Download Zipped Introduced WordPerfect HB0340.ZIP
[Status][Bill Documents][Fiscal Note][Bills Directory]
H.B. 340
1
2
3
4
5
6
7 LONG TITLE
8 General Description:
9 This bill modifies the Insurance Code by repealing existing insurer rehabilitation and
10 liquidation provisions and enacting the Insurer Receivership Act.
11 Highlighted Provisions:
12 This bill:
13 . repeals most provisions of Title 31A, Chapter 27, Insurers Rehabilitation and
14 Liquidation, and enacts Title 31A, Chapter 27a, Insurer Receivership Act;
15 . renumbers and amends provisions related to administrative actions;
16 . provides general provisions relating to:
17 . definitions;
18 . persons covered;
19 . court proceedings, including jurisdiction, venue, notice and hearings, orders,
20 and statutes of limitations;
21 . exemptions from fees;
22 . actions by and against a receiver, providing immunity and indemnification, and
23 the possession and control of an insurer's records by a receiver;
24 . financial obligations, including approval and payment of expenses and financial
25 reporting;
26 . reporting;
27 . the affect of delinquency proceedings commenced before April 30, 2007; and
28 . severability;
29 . provides procedures governing delinquency proceedings, including:
30 . commencing delinquency proceedings, expedited trials, decisions, and appeals;
31 . finding grounds for rehabilitation or liquidation, and the entry and effect of an
32 order of rehabilitation or liquidation; and
33 . preserving the confidentiality of the proceedings;
34 . provides provisions governing the rehabilitation of an insurer, including:
35 . issuing rehabilitation orders;
36 . establishing the powers and duties of the rehabilitator;
37 . filing of rehabilitation plans;
38 . terminating rehabilitation; and
39 . requiring coordination with guaranty associations to assist in the orderly
40 transition to rehabilitation or liquidation;
41 . establishes provisions for liquidation of an insurer, including:
42 . establishing the power of the liquidator;
43 . providing notice requirements;
44 . addressing liquidation orders;
45 . addressing continuance of coverage; and
46 . providing for the sale or dissolution of the corporate entity;
47 . addresses asset recovery, including:
48 . turning over assets;
49 . recovering from affiliates;
50 . addressing unauthorized postpetition transfers;
51 . addressing voidable preferences and liens;
52 . addressing avoidance of property title transfers;
53 . addressing fraudulent transfers and obligations;
54 . addressing liability of transferees;
55 . providing for setoffs;
56 . providing for assessment of assets;
57 . addressing a reinsurer's liability;
58 . addressing life and health reinsurance;
59 . recovering of premiums owed; and
60 . requiring in certain circumstances reinsurance recoverable trust;
61 . establishes claim procedures relating to:
62 . filing, proof, and allowance of claims;
63 . claims under occurrence policies, surety bonds, and surety undertakings;
64 . allowance of contingent and unliquidated claims;
65 . provisions for third party claims, disputed claims, codebtors, and secured
66 creditors' claims; and
67 . qualified financial contracts;
68 . provides for distribution of assets, including priority for distribution, early
69 distribution, and partial and final distribution;
70 . establishes discharge and termination of delinquency and liquidations proceedings;
71 . establishes provisions relating to interstate relations; and
72 . makes technical and confirming changes.
73 Monies Appropriated in this Bill:
74 None
75 Other Special Clauses:
76 None
77 Utah Code Sections Affected:
78 AMENDS:
79 31A-1-106, as last amended by Chapter 95, Laws of Utah 1987
80 31A-2-108, as last amended by Chapter 344, Laws of Utah 1995
81 31A-2-203, as last amended by Chapter 177, Laws of Utah 2006
82 31A-2-204, as last amended by Chapter 177, Laws of Utah 2006
83 31A-2-206, as last amended by Chapters 79 and 204, Laws of Utah 1996
84 31A-2-207, as last amended by Chapter 2, Laws of Utah 2004
85 31A-2-212, as last amended by Chapter 177, Laws of Utah 2006
86 31A-2-308, as last amended by Chapter 58, Laws of Utah 2005
87 31A-5-212, as enacted by Chapter 242, Laws of Utah 1985
88 31A-5-217, as last amended by Chapter 9, Laws of Utah 1996, Second Special Session
89 31A-5-305, as last amended by Chapter 316, Laws of Utah 1994
90 31A-5-416, as last amended by Chapter 277, Laws of Utah 1992
91 31A-5-504, as last amended by Chapter 320, Laws of Utah 2006
92 31A-5-506, as last amended by Chapter 204, Laws of Utah 1986
93 31A-8-213, as last amended by Chapter 116, Laws of Utah 2001
94 31A-9-502, as last amended by Chapter 300, Laws of Utah 2000
95 31A-9-504, as enacted by Chapter 242, Laws of Utah 1985
96 31A-11-104, as last amended by Chapter 90, Laws of Utah 2004
97 31A-11-109, as enacted by Chapter 242, Laws of Utah 1985
98 31A-13-107, as last amended by Chapter 204, Laws of Utah 1986
99 31A-14-206, as last amended by Chapter 90, Laws of Utah 2004
100 31A-14-215, as last amended by Chapter 204, Laws of Utah 1986
101 31A-14-217, as last amended by Chapter 230, Laws of Utah 1992
102 31A-15-105, as last amended by Chapter 204, Laws of Utah 1986
103 31A-17-605, as last amended by Chapter 116, Laws of Utah 2001
104 31A-17-606, as last amended by Chapter 116, Laws of Utah 2001
105 31A-17-609, as last amended by Chapter 116, Laws of Utah 2001
106 31A-17-610, as last amended by Chapter 116, Laws of Utah 2001
107 31A-18-106, as last amended by Chapter 176, Laws of Utah 2006
108 31A-22-617, as last amended by Chapter 3, Laws of Utah 2005, First Special Session
109 31A-23a-704, as renumbered and amended by Chapter 298, Laws of Utah 2003
110 31A-28-108, as last amended by Chapters 116 and 161, Laws of Utah 2001
111 31A-28-114, as last amended by Chapter 161, Laws of Utah 2001
112 31A-28-207, as last amended by Chapter 308, Laws of Utah 2002
113 31A-28-213, as last amended by Chapter 363, Laws of Utah 2001
114 31A-35-103, as enacted by Chapter 293, Laws of Utah 1998
115 31A-37-504, as last amended by Chapter 312, Laws of Utah 2004
116 ENACTS:
117 31A-27-502, Utah Code Annotated 1953
118 31A-27a-101, Utah Code Annotated 1953
119 31A-27a-102, Utah Code Annotated 1953
120 31A-27a-103, Utah Code Annotated 1953
121 31A-27a-104, Utah Code Annotated 1953
122 31A-27a-105, Utah Code Annotated 1953
123 31A-27a-106, Utah Code Annotated 1953
124 31A-27a-107, Utah Code Annotated 1953
125 31A-27a-108, Utah Code Annotated 1953
126 31A-27a-109, Utah Code Annotated 1953
127 31A-27a-110, Utah Code Annotated 1953
128 31A-27a-111, Utah Code Annotated 1953
129 31A-27a-112, Utah Code Annotated 1953
130 31A-27a-113, Utah Code Annotated 1953
131 31A-27a-114, Utah Code Annotated 1953
132 31A-27a-115, Utah Code Annotated 1953
133 31A-27a-116, Utah Code Annotated 1953
134 31A-27a-117, Utah Code Annotated 1953
135 31A-27a-119, Utah Code Annotated 1953
136 31A-27a-120, Utah Code Annotated 1953
137 31A-27a-201, Utah Code Annotated 1953
138 31A-27a-202, Utah Code Annotated 1953
139 31A-27a-203, Utah Code Annotated 1953
140 31A-27a-204, Utah Code Annotated 1953
141 31A-27a-205, Utah Code Annotated 1953
142 31A-27a-206, Utah Code Annotated 1953
