opt out legislation is enacted into law or the regulation opting out becomes
             390      effective.
             391          Once the opt out of a Uniform Standard by a Compacting State becomes effective as
             392      provided under the laws of that State, the Uniform Standard shall have no further force and
             393      effect in that State unless and until the legislation or regulation implementing the opt out is
             394      repealed or otherwise becomes ineffective under the laws of the State. If a Compacting State
             395      opts out of a Uniform Standard after the Uniform Standard has been made effective in that
             396      State, the opt out shall have the same prospective effect as provided under Article XIV for
             397      withdrawals.
             398          6. Stay of Uniform Standard. If a Compacting State has formally initiated the process
             399      of opting out of a Uniform Standard by regulation, and while the regulatory opt out is pending,

             400      the Compacting State may petition the Commission, at least fifteen (15) days before the
             401      effective date of the Uniform Standard, to stay the effectiveness of the Uniform Standard in
             402      that State. The Commission may grant a stay if it determines the regulatory opt out is being
             403      pursued in a reasonable manner and there is a likelihood of success. If a stay is granted or
             404      extended by the Commission, the stay or extension thereof may postpone the effective date by
             405      up to ninety (90) days, unless affirmatively extended by the Commission; provided, a stay may
             406      not be permitted to remain in effect for more than one (1) year unless the Compacting State can
             407      show extraordinary circumstances which warrant a continuance of the stay, including, but not
             408      limited to, the existence of a legal challenge which prevents the Compacting State from opting
             409      out. A stay may be terminated by the Commission upon notice that the rulemaking process has
             410      been terminated.
             411          7. Not later than thirty (30) days after a Rule or Operating Procedure is promulgated,
             412      any person may file a petition for judicial review of the Rule or Operating Procedure; provided,
             413      that the filing of such a petition shall not stay or otherwise prevent the Rule or Operating
             414      Procedure from becoming effective unless the court finds that the petitioner has a substantial
             415      likelihood of success. The court shall give deference to the actions of the Commission
             416      consistent with applicable law and shall not find the Rule or Operating Procedure to be
             417      unlawful if the Rule or Operating Procedure represents a reasonable exercise of the
             418      Commission's authority.

             420          1. The Commission shall promulgate Rules establishing conditions and procedures for
             421      public inspection and copying of its information and official records, except such information
             422      and records involving the privacy of individuals and insurers' trade secrets. The Commission
             423      may promulgate additional Rules under which it may make available to federal and state
             424      agencies, including law enforcement agencies, records and information otherwise exempt from
             425      disclosure, and may enter into agreements with such agencies to receive or exchange
             426      information or records subject to nondisclosure and confidentiality provisions.
             427          2. Except as to privileged records, data and information, the laws of any Compacting
             428      State pertaining to confidentiality or nondisclosure shall not relieve any Compacting State
             429      Commissioner of the duty to disclose any relevant records, data or information to the
             430      Commission; provided, that disclosure to the Commission shall not be deemed to waive or

             431      otherwise affect any confidentiality requirement; and further provided, that, except as otherwise
             432      expressly provided in this Act, the Commission shall not be subject to the Compacting State's
             433      laws pertaining to confidentiality and nondisclosure with respect to records, data and
             434      information in its possession. Confidential information of the Commission shall remain
             435      confidential after such information is provided to any Commissioner.
             436          3. The Commission shall monitor Compacting States for compliance with duly adopted
             437      Bylaws, Rules, including Uniform Standards, and Operating Procedures. The Commission
             438      shall notify any non-complying Compacting State in writing of its noncompliance with
             439      Commission Bylaws, Rules or Operating Procedures. If a non-complying Compacting State
             440      fails to remedy its noncompliance within the time specified in the notice of noncompliance, the
             441      Compacting State shall be deemed to be in default as set forth in Article XIV.
             442          4. The Commissioner of any State in which an Insurer is authorized to do business, or
             443      is conducting the business of insurance, shall continue to exercise his or her authority to
             444      oversee the market regulation of the activities of the Insurer in accordance with the provisions
             445      of the State's law. The Commissioner's enforcement of compliance with the Compact is
             446      governed by the following provisions:
             447          a. With respect to the Commissioner's market regulation of a Product or
             448      Advertisement that is approved or certified to the Commission, the content of the Product or
             449      Advertisement shall not constitute a violation of the provisions, standards or requirements of
             450      the Compact except upon a final order of the Commission, issued at the request of a
             451      Commissioner after prior notice to the Insurer and an opportunity for hearing before the
             452      Commission.
             453          b. Before a Commissioner may bring an action for violation of any provision, standard
             454      or requirement of the Compact relating to the content of an Advertisement not approved or
             455      certified to the Commission, the Commission, or an authorized Commission officer or
             456      employee, must authorize the action. However, authorization pursuant to this Paragraph does
             457      not require notice to the Insurer, opportunity for hearing or disclosure of requests for
             458      authorization or records of the Commission's action on such requests.