143 31A-27a-207, Utah Code Annotated 1953
144 31A-27a-208, Utah Code Annotated 1953
145 31A-27a-209, Utah Code Annotated 1953
146 31A-27a-301, Utah Code Annotated 1953
147 31A-27a-302, Utah Code Annotated 1953
148 31A-27a-303, Utah Code Annotated 1953
149 31A-27a-304, Utah Code Annotated 1953
150 31A-27a-305, Utah Code Annotated 1953
151 31A-27a-401, Utah Code Annotated 1953
152 31A-27a-402, Utah Code Annotated 1953
153 31A-27a-403, Utah Code Annotated 1953
154 31A-27a-404, Utah Code Annotated 1953
155 31A-27a-405, Utah Code Annotated 1953
156 31A-27a-406, Utah Code Annotated 1953
157 31A-27a-407, Utah Code Annotated 1953
158 31A-27a-501, Utah Code Annotated 1953
159 31A-27a-502, Utah Code Annotated 1953
160 31A-27a-503, Utah Code Annotated 1953
161 31A-27a-504, Utah Code Annotated 1953
162 31A-27a-505, Utah Code Annotated 1953
163 31A-27a-506, Utah Code Annotated 1953
164 31A-27a-507, Utah Code Annotated 1953
165 31A-27a-508, Utah Code Annotated 1953
166 31A-27a-509, Utah Code Annotated 1953
167 31A-27a-510, Utah Code Annotated 1953
168 31A-27a-511, Utah Code Annotated 1953
169 31A-27a-512, Utah Code Annotated 1953
170 31A-27a-513, Utah Code Annotated 1953
171 31A-27a-514, Utah Code Annotated 1953
172 31A-27a-515, Utah Code Annotated 1953
173 31A-27a-516, Utah Code Annotated 1953
174 31A-27a-601, Utah Code Annotated 1953
175 31A-27a-602, Utah Code Annotated 1953
176 31A-27a-603, Utah Code Annotated 1953
177 31A-27a-604, Utah Code Annotated 1953
178 31A-27a-605, Utah Code Annotated 1953
179 31A-27a-606, Utah Code Annotated 1953
180 31A-27a-607, Utah Code Annotated 1953
181 31A-27a-608, Utah Code Annotated 1953
182 31A-27a-609, Utah Code Annotated 1953
183 31A-27a-610, Utah Code Annotated 1953
184 31A-27a-611, Utah Code Annotated 1953
185 31A-27a-612, Utah Code Annotated 1953
186 31A-27a-701, Utah Code Annotated 1953
187 31A-27a-702, Utah Code Annotated 1953
188 31A-27a-703, Utah Code Annotated 1953
189 31A-27a-704, Utah Code Annotated 1953
190 31A-27a-705, Utah Code Annotated 1953
191 31A-27a-801, Utah Code Annotated 1953
192 31A-27a-802, Utah Code Annotated 1953
193 31A-27a-803, Utah Code Annotated 1953
194 31A-27a-804, Utah Code Annotated 1953
195 31A-27a-805, Utah Code Annotated 1953
196 31A-27a-901, Utah Code Annotated 1953
197 31A-27a-902, Utah Code Annotated 1953
198 RENUMBERS AND AMENDS:
199 31A-27-501, (Renumbered from 31A-27-101, as last amended by Chapter 204, Laws of
200 Utah 1986)
201 31A-27-503, (Renumbered from 31A-27-201, as last amended by Chapter 161, Laws of
202 Utah 1987)
203 31A-27-504, (Renumbered from 31A-27-203, as last amended by Chapter 204, Laws of
204 Utah 1986)
205 31A-27a-118, (Renumbered from 31A-27-107, as enacted by Chapter 242, Laws of
206 Utah 1985)
207 REPEALS:
208 31A-27-102, as last amended by Chapter 308, Laws of Utah 2002
209 31A-27-103, as last amended by Chapter 298, Laws of Utah 2003
210 31A-27-104, as last amended by Chapter 131, Laws of Utah 1999
211 31A-27-105, as enacted by Chapter 242, Laws of Utah 1985
212 31A-27-106, as last amended by Chapter 204, Laws of Utah 1986
213 31A-27-108, as enacted by Chapter 242, Laws of Utah 1985
214 31A-27-109, as enacted by Chapter 204, Laws of Utah 1986
215 31A-27-110, as enacted by Chapter 131, Laws of Utah 1999
216 31A-27-202, as last amended by Chapter 204, Laws of Utah 1986
217 31A-27-301, as last amended by Chapter 204, Laws of Utah 1986
218 31A-27-302, as last amended by Chapter 252, Laws of Utah 2003
219 31A-27-303, as last amended by Chapter 204, Laws of Utah 1986
220 31A-27-304, as last amended by Chapter 344, Laws of Utah 1995
221 31A-27-305, as last amended by Chapter 308, Laws of Utah 2002
222 31A-27-306, as enacted by Chapter 242, Laws of Utah 1985
223 31A-27-307, as last amended by Chapter 131, Laws of Utah 1999
224 31A-27-308, as last amended by Chapter 185, Laws of Utah 1997
225 31A-27-309, as enacted by Chapter 242, Laws of Utah 1985
226 31A-27-310, as last amended by Chapter 131, Laws of Utah 1999
227 31A-27-311, as last amended by Chapter 13, Laws of Utah 1998
228 31A-27-311.5, as last amended by Chapter 252, Laws of Utah 2003
229 31A-27-312, as last amended by Chapter 230, Laws of Utah 1992
230 31A-27-313, as enacted by Chapter 242, Laws of Utah 1985
231 31A-27-314, as last amended by Chapter 105, Laws of Utah 2004
232 31A-27-315, as last amended by Chapter 177, Laws of Utah 2006
233 31A-27-316, as last amended by Chapter 298, Laws of Utah 2003
234 31A-27-317, as last amended by Chapter 308, Laws of Utah 2002
235 31A-27-318, as enacted by Chapter 242, Laws of Utah 1985
236 31A-27-319, as last amended by Chapter 204, Laws of Utah 1986
237 31A-27-320, as last amended by Chapter 204, Laws of Utah 1986
238 31A-27-321, as last amended by Chapter 277, Laws of Utah 1992
239 31A-27-322, as enacted by Chapter 204, Laws of Utah 1986
240 31A-27-323, as last amended by Chapter 131, Laws of Utah 1999
241 31A-27-324, as last amended by Chapter 298, Laws of Utah 2003
242 31A-27-325, as last amended by Chapter 204, Laws of Utah 1986
243 31A-27-326, as last amended by Chapter 105, Laws of Utah 2004
244 31A-27-327, as last amended by Chapter 105, Laws of Utah 2004
245 31A-27-328, as last amended by Chapter 131, Laws of Utah 1999
246 31A-27-329, as enacted by Chapter 242, Laws of Utah 1985
247 31A-27-330, as last amended by Chapter 9, Laws of Utah 1996, Second Special Session
248 31A-27-330.5, as last amended by Chapter 185, Laws of Utah 1997
249 31A-27-330.6, as last amended by Chapter 105, Laws of Utah 2004
250 31A-27-331, as enacted by Chapter 242, Laws of Utah 1985
251 31A-27-332, as last amended by Chapter 308, Laws of Utah 2002
252 31A-27-333, as last amended by Chapter 204, Laws of Utah 1986
253 31A-27-334, as last amended by Chapter 204, Laws of Utah 1986
254 31A-27-335, as last amended by Chapter 300, Laws of Utah 2000
255 31A-27-335.5, as last amended by Chapter 344, Laws of Utah 1995
256 31A-27-336, as enacted by Chapter 242, Laws of Utah 1985
257 31A-27-337, as last amended by Chapter 308, Laws of Utah 2002
258 31A-27-338, as enacted by Chapter 242, Laws of Utah 1985
259 31A-27-339, as last amended by Chapter 204, Laws of Utah 1986
260 31A-27-340, as last amended by Chapter 308, Laws of Utah 2002
261 31A-27-341, as last amended by Chapter 308, Laws of Utah 2002
262 31A-27-342, as enacted by Chapter 242, Laws of Utah 1985
263 31A-27-401, as last amended by Chapter 204, Laws of Utah 1986
264 31A-27-402, as enacted by Chapter 242, Laws of Utah 1985
265 31A-27-403, as enacted by Chapter 242, Laws of Utah 1985
266 31A-27-404, as enacted by Chapter 242, Laws of Utah 1985
267 31A-27-405, as enacted by Chapter 242, Laws of Utah 1985
268 31A-27-406, as enacted by Chapter 242, Laws of Utah 1985
269 31A-27-407, as last amended by Chapter 204, Laws of Utah 1986
270 31A-27-408, as enacted by Chapter 242, Laws of Utah 1985
271 31A-27-409, as last amended by Chapter 204, Laws of Utah 1986
272 31A-27-410, as last amended by Chapter 344, Laws of Utah 1995
273 31A-27-411, as last amended by Chapter 204, Laws of Utah 1986
274
275 Be it enacted by the Legislature of the state of Utah:
276 Section 1. Section 31A-1-106 is amended to read:
277 31A-1-106. Residual unlicensed domestic insurers.
278 (1) Every person doing an insurance business in Utah not covered under another
279 section of this title, that does not hold a valid certificate of authority or license under [
280
281 Subsections (2) through (5). This section does not apply to an unauthorized foreign insurer
282 doing an insurance business in Utah in full compliance with Section 31A-15-103 .
283 (2) An insurer under Subsection (1) may incorporate and apply, or if already
284 incorporated, may apply for a certificate of authority under Chapter 5, 6, 7, 8, or 9. If the
285 commissioner is satisfied that the insurer substantially complies with the requirements of the
286 appropriate chapter necessary for the protection of insureds and the public, the commissioner
287 shall issue a certificate of authority.
288 (3) An insurer under Subsection (1) may transfer all its obligations to a corporation
289 authorized under this title to assume them, according to a plan approved by the commissioner.
290 The commissioner may disapprove the plan on a finding, after a hearing, that it is contrary to
291 the interests of insureds, the public, or the law.
292 (4) An insurer under Subsection (1) may adopt a plan to run off existing obligations
293 without accepting any new policyholders or new obligations. The commissioner may
294 disapprove the plan on a finding, after a hearing, that it is contrary to the interests of insureds,
295 the public, or the law.
296 (5) The commissioner may, by order, exempt an insurer from the requirements of
297 Subsection (1) or extend the deadline under Subsection (1) on a finding that:
298 (a) incorporation, licensing, reinsurance, or run off would cause disproportionate
299 expense, loss, or substantial hardship; and
300 (b) the nature of the existing and prospective business, the assets, or the business plan
301 of the insurer can be reasonably expected to continue to operate in a sound manner and can be
302 subjected to adequate regulatory controls.
303 (6) Whenever the commissioner grants an exemption under Subsection (5), the
304 commissioner shall issue to the insurer a certificate of authority. The commissioner may
305 amend the certificate at any time, specifying the business that the insurer may transact and
306 specifying in detail the controls to which the insurer shall be subject. These controls shall
307 correspond as nearly as practicable to the controls applicable to corporations transacting a like
308 business.
309 (7) It is a ground for liquidation under Section [
310 has not completed action under one of Subsections (2) through (4) and has not applied for and
311 been granted exemption under Subsection (5) before July 1, 1987.
312 Section 2. Section 31A-2-108 is amended to read:
313 31A-2-108. Legal services.
314 (1) Except as provided in Subsection (4), the commissioner shall call upon the attorney
315 general for the legal counsel and assistance necessary to enforce [
316 Upon the commissioner's request, or upon the attorney general's own initiative, the attorney
317 general may hire special legal counsel under Section 67-5-5 to represent the [
318 department.
319 (2) Upon the commissioner's request, or upon the commissioner's own initiative, the
320 attorney general may aid in any investigation, hearing, or other procedure under this title and
321 may institute, prosecute, and defend proceedings relating to the enforcement or interpretation
322 of this title, including any proceeding to which the state, or the commissioner or any employee
323 of the department in an official capacity, is a party or is interested.
324 (3) The commissioner may refer such evidence as is available concerning violations of
325 this title or of any rule or order under this title to the proper county attorney or district attorney,
326 who may, with or without this reference, institute the appropriate criminal proceedings.
327 (4) For proceedings authorized by [
328
329 contract basis legal counsel other than the attorney general, with the fees, costs, and expenses
330 of the counsel and the attorney general being a class one administrative expense under Section
331 [
332 Section 3. Section 31A-2-203 is amended to read:
333 31A-2-203. Examinations and alternatives.
334 (1) (a) Whenever the commissioner considers it necessary in order to inform the
335 commissioner about any matter related to the enforcement of this title, the commissioner may
336 examine the affairs and condition of:
337 (i) a licensee under this title;
338 (ii) an applicant for a license under this title;
339 (iii) a person or organization of persons doing or in process of organizing to do an
340 insurance business in this state; or
341 (iv) a person who is not, but should be, licensed under this title.
342 (b) When reasonably necessary for an examination under Subsection (1)(a), the
343 commissioner may examine:
344 (i) so far as they relate to the examinee, the accounts, records, documents, or evidences
345 of transactions of:
346 (A) the insurer or other licensee;
347 (B) any officer or other person who has executive authority over or is in charge of any
348 segment of the examinee's affairs; or
349 (C) any affiliate of the examinee; or
350 (ii) any third party model or product used by the examinee.
351 (c) (i) On demand, each examinee under Subsection (1)(a) shall make available to the
352 commissioner for examination:
353 (A) any of the examinee's own accounts, records, files, documents, or evidences of
354 transactions; and
355 (B) to the extent reasonably necessary for an examination, the accounts, records, files,
356 documents, or evidences of transactions of any persons under Subsection (1)(b).
357 (ii) Except as provided in Subsection (1)(c)(iii), failure to make the documents
358 described in Subsection (1)(c)(i) available is concealment of records under Subsection
359 [
360 (iii) If the examinee is unable to obtain accounts, records, files, documents, or
361 evidences of transactions from persons under Subsection (1)(b), that failure is not concealment
362 of records if the examinee immediately terminates the relationship with the other person.
363 (d) (i) Neither the commissioner nor an examiner may remove any account, record, file,
364 document, evidence of transaction, or other property of the examinee from the examinee's
365 offices unless:
366 (A) the examinee consents in writing; or
367 (B) a court grants permission.
368 (ii) The commissioner may make and remove copies or abstracts of the following
369 described in Subsection (1)(d)(i):
370 (A) an account;
371 (B) a record;
372 (C) a file;
373 (D) a document;
374 (E) evidence of transaction; or
375 (F) other property.
376 (2) (a) Subject to the other provisions of this section, the commissioner shall examine
377 as needed and as otherwise provided by law:
378 (i) every insurer, both domestic and nondomestic;
379 (ii) every licensed rate service organization; and
380 (iii) any other licensee.
381 (b) The commissioner shall examine insurers, both domestic and nondomestic, no less
382 frequently than once every five years, but the commissioner may use in lieu examinations
383 under Subsection (4) to satisfy this requirement.
384 (c) The commissioner shall revoke the certificate of authority of an insurer or the
385 license of a rate service organization that has not been examined, or submitted an acceptable in
386 lieu report under Subsection (4), within the past five years.
387 (d) (i) Any 25 persons who are policyholders, shareholders, or creditors of a domestic
388 insurer may by verified petition demand a hearing under Section 31A-2-301 to determine
389 whether the commissioner should conduct an unscheduled examination of the insurer.
390 (ii) Persons demanding the hearing under this Subsection (2)(d) shall be given an
391 opportunity in the hearing to present evidence that an examination of the insurer is necessary.
392 (iii) If the evidence justifies an examination, the commissioner shall order an
393 examination.
394 (e) (i) When the board of directors of a domestic insurer requests that the
395 commissioner examine the insurer, the commissioner shall examine the insurer as soon as
396 reasonably possible.
397 (ii) If the examination requested under this Subsection (2)(e) is conducted within two
398 years after completion of a comprehensive examination by the commissioner, costs of the
399 requested examination may not be deducted from premium taxes under Section 59-9-102
400 unless the commissioner's order specifically provides for the deduction.
401 (f) Bail bond surety companies as defined in Section 31A-35-102 are exempted from:
402 (i) the five-year examination requirement in Subsection (2)(b);
403 (ii) the revocation under Subsection (2)(c); and
404 (iii) Subsections (2)(d) and (2)(e).