             460          The Commission shall attempt, upon the request of a Member, to resolve any disputes
             461      or other issues that are subject to this Compact and which may arise between two or more

             462      Compacting States, or between Compacting States and Non-compacting States, and the
             463      Commission shall promulgate an Operating Procedure providing for resolution of such
             464      disputes.

             466          1. Insurers and Third-Party Filers seeking to have a Product approved by the
             467      Commission shall file the Product with, and pay applicable filing fees to, the Commission.
             468      Nothing in this Act shall be construed to restrict or otherwise prevent an insurer from filing its
             469      Product with the insurance department in any State wherein the insurer is licensed to conduct
             470      the business of insurance, and such filing shall be subject to the laws of the States where filed.
             471          2. The Commission shall establish appropriate filing and review processes and
             472      procedures pursuant to Commission Rules and Operating Procedures. Notwithstanding any
             473      provision herein to the contrary, the Commission shall promulgate Rules to establish
             474      conditions and procedures under which the Commission will provide public access to Product
             475      filing information. In establishing such Rules, the Commission shall consider the interests of
             476      the public in having access to such information, as well as protection of personal medical and
             477      financial information and trade secrets, that may be contained in a Product filing or supporting
             478      information.
             479          3. Any Product approved by the Commission may be sold or otherwise issued in those
             480      Compacting States for which the Insurer is legally authorized to do business.

             482          1. Not later than thirty (30) days after the Commission has given notice of a
             483      disapproved Product or Advertisement filed with the Commission, the Insurer or Third Party
             484      Filer whose filing was disapproved may appeal the determination to a review panel appointed
             485      by the Commission. The Commission shall promulgate Rules to establish procedures for
             486      appointing such review panels and provide for notice and hearing. An allegation that the
             487      Commission, in disapproving a Product or Advertisement filed with the Commission, acted
             488      arbitrarily, capriciously, or in a manner that is an abuse of discretion or otherwise not in
             489      accordance with the law, is subject to judicial review in accordance with Article III, Section 4.
             490          2. The Commission shall have authority to monitor, review and reconsider Products
             491      and Advertisement subsequent to their filing or approval upon a finding that the product does
             492      not meet the relevant Uniform Standard. Where appropriate, the Commission may withdraw or

             493      modify its approval after proper notice and hearing, subject to the appeal process in Section 1
             494      above.

             496          1. The Commission shall pay or provide for the payment of the reasonable expenses of
             497      its establishment and organization. To fund the cost of its initial operations, the Commission
             498      may accept contributions and other forms of funding from the National Association of
             499      Insurance Commissioners, Compacting States and other sources. Contributions and other forms
             500      of funding from other sources shall be of such a nature that the independence of the
             501      Commission concerning the performance of its duties shall not be compromised.
             502          2. The Commission shall collect a filing fee from each Insurer and Third Party Filer
             503      filing a product with the Commission to cover the cost of the operations and activities of the
             504      Commission and its staff in a total amount sufficient to cover the Commission's annual budget.
             505          3. The Commission's budget for a fiscal year shall not be approved until it has been
             506      subject to notice and comment as set forth in Article VII of this Compact.
             507          4. The Commission shall be exempt from all taxation in and by the Compacting States.
             508          5. The Commission shall not pledge the credit of any Compacting State, except by and
             509      with the appropriate legal authority of that Compacting State.
             510          6. The Commission shall keep complete and accurate accounts of all its internal
             511      receipts, including grants and donations, and disbursements of all funds under its control. The
             512      internal financial accounts of the Commission shall be subject to the accounting procedures
             513      established under its Bylaws. The financial accounts and reports including the system of
             514      internal controls and procedures of the Commission shall be audited annually by an
             515      independent certified public accountant. Upon the determination of the Commission, but no
             516      less frequently than every three (3) years, the review of the independent auditor shall include a
             517      management and performance audit of the Commission. The Commission shall make an
             518      Annual Report to the Governor and legislature of the Compacting States, which shall include a
             519      report of the independent audit. The Commission's internal accounts shall not be confidential
             520      and such materials may be shared with the Commissioner of any Compacting State upon
             521      request, provided, however, that any work papers related to any internal or independent audit
             522      and any information regarding the privacy of individuals and insurers' proprietary information,
             523      including trade secrets, shall remain confidential.