405 (3) (a) The commissioner may order an independent audit or examination by technical
406 experts, including certified public accountants and actuaries:
407 (i) in lieu of all or part of an examination under Subsection (1) or (2); or
408 (ii) in addition to an examination under Subsection (1) or (2).
409 (b) Any audit or evaluation under this Subsection (3) is subject to Subsection (5),
410 Section 31A-2-204 , and Subsection 31A-2-205 (4).
411 (4) (a) In lieu of all or any part of an examination under this section, the commissioner
412 may accept the report of an examination made by:
413 (i) the insurance department of another state; or
414 (ii) another government agency in:
415 (A) this state;
416 (B) the federal government; or
417 (C) another state.
418 (b) An examination by the commissioner under Subsection (1) or (2) or accepted by the
419 commissioner under this Subsection (4) may use:
420 (i) an audit already made by a certified public accountant; or
421 (ii) an actuarial evaluation made by an actuary approved by the commissioner.
422 (5) (a) An examination may be comprehensive or limited with respect to the
423 examinee's affairs and condition. The commissioner shall determine the nature and scope of
424 each examination, taking into account all relevant factors, including:
425 (i) the length of time the examinee has been licensed in this state;
426 (ii) the nature of the business being examined;
427 (iii) the nature of the accounting or other records available;
428 (iv) reports from:
429 (A) independent auditors; and
430 (B) self-certification entities; and
431 (v) the nature of examinations performed elsewhere.
432 (b) The examination of an alien insurer shall be limited to insurance transactions and
433 assets in the United States, unless the commissioner orders otherwise after finding that
434 extraordinary circumstances necessitate a broader examination.
435 (6) To effectively administer this section, the commissioner:
436 (a) shall:
437 (i) maintain effective financial condition and market regulation surveillance systems
438 including:
439 (A) financial and market analysis; and
440 (B) review of insurance regulatory information system reports;
441 (ii) employ a priority scheduling method that focuses on insurers and other licensees
442 most in need of examination; and
443 (iii) use examination management techniques similar to those outlined in the Financial
444 Condition Examination Handbook of the National Association of Insurance Commissioners;
445 and
446 (b) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
447 may make rules pertaining to the financial condition and market regulation surveillance
448 systems.
449 Section 4. Section 31A-2-204 is amended to read:
450 31A-2-204. Conducting examinations.
451 (1) (a) For each examination under Section 31A-2-203 , the commissioner shall issue an
452 order:
453 (i) stating the scope of the examination; and
454 (ii) designating the examiner in charge.
455 (b) The commissioner need not give advance notice of an examination to an examinee.
456 (c) The examiner in charge shall give the examinee a copy of the order issued under
457 this Subsection (1).
458 (d) (i) The commissioner may alter the scope or nature of an examination at any time
459 without advance notice to the examinee.
460 (ii) If the commissioner amends an order described in this Subsection (1), the
461 commissioner shall provide a copy of any amended order to the examinee.
462 (e) Statements in the commissioner's examination order concerning examination scope
463 are for the examiner's guidance only.
464 (f) Examining relevant matters not mentioned in an order issued under this Subsection
465 (1) is not a violation of this title.
466 (2) The commissioner shall, whenever practicable, cooperate with the insurance
467 regulators of other states by conducting joint examinations of:
468 (a) multistate insurers doing business in this state; or
469 (b) other multistate licensees doing business in this state.
470 (3) An examiner authorized by the commissioner shall, when necessary to the purposes
471 of the examination, have access at all reasonable hours to the premises and to any books,
472 records, files, securities, documents, or property of:
473 (a) the examinee; and
474 (b) any of the following if the premises, books, records, files, securities, documents, or
475 property relate to the affairs of the examinee:
476 (i) an officer of the examinee;
477 (ii) any other person who:
478 (A) has executive authority over the examinee; or
479 (B) is in charge of any segment of the examinee's affairs; or
480 (iii) any affiliate of the examinee under Subsection 31A-2-203 (1)(b).
481 (4) (a) The officers, employees, and agents of the examinee and of persons under
482 Subsection 31A-2-203 (1)(b) shall comply with every reasonable request of the examiners for
483 assistance in any matter relating to the examination.
484 (b) A person may not obstruct or interfere with the examination except by legal
485 process.
486 (5) If the commissioner finds the accounts or records to be inadequate for proper
487 examination of the condition and affairs of the examinee or improperly kept or posted, the
488 commissioner may employ experts to rewrite, post, or balance the accounts or records at the
489 expense of the examinee.
490 (6) (a) The examiner in charge of an examination shall make a report of the
491 examination no later than 60 days after the completion of the examination that shall include:
492 (i) the information and analysis ordered under Subsection (1); and
493 (ii) the examiner's recommendations.
494 (b) At the option of the examiner in charge, preparation of the report may include
495 conferences with the examinee or representatives of the examinee.
496 (c) The report is confidential until the report becomes a public document under
497 Subsection (7), except the commissioner may use information from the report as a basis for
498 action under Chapter [
499 Act.
500 (7) (a) The commissioner shall serve a copy of the examination report described in
501 Subsection (6) upon the examinee.
502 (b) Within 20 days after service, the examinee shall:
503 (i) accept the examination report as written; or
504 (ii) request agency action to modify the examination report.
505 (c) The report is considered accepted under this Subsection (7) if the examinee does
506 not file a request for agency action to modify the report within 20 days after service of the
507 report.
508 (d) If the examination report is accepted:
509 (i) the examination report immediately becomes a public document; and
510 (ii) the commissioner shall distribute the examination report to all jurisdictions in
511 which the examinee is authorized to do business.
512 (e) (i) Any adjudicative proceeding held as a result of the examinee's request for
513 agency action shall, upon the examinee's demand, be closed to the public, except that the
514 commissioner need not exclude any participating examiner from this closed hearing.
515 (ii) Within 20 days after the hearing held under this Subsection (7)(e), the
516 commissioner shall:
517 (A) adopt the examination report with any necessary modifications; and
518 (B) serve a copy of the adopted report upon the examinee.
519 (iii) Unless the examinee seeks judicial relief, the adopted examination report:
520 (A) shall become a public document ten days after service; and
521 (B) may be distributed as described in this section.
522 (f) Notwithstanding Title 63, Chapter 46b, Administrative Procedures Act, to the
523 extent that this section is in conflict with Title 63, Chapter 46b, this section governs:
524 (i) a request for agency action under this section; or
525 (ii) adjudicative proceeding under this section.
526 (8) The examinee shall promptly furnish copies of the adopted examination report
527 described in Subsection (7) to each member of the examinee's board.
528 (9) After an examination report becomes a public document under Subsection (7), the
529 commissioner may furnish, without cost or at a reasonable price set under Section 31A-3-103 ,
530 a copy of the examination report to interested persons, including:
531 (a) a member of the board of the examinee; or
532 (b) one or more newspapers in this state.
533 (10) (a) In a proceeding by or against the examinee, or any officer or agent of the
534 examinee, the examination report as adopted by the commissioner is admissible as evidence of
535 the facts stated in the report.
536 (b) In any proceeding commenced under Chapter [
537
538 commissioner or not, is admissible as evidence of the facts stated in the examination report.
539 Section 5. Section 31A-2-206 is amended to read:
540 31A-2-206. Receipt and handling of deposits.
541 (1) As used in this chapter:
542 (a) "Custodian institution" means [
543 under Section 7-1-103 that:
544 (i) has authority under Title 7, Chapter 5, Trust Business, to engage in a trust business;
545 and
546 (ii) is approved by the commissioner to have custody of deposited securities, whether
547 physically, through the Federal Reserve book-entry system, or through a clearing corporation as
548 defined under Subsection 70A-8-101 (1).
549 (b) "Federal Reserve book-entry system" means the computerized system sponsored by
550 the United States Department of the Treasury and certain other agencies and instrumentalities
551 of the United States for holding and transferring securities of the United States government and
552 other agencies and instrumentalities.
553 (2) Subject to the commissioner's approval and to the requirements of this section, the
554 state treasurer shall accept, and a custodian institution qualified under Subsection (1)(a) may
555 accept:
556 (a) deposits required or permitted under this title or rules adopted under this title;
557 (b) deposits of domestic insurers or of alien insurers domiciled in this state if required
558 by the laws of other states as a prerequisite to authority to do an insurance business in other
559 states; and
560 (c) deposits resulting from application of any retaliatory provisions of this title.
561 (3) Deposits authorized under Subsection (2) shall be of securities described in
562 Subsection (7).
563 (4) Unless otherwise provided by the law requiring or permitting the deposit, each
564 deposit shall be held in trust:
565 (a) first, for administrative costs under Subsection [
566 (b) second, for the claimants under Subsection [
567 (c) third, for the claimants under Subsection [
568 (d) fourth, for all other creditors in the order of priority established under Section
569 [
570 (5) A claim may be made against the deposit of an alien insurer only if it arises out of a
571 transaction in the United States.
572 (6) Deposits may be made by:
573 (a) delivering physical custody and control of the deposited security to the state
574 treasurer or a custodian institution, accompanied by a statement signed by the depositor
575 indicating that the deposit shall be held in trust under the terms of this section and subject to
576 the commissioner's exclusive direction until control is released by the commissioner; or
577 (b) delivering to the commissioner, on a form adopted by rule, a signed certificate of a
578 custodian institution, describing securities qualifying for deposit under Subsection (7) that are
579 on deposit with a clearing corporation or held in the Federal Reserve book-entry system in the
580 name of the custodian institution, in trust for the purposes stated under this section, and that
581 these securities are subject to the exclusive direction of the commissioner and may not be
582 withdrawn or transferred by any person, including the insurer owning the securities, without the
583 commissioner's written approval.
584 (7) (a) Deposits may consist of any securities authorized in Subsection (7) (b) for
585 which there is a ready market if they:
586 (i) are expressly approved by the commissioner;
587 (ii) are subject to disposition by the state treasurer or custodian institution only with the
588 concurrence of the commissioner; and
589 (iii) are not available to any other person except as expressly provided by law.
590 (b) The authorized securities are:
591 (i) deposits or certificates of deposit insured by the Federal Deposit Insurance
592 Corporation;
593 (ii) bonds or other evidences of indebtedness that are guaranteed as to principal and
594 interest by the United States;
595 (iii) tax anticipation bonds or notes, general obligation bonds, or revenue bonds of this
596 state or of any county, incorporated city or town, school district, or other political subdivision
597 of this state, if the bonds or notes are rated AAA by Standard and Poor's or an equivalent
598 nationally recognized rating agency;
599 (iv) bonds or other evidences of indebtedness issued or guaranteed by an agency or
600 instrumentality of the United States; and
601 (v) any other security approved by the commissioner that [
602 considers an equivalent grade investment to those enumerated under Subsections (7)(b)(i)
603 through (iv) based on tests of the safety of principal and liquidity.
604 (8) Securities held on deposit shall be valued under Section 31A-17-401 as those
605 investments are valued for life insurers, or at market, whichever is lower. The securities shall
606 be revalued whenever the commissioner requests to ensure continued compliance with the
607 requirements of this title.
608 (9) (a) The state treasurer or custodian institution shall:
609 (i) deliver to the depositor a receipt for all securities deposited or held;
610 (ii) issue a duplicate copy of the receipt to the commissioner; and
611 (iii) permit the depositor to inspect its physically held securities at any reasonable time.
612 (b) On application of the depositor or when required by the law of any state or country
613 or by the order of any court of competent jurisdiction, the state treasurer or custodian institution
614 shall certify that the deposit was made and what is on deposit.
615 (c) Depositors, the state treasurer, any custodian institution, and the commissioner shall
616 each keep a permanent record of securities deposited or held under this section and of any
617 substitutions or withdrawals. They shall compare records at least annually.
618 (10) A transfer of a deposited security, whether voluntary or by operation of law, is
619 valid only if approved in writing by the commissioner and countersigned by the state treasurer
620 or custodian institution.
621 (11) Neither a judgment creditor nor other person may levy upon any deposit held
622 under this section.
623 (12) A depositor that has complied with all provisions of this title intended to preserve
624 its financial solidity is, while solvent and complying with the laws of this state, entitled to:
625 (a) receive interest and cash dividends accruing on the securities held for its account;
626 and
627 (b) substitute for deposited securities other eligible securities, as expressly approved by
628 the commissioner.
629 (13) Within 45 days after the commissioner gives notice to a depositor that a deposit is
630 not an acceptable deposit under Subsection (7), the depositor shall substitute other eligible
631 securities expressly approved by the commissioner and allowed under Subsection (7).
632 (14) A depositor may voluntarily deposit or transfer control of eligible securities in
633 excess of requirements to absorb fluctuations in value and to facilitate substitution of
634 securities.
635 (15) Upon the depositor's request and upon approval of the commissioner, any deposit
636 or part of a deposit shall be released to, or on order of, the depositor to the extent not needed to
637 satisfy requirements of this title. On the order of a court of competent jurisdiction, the deposit
638 or appropriate part of the deposit shall be released to the person for whom it is held.
639 (16) Each depositor shall pay the cost of custody of securities by a custodian institution
640 or by the state treasurer.
641 (17) The commissioner shall adopt rules to implement this section.
642 Section 6. Section 31A-2-207 is amended to read:
643 31A-2-207. Commissioner's records and reports -- Protection from disclosure of
644 certain records.
645 (1) The commissioner shall maintain all department records that are:
646 (a) required by law;
647 (b) necessary for the effective operation of the department; or
648 (c) necessary to maintain a full record of department activities.
649 (2) The records of the department may be preserved, managed, stored, and made
650 available for review consistent with:
651 (a) another Utah statute;
652 (b) the rules made under Section 63-2-904 ;
653 (c) the decisions of the State Records Committee made under Title 63, Chapter 2,
654 Government Records Access and Management Act; or
655 (d) the needs of the public.
656 (3) A department record may not be destroyed, damaged, or disposed of without:
657 (a) authorization of the commissioner; and
658 (b) compliance with all other applicable laws.
659 (4) The commissioner shall maintain a permanent record of the commissioner's
660 proceedings and important activities, including:
661 (a) a concise statement of the condition of each insurer examined by the commissioner;
662 and
663 (b) a record of all certificates of authority and licenses issued by the commissioner.
664 (5) (a) Prior to October 1 of each year, the commissioner shall prepare an annual report
665 to the governor which shall include, for the preceding calendar year, the information
666 concerning the department and the insurance industry which the commissioner believes will be
667 useful to the governor and the public.
668 (b) The report required by this Subsection (5) shall include the information required
669 under Chapter [
670 31A-2-205 (3), and 31A-2-208 (3).
671 (c) The commissioner shall make the report required by this Subsection (5) available to
672 the public and industry in electronic format.
673 (6) All department records and reports are open to public inspection unless specifically
674 provided otherwise by statute or by Title 63, Chapter 2, Government Records Access and
675 Management Act.
676 (7) On request, the commissioner shall provide to any person certified or uncertified
677 copies of any record in the department that is open to public inspection.
678 (8) Notwithstanding Subsection (6) and Title 63, Chapter 2, Government Records
679 Access and Management Act, the commissioner shall protect from disclosure any record, as
680 defined in Section 63-2-103 , or other document received from an insurance regulator of
681 another jurisdiction:
682 (a) at least to the same extent the record or document is protected from disclosure
683 under the laws applicable to the insurance regulator providing the record or document; or
684 (b) under the same terms and conditions of confidentiality as the National Association
685 of Insurance Commissioners requires as a condition of participating in any of the National
686 Association of Insurance Commissioners' programs.
687 Section 7. Section 31A-2-212 is amended to read:
688 31A-2-212. Miscellaneous duties.
689 (1) Upon issuance of any order limiting, suspending, or revoking an insurer's authority
690 to do business in Utah, and on institution of any proceedings against the insurer under Chapter
691 [
692 (a) shall notify by mail all agents of the insurer of whom the commissioner has record;
693 and
694 (b) may publish notice of the order or proceeding in any manner the commissioner
695 considers necessary to protect the rights of the public.