             524          7. No Compacting State shall have any claim to or ownership of any property held by
             525      or vested in the Commission or to any Commission funds held pursuant to the provisions of
             526      this Compact.

             528          1. Any State is eligible to become a Compacting State.
             529          2. The Compact shall become effective and binding upon legislative enactment of the
             530      Compact into law by two Compacting States; provided, the Commission shall become effective
             531      for purposes of adopting Uniform Standards for, reviewing, and giving approval or disapproval
             532      of, Products filed with the Commission that satisfy applicable Uniform Standards only after
             533      twenty-six (26) States are Compacting States or, alternatively, by States representing greater
             534      than forty percent (40%) of the premium volume for life insurance, annuity, disability income
             535      and long-term care insurance products, based on records of the NAIC for the prior year.
             536      Thereafter, it shall become effective and binding as to any other Compacting State upon
             537      enactment of the Compact into law by that State.
             538          3. Amendments to the Compact may be proposed by the Commission for enactment by
             539      the Compacting States. No amendment shall become effective and binding upon the
             540      Commission and the Compacting States unless and until all Compacting States enact the
             541      amendment into law.

             543          1. Withdrawal
             544          a. Once effective, the Compact shall continue in force and remain binding upon each
             545      and every Compacting State; provided, that a Compacting State may withdraw from the
             546      Compact ("Withdrawing State") by enacting a statute specifically repealing the statute which
             547      enacted the Compact into law.
             548          b. The effective date of withdrawal is the effective date of the repealing statute.
             549      However, the withdrawal shall not apply to any product filings approved or self-certified, or
             550      any Advertisement of such products, on the date the repealing statute becomes effective, except
             551      by mutual agreement of the Commission and the Withdrawing State unless the approval is
             552      rescinded by the Withdrawing State as provided in Paragraph e of this section.
             553          c. The Commissioner of the Withdrawing State shall immediately notify the
             554      Management Committee in writing upon the introduction of legislation repealing this Compact

             555      in the Withdrawing State.
             556          d. The Commission shall notify the other Compacting States of the introduction of
             557      such legislation within ten (10) days after its receipt of notice thereof.
             558          e. The Withdrawing State is responsible for all obligations, duties and liabilities
             559      incurred through the effective date of withdrawal, including any obligations, the performance
             560      of which extend beyond the effective date of withdrawal, except to the extent those obligations
             561      may have been released or relinquished by mutual agreement of the Commission and the
             562      Withdrawing State. The Commission's approval of Products and Advertisement prior to the
             563      effective date of withdrawal shall continue to be effective and be given full force and effect in
             564      the Withdrawing State, unless formally rescinded by the Withdrawing State in the same manner
             565      as provided by the laws of the Withdrawing State for the prospective disapproval of products or
             566      advertisement previously approved under state law.
             567          f. Reinstatement following withdrawal of any Compacting State shall occur upon the
             568      effective date of the Withdrawing State reenacting the Compact.
             569          2. Default
             570          a. If the Commission determines that any Compacting State has at any time defaulted
             571      ("Defaulting State") in the performance of any of its obligations or responsibilities under this
             572      Compact, the Bylaws or duly promulgated Rules or Operating Procedures, then, after notice
             573      and hearing as set forth in the Bylaws, all rights, privileges and benefits conferred by this
             574      Compact on the Defaulting State shall be suspended from the effective date of default as fixed
             575      by the Commission. The grounds for default include, but are not limited to, failure of a
             576      Compacting State to perform its obligations or responsibilities, and any other grounds
             577      designated in Commission Rules. The Commission shall immediately notify the Defaulting
             578      State in writing of the Defaulting State's suspension pending a cure of the default. The
             579      Commission shall stipulate the conditions and the time period within which the Defaulting
             580      State must cure its default. If the Defaulting State fails to cure the default within the time
             581      period specified by the Commission, the Defaulting State shall be terminated from the
             582      Compact and all rights, privileges and benefits conferred by this Compact shall be terminated
             583      from the effective date of termination.
             584          b. Product approvals by the Commission or product self-certifications, or any
             585      Advertisement in connection with such product, that are in force on the effective date of