696 (2) When required for evidence in any legal proceeding, the commissioner shall furnish
697 a certificate of the authority of any licensee to transact insurance business in Utah on any
698 particular date. The court or other officer shall receive the certificate of authority in lieu of the
699 commissioner's testimony.
700 (3) (a) On the request of any insurer authorized to do a surety business, the
701 commissioner shall furnish a copy of the insurer's certificate of authority to any designated
702 public officer in this state who requires that certificate of authority before accepting a bond.
703 (b) The public officer described in Subsection (3)(a) shall file the certificate of
704 authority furnished under Subsection (3)(a).
705 (c) After a certified copy of a certificate of authority has been furnished to a public
706 officer, it is not necessary, while the certificate of authority remains effective, to attach a copy
707 of it to any instrument of suretyship filed with that public officer.
708 (d) Whenever the commissioner revokes the certificate of authority or starts
709 proceedings under Chapter [
710 Receivership Act, against any insurer authorized to do a surety business, the commissioner
711 shall immediately give notice of that action to each public officer who was sent a certified copy
712 under this Subsection (3).
713 (4) (a) The commissioner shall immediately notify every judge and clerk of all courts
714 of record in the state when:
715 (i) an authorized insurer doing a surety business:
716 (A) files a petition for receivership; or
717 (B) is in receivership; or
718 (ii) the commissioner has reason to believe that the authorized insurer doing surety
719 business:
720 (A) is in financial difficulty; or
721 (B) has unreasonably failed to carry out any of its contracts.
722 (b) Upon the receipt of the notice required by this Subsection (4) it is the duty of the
723 judges and clerks to notify and require every person that has filed with the court a bond on
724 which the authorized insurer doing surety business is surety, to immediately file a new bond
725 with a new surety.
726 (5) The commissioner shall require an insurer that issues, sells, renews, or offers health
727 insurance coverage in this state to comply with the Health Insurance Portability and
728 Accountability Act, P.L. 104-191, pursuant to 110 Stat. 1968, Sec. 2722.
729 Section 8. Section 31A-2-308 is amended to read:
730 31A-2-308. Enforcement penalties and procedures.
731 (1) (a) A person who violates any insurance statute or rule or any order issued under
732 Subsection 31A-2-201 (4) shall forfeit to the state twice the amount of any profit gained from
733 the violation, in addition to any other forfeiture or penalty imposed.
734 (b) (i) The commissioner may order an individual producer, limited line producer,
735 customer service representative, managing general agent, reinsurance intermediary, adjuster, or
736 insurance consultant who violates an insurance statute or rule to forfeit to the state not more
737 than $2,500 for each violation.
738 (ii) The commissioner may order any other person who violates an insurance statute or
739 rule to forfeit to the state not more than $5,000 for each violation.
740 (c) (i) The commissioner may order an individual producer, limited line producer,
741 customer service representative, managing general agent, reinsurance intermediary, adjuster, or
742 insurance consultant who violates an order issued under Subsection 31A-2-201 (4) to forfeit to
743 the state not more than $2,500 for each violation. Each day the violation continues is a
744 separate violation.
745 (ii) The commissioner may order any other person who violates an order issued under
746 Subsection 31A-2-201 (4) to forfeit to the state not more than $5,000 for each violation. Each
747 day the violation continues is a separate violation.
748 (d) The commissioner may accept or compromise any forfeiture under this Subsection
749 (1) until after a complaint is filed under Subsection (2). After the filing of the complaint, only
750 the attorney general may compromise the forfeiture.
751 (2) When a person fails to comply with an order issued under Subsection
752 31A-2-201 (4), including a forfeiture order, the commissioner may file an action in any court of
753 competent jurisdiction or obtain a court order or judgment:
754 (a) enforcing the commissioner's order;
755 (b) (i) directing compliance with the commissioner's order and restraining further
756 violation of the order; and
757 (ii) subjecting the person ordered to the procedures and sanctions available to the court
758 for punishing contempt if the failure to comply continues; or
759 (c) imposing a forfeiture in an amount the court considers just, up to $10,000 for each
760 day the failure to comply continues after the filing of the complaint until judgment is rendered.
761 (3) The Utah Rules of Civil Procedure govern actions brought under Subsection (2),
762 except that the commissioner may file a complaint seeking a court-ordered forfeiture under
763 Subsection (2)(c) no sooner than two weeks after giving written notice of the commissioner's
764 intention to proceed under Subsection (2)(c). The commissioner's order issued under
765 Subsection 31A-2-201 (4) may contain a notice of intention to seek a court-ordered forfeiture if
766 the commissioner's order is disobeyed.
767 (4) If, after a court order is issued under Subsection (2), the person fails to comply with
768 the commissioner's order or judgment:
769 (a) the commissioner may certify the fact of the failure to the court by affidavit; and
770 (b) the court may, after a hearing following at least five days written notice to the
771 parties subject to the order or judgment, amend the order or judgment to add the forfeiture or
772 forfeitures, as prescribed in Subsection (2)(c), until the person complies.
773 (5) (a) The proceeds of all forfeitures under this section, including collection expenses,
774 shall be paid into the General Fund.
775 (b) The expenses of collection shall be credited to the [
776 (c) The attorney general's budget shall be credited to the extent the [
777 department reimburses the attorney general's office for its collection expenses under this
778 section.
779 (6) (a) Forfeitures and judgments under this section bear interest at the rate charged by
780 the United States Internal Revenue Service for past due taxes on the:
781 (i) date of entry of the commissioner's order under Subsection (1); or
782 (ii) date of judgment under Subsection (2).
783 (b) Interest accrues from the later of the dates described in Subsection (6)(a) until the
784 forfeiture and accrued interest are fully paid.
785 (7) A forfeiture may not be imposed under Subsection (2)(c) if:
786 (a) at the time the forfeiture action is commenced, the person was in compliance with
787 the commissioner's order; or
788 (b) the violation of the order occurred during the order's suspension.
789 (8) The commissioner may seek an injunction as an alternative to issuing an order
790 under Subsection 31A-2-201 (4).
791 (9) (a) A person is guilty of a class B misdemeanor if that person:
792 (i) intentionally violates:
793 (A) an insurance statute or rule of this state; or
794 (B) an order issued under Subsection 31A-2-201 (4);
795 (ii) intentionally permits a person over whom that person has authority to violate:
796 (A) an insurance statute or rule of this state; or
797 (B) an order issued under Subsection 31A-2-201 (4); or
798 (iii) intentionally aids any person in violating:
799 (A) an insurance statute or rule of this state; or
800 (B) an order issued under Subsection 31A-2-201 (4).
801 (b) Unless a specific criminal penalty is provided elsewhere in this title, the person may
802 be fined not more than:
803 (i) $10,000 if a corporation; or
804 (ii) $5,000 if a person other than a corporation.
805 (c) If the person is an individual, the person may, in addition, be imprisoned for up to
806 one year.
807 (d) As used in this Subsection (9), "intentionally" has the same meaning as under
808 Subsection 76-2-103 (1).
809 (10) (a) A person who knowingly and intentionally violates Section 31A-4-102 ,
810 31A-8a-208 , 31A-15-105 , 31A-23a-116 , or 31A-31-111 is guilty of a felony as provided in this
811 Subsection (10).
812 (b) When the value of the property, money, or other things obtained or sought to be
813 obtained in violation of Subsection (10)(a):
814 (i) is less than $5,000, a person is guilty of a third degree felony; or
815 (ii) is or exceeds $5,000, a person is guilty of a second degree felony.
816 (11) (a) After a hearing, the commissioner may, in whole or in part, revoke, suspend,
817 place on probation, limit, or refuse to renew the licensee's license or certificate of authority:
818 (i) when a licensee of the department, other than a domestic insurer:
819 (A) persistently or substantially violates the insurance law; or
820 (B) violates an order of the commissioner under Subsection 31A-2-201 (4);
821 (ii) if there are grounds for delinquency proceedings against the licensee under Section
822 [
823 (iii) if the licensee's methods and practices in the conduct of the licensee's business
824 endanger, or the licensee's financial resources are inadequate to safeguard, the legitimate
825 interests of the licensee's customers and the public.
826 (b) Additional license termination or probation provisions for licensees other than
827 insurers are set forth in Sections 31A-19a-303 , 31A-19a-304 , 31A-23a-111 , 31A-23a-112 ,
828 31A-25-208 , 31A-25-209 , 31A-26-213 , 31A-26-214 , 31A-35-501 , and 31A-35-503 .
829 (12) The enforcement penalties and procedures set forth in this section are not
830 exclusive, but are cumulative of other rights and remedies the commissioner has pursuant to
831 applicable law.
832 Section 9. Section 31A-5-212 is amended to read:
833 31A-5-212. Certificate of authority.
834 (1) The corporation may apply for a certificate of authority at any time prior to the
835 expiration of its organization permit. The application shall include a detailed statement by a
836 principal officer about any material changes that have taken place or are likely to take place in
837 the facts on which the issuance of the organization permit was based, and if any material
838 changes are proposed in the business plan, the information about the changes that would be
839 required if an organization permit were being applied for.
840 (2) (a) The commissioner shall issue a certificate of authority if [
841 finds:
842 (i) enough cash or property authorized under Subsection 31A-5-207 (1)(a) or (2)(a) has
843 been received to satisfy the requirements of Section 31A-5-211 ;
844 (ii) there is no basis for revoking the organization permit under Subsection
845 31A-5-209 (2); and
846 (iii) all other applicable requirements of the law have been met.
847 (b) The certificate of authority shall specify any limits placed on the insurance business
848 the corporation may carry on and may, within the powers given the commissioner under this
849 title, specify limits on the corporation's methods of operation.
850 (3) After the issuance of the certificate of authority the following action shall take
851 place:
852 (a) The board shall authorize and direct the issuance of certificates for shares, bonds, or
853 notes subscribed to under the organization permit, and of insurance policies upon qualifying
854 applications obtained under the organization permit.
855 (b) The commissioner shall authorize the release to the corporation of all funds held in
856 escrow under Section 31A-5-208 .
857 (4) (a) A corporation may apply to the commissioner for a new or amended certificate
858 of authority altering limits on its business or methods of operation. The application shall
859 contain or be accompanied by information in Subsection 31A-5-204 (2) as the commissioner
860 reasonably requires. The commissioner shall issue the new certificate if [
861 finds:
862 (i) the corporation's capital and surplus satisfy the requirements of Section 31A-5-211
863 as to the operations proposed under the new certificate of authority; and
864 (ii) the proposed business would not be contrary to law or to the interests of insureds or
865 the public.
866 (b) If the commissioner issues [
867 Chapter 27, Part 5, Administrative Actions, against a corporation, [
868 also revoke the corporation's certificate and issue a new one with any limitation [
869 commissioner considers necessary.
870 (5) Except as to Subsection (4), this section does not apply to stock or mutual
871 insurance corporations already in existence on July 1, 1986.
872 Section 10. Section 31A-5-217 is amended to read:
873 31A-5-217. Separate accounts for variable contracts.
874 (1) Separate accounts under this section may be designated by any appropriate name
875 the corporation wishes to use, except that the commissioner may by rule provide guidelines for
876 the naming of separate accounts.
877 (2) With the approval of the commissioner, any corporation may establish, or at the
878 direction of the commissioner shall establish, one or more separate accounts and allocate to
879 them any amounts paid or remitted to, or held by, the corporation under designated contracts or
880 classes of contracts. These amounts are to be applied to provide benefits payable partly or
881 wholly in variable dollar amounts, and to provide benefits in fixed and guaranteed dollar
882 amounts and other incidental benefits.
883 (3) To the extent necessary to comply with the federal Investment Company Act of
884 1940, 15 U.S.C. Sec. 80a-1 et seq., or its interpretive rules, the corporation may:
885 (a) adopt special procedures for the conduct of the business and affairs of a separate
886 account; and
887 (b) for persons having beneficial interests in a separate account, provide special voting
888 and other rights, including special rights and procedures relating to investment policy,
889 investment advisory services, selection of certified public accountants, and selection of a
890 committee, the members of which need not be otherwise affiliated with the corporation, to
891 manage the business and affairs of the account.
892 (4) The commissioner may specify in the certificate of authority of a newly organized
893 corporation the minimum required capital or the minimum required permanent surplus to be
894 provided for each separate account. If a separate account is established after a certificate of
895 authority has been issued, the commissioner shall require the corporation to allocate an
896 adequate amount of capital and surplus to the separate account. An insurer may not be required
897 to allocate more capital and surplus to a separate account than would be required of a separate
898 insurer under Section 31A-5-211 and Chapter 17, Part 6, Risk-Based Capital.
899 (5) The income and assets attributable to a separate account shall always remain
900 identified with the particular account, but unless the commissioner so orders, the assets need
901 not be kept physically separate from other assets of the corporation. The income and gains and
902 losses, whether or not realized, from assets attributable to a separate account shall be credited
903 to or charged against the account without regard to other income, gains, or losses of the
904 corporation.
905 (6) Except as provided in Subsection (7), liabilities arising out of any other business of
906 the corporation are not to be allocated to a separate account, nor are any liabilities arising out of
907 a separate account to be allocated to any other account of the corporation, except as provided in
908 Subsection (11).
909 (7) (a) Each separate account shall be considered as an insurer within the meaning of
910 Subsection [
911 (b) A liquidation order under Section [
912 account or for any separate account shall have effect as a rehabilitation order under Section
913 [
914 after completion of the liquidation under Chapter [
915 liens on the interests of shareholders, if any, but not on any other interests, in all of the
916 corporation's assets that are not liquidated. The rehabilitator may transform these liens into
917 ownership interests under [
918 (8) Assets in excess of the liabilities allocated to separate accounts are the property of
919 the corporation.
920 (9) A corporation may own a particular asset in determinate proportions for separate
921 accounts, for its general account, or as a trustee when acting as such within its legal powers.
922 (10) The corporation may by an identifiable act transfer assets among the separate
923 accounts, the general account, and any trust accounts of the corporation, for fair consideration
924 as defined in [
925 (11) The general account of the corporation, or any separate account, may, for a fair
926 consideration as defined in [
927 guarantees in connection with, perform services for, or reinsure other accounts, subject to rules
928 adopted by the commissioner. The determination of a fair consideration shall be made by
929 applying generally accepted accounting principles and realistic actuarial tables.
930 (12) Section 31A-18-102 deals with separate account investments. Section
931 31A-20-106 requires the commissioner's approval before delivery of certain variable contracts.
932 Section 31A-22-411 and Subsection 31A-21-301 (1)(d) deal with policy provisions in separate
933 account contracts.
934 Section 11. Section 31A-5-305 is amended to read:
935 31A-5-305. Authorized securities.
936 (1) (a) The articles of incorporation of a stock corporation may authorize the kind of
937 shares permitted by Sections 16-10a-601 and 16-10a-602 , and stock rights and options, except
938 that:
939 (i) [
940 (ii) all classes of common stock must have equal voting rights;
941 (iii) all common stock must have a stated par value; and
942 (iv) except with the commissioner's approval, for two years after the initial issuance of
943 a certificate of authority, the corporation may issue no shares and no other securities
944 convertible into shares except a single class of common stock.
945 (b) Section 16-10a-604 applies to the issuance of certificates for fractional shares or
946 scrip.
947 (c) The consideration and payment for shares and certificates representing shares is
948 governed by [
949 (d) The liability of subscribers and shareholders for unpaid subscriptions and the status
950 of stock is governed by Section 16-10a-622 .
951 (e) A shareholder's preemptive rights is governed by Section 16-10a-630 .
952 (f) Stock corporations may issue bonds and contribution notes on the same basis as
953 mutuals under Subsections (2)(a) and (b).
954 (2) (a) The articles of incorporation of a nonassessable mutual may authorize bonds of
955 one or more classes. The articles of incorporation shall specify the amount of each class of
956 bonds the corporation is authorized to issue, their designations, preferences, limitations, rates
957 of interest, relative rights, and other terms, subject to all of the following provisions:
958 (i) During the first year after the initial issuance of a certificate of authority, the
959 corporation may issue only a single class of bonds with identical rights.