             586      termination shall remain in force in the Defaulting State in the same manner as if the
             587      Defaulting State had withdrawn voluntarily pursuant to Section 1 of this Article.
             588          c. Reinstatement following termination of any Compacting State requires a
             589      reenactment of the Compact.
             590          3. Dissolution of Compact
             591          a. The Compact dissolves effective upon the date of the withdrawal or default of the
             592      Compacting State which reduces membership in the Compact to one Compacting State.
             593          b. Upon the dissolution of this Compact, the Compact becomes null and void and shall
             594      be of no further force or effect, and the business and affairs of the Commission shall be wound
             595      up and any surplus funds shall be distributed in accordance with the Bylaws.

             597          1. The provisions of this Compact shall be severable; and if any phrase, clause,
             598      sentence or provision is deemed unenforceable, the remaining provisions of the Compact shall
             599      be enforceable.
             600          2. The provisions of this Compact shall be liberally construed to effectuate its
             601      purposes.

             603          1. Other Laws
             604          a. Nothing herein prevents the enforcement of any other law of a Compacting State,
             605      except as provided in Paragraph b of this Article.
             606          b. For any Product approved or certified to the Commission, the Rules, Uniform
             607      Standards and any other requirements of the Commission shall constitute the exclusive
             608      provisions applicable to the content, approval and certification of such Products. For
             609      Advertisement that is subject to the Commission's authority, any Rule, Uniform Standard or
             610      other requirement of the Commission which governs the content of the Advertisement shall
             611      constitute the exclusive provision that a Commissioner may apply to the content of the
             612      Advertisement. Notwithstanding the foregoing, no action taken by the Commission shall
             613      abrogate or restrict: (i) the access of any person to state courts; (ii) remedies available under
             614      state law related to breach of contract, tort, or other laws not specifically directed to the content
             615      of the Product; (iii) state law relating to the construction of insurance contracts; or (iv) the
             616      authority of the attorney general of the state, including but not limited to maintaining any

             617      actions or proceedings, as authorized by law.
             618          c. All insurance products filed with individual States shall be subject to the laws of
             619      those States.
             620          2. Binding Effect of this Compact
             621          a. All lawful actions of the Commission, including all Rules and Operating Procedures
             622      promulgated by the Commission, are binding upon the Compacting States.
             623          b. All agreements between the Commission and the Compacting States are binding in
             624      accordance with their terms.
             625          c. Upon the request of a party to a conflict over the meaning or interpretation of
             626      Commission actions, and upon a majority vote of the Compacting States, the Commission may
             627      issue advisory opinions regarding the meaning or interpretation in dispute.
             628          d. In the event any provision of this Compact exceeds the constitutional limits imposed
             629      on the legislature of any Compacting State, the obligations, duties, powers or jurisdiction
             630      sought to be conferred by that provision upon the Commission shall be ineffective as to that
             631      Compacting State, and those obligations, duties, powers or jurisdiction shall remain in the
             632      Compacting State and shall be exercised by the agency thereof to which those obligations,
             633      duties, powers or jurisdiction are delegated by law in effect at the time this Compact becomes
             634      effective.

Legislative Review Note
    as of 2-3-04 11:46 AM

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

Office of Legislative Research and General Counsel

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