960 (ii) After the first year, but within five years after the initial issuance of a certificate of
961 authority, additional classes of bonds may be authorized after receiving the approval of the
962 commissioner. The commissioner shall approve the issuance if [
963 that policyholders and prior bondholders will not be prejudiced.
964 (iii) The rate of interest shall be fair.
965 (iv) The bonds shall bear a maturity date not later than ten years from the date of
966 issuance, when principal and accrued interest shall be due and payable, subject to Subsection
967 (2)(d).
968 (b) A mutual may issue contribution notes with the commissioner's approval. The
969 contribution notes may be denominated by any name that is not misleading. The contribution
970 notes are subject to this subsection. The commissioner may approve the issuance only if [
971 the commissioner finds that:
972 (i) the notes will not be issued in denominations of less than $2,500, and no single
973 issue will be sold to more than 15 persons;
974 (ii) no discount, commission, or other fee will be paid or allowed;
975 (iii) the notes will not be the subject of a public offering;
976 (iv) the terms of the notes are not prejudicial to policyholders, holders of mutual bonds,
977 or prior contribution notes; and
978 (v) the mutual's articles or bylaws do not forbid their issuance.
979 (c) [
980 (i) if it has any outstanding obligations on bonds or contribution notes, borrow on
981 contribution notes from, or sell bonds to, any other insurer without the approval of the
982 commissioner; or
983 (ii) make a loan to another insurer except a fully secured loan at usual market rates of
984 interest.
985 (d) Payment of the principal or interest on bonds or contribution notes may be made in
986 whole or in part only after approval by the commissioner. The commissioner's approval shall
987 be given if all the financial requirements of the issuer to do the insurance business it is then
988 doing will continue to be satisfied after that payment, and if the interests of its insureds and the
989 public are not endangered by the payment. In the event of liquidation under Chapter [
990 Insurer Receivership Act, unpaid amounts of principal and interest on contribution notes are
991 subordinate to the payment of principal and interest on any bonds issued by the corporation.
992 (e) This section does not prevent a mutual from borrowing money on notes which are
993 its general obligations, nor from pledging any part of its disposable assets.
994 (3) This section does not apply to securities issued prior to July 1, 1986.
995 Section 12. Section 31A-5-416 is amended to read:
996 31A-5-416. Executive compensation.
997 (1) Subject to this section, Section 16-10a-302 , except Subsection 16-10a-302 (13),
998 applies to stock and mutual corporations.
999 (2) Shareholders' approval is required of any benefit or payment to a director or officer
1000 for services rendered to a stock corporation more than 90 days before the agreement or decision
1001 to give the benefit or make the payment, unless the benefit or payment is made under a plan
1002 approved by the shareholders. Shareholder approval is also required for a new pension plan,
1003 profit-sharing plan, stock option plan, or an amendment to an existing plan which, so far as it
1004 pertains to any director or officer, substantially increases the financial burden on the
1005 corporation.
1006 (3) An action taken by the board of a mutual on the compensation of officers, directors,
1007 or employees, other than setting individual salaries or standards for salaries of classes of
1008 employees, shall be reported to the commissioner within 30 days.
1009 (4) The annual report to the commissioner shall include the amount of all direct and
1010 indirect remuneration for services, including retirement and other deferred compensation
1011 benefits and stock options, paid or accrued each year:
1012 (a) for the benefit of each director, each officer, and employee whose remuneration
1013 exceeds an amount established by the commissioner by rule;
1014 (b) for all directors and officers as a group; and
1015 (c) for the five most highly compensated officers, directors, and employees.
1016 (5) [
1017 director, officer, or employee with decision-making power may not be made if it would:
1018 (a) measure the compensation or other benefits in whole or in part by any criteria that
1019 would create a financial inducement to act contrary to the best interests of the corporation; or
1020 (b) have a tendency to make the corporation depend for continuance or soundness of
1021 operation upon the continuation of any director, officer, or employee in [
1022 position.
1023 (6) Except for the insurer, no person having any authority in the investment or
1024 disposition of the funds of a domestic insurer may accept any fee, brokerage, gift, or other
1025 emolument because of any investment, loan, deposit, purchase, sale, payment, or exchange
1026 made by or for the insurer, nor may that person be financially interested in the investment or
1027 disposition of funds in any capacity.
1028 (7) Unless the commissioner, acting in the corporation's best interests, orders
1029 otherwise, if an order of rehabilitation or liquidation is issued under Section [
1030 31A-27a-301 or [
1031 for unperformed services of any director, principal officer, or person performing similar
1032 functions or having similar powers are terminated. This Subsection (7) does not apply to
1033 obligations vested before July 1, 1986.
1034 Section 13. Section 31A-5-504 is amended to read:
1035 31A-5-504. Voluntary dissolution of domestic insurance corporations.
1036 (1) (a) Except as otherwise modified by this section, a domestic stock insurance
1037 corporation may dissolve under Sections 16-10a-1401 through 16-10a-1409 and Section
1038 16-10a-1440 .
1039 (b) Except as otherwise modified by this section, a domestic mutual insurance
1040 corporation may dissolve under Sections 16-6a-1401 through 16-6a-1409 and Section
1041 16-6a-1419 .
1042 (2) (a) At least 60 days prior to the submission to shareholders or policyholders of any
1043 proposed voluntary dissolution of an insurance corporation, the plan of dissolution shall be
1044 filed with the commissioner.
1045 (b) The commissioner may require the submission of any information in addition to the
1046 plan of dissolution that will establish:
1047 (i) the financial condition of the corporation; or
1048 (ii) other facts relevant to the proposed dissolution.
1049 (c) If the shareholders or policyholders adopt the resolution to dissolve, the
1050 commissioner shall, within 30 days after the adoption of the resolution, begin an examination
1051 of the corporation.
1052 (d) The commissioner shall approve the dissolution unless the commissioner finds,
1053 after a hearing, that the corporation:
1054 (i) is insolvent; or
1055 (ii) may become insolvent in the process of dissolution.
1056 (e) Upon approval, the corporation may:
1057 (i) transfer all of its obligations under insurance policies to other insurers approved by
1058 the commissioner; and
1059 (ii) after the transfers described in Subsection (2)(e)(i), dissolve under Subsection (1).
1060 (f) If the commissioner disapproves the dissolution, the commissioner shall petition the
1061 court for a liquidation under Section [
1062 (3) During the dissolution under Subsection (1), the corporation may apply to the
1063 commissioner to have the dissolution continued under the commissioner's supervision. After
1064 receiving this application, the commissioner shall apply to the court for a liquidation under
1065 Section [
1066 (4) If the corporation revokes the voluntary dissolution proceedings under Section
1067 16-6a-1404 or 16-10a-1404 , the corporation shall file a copy of the revocation of voluntary
1068 dissolution proceedings with the commissioner.
1069 (5) In distributing the assets in the dissolution of a nonlife mutual, [
1070
1071 (6) (a) No remedy available to or against the corporation, its directors, officers, or
1072 shareholders is taken away or impaired if an action or other proceeding is brought within two
1073 years after dissolution for any right or claim existing, or any liability incurred, prior to the
1074 voluntary dissolution under this section.
1075 (b) The action or proceeding described in Subsection (6)(a) may be prosecuted or
1076 defended by the corporation in its corporate name. The shareholders, directors, and officers
1077 may take appropriate corporate or other action to protect the remedy, right, or claim.
1078 (c) A corporation which is dissolved by the expiration of its period of duration may
1079 amend its articles of incorporation during the two years to provide for perpetual existence.
1080 (7) During the voluntary dissolution of a domestic insurance corporation under this
1081 section, its corporate existence continues to allow the winding up of the corporation's affairs
1082 regarding any property and assets not distributed or otherwise disposed of prior to dissolution.
1083 To effect that purpose, the corporation may:
1084 (a) sell or otherwise dispose of the property and assets;
1085 (b) sue and be sued;
1086 (c) contract; and
1087 (d) exercise all other necessary powers.
1088 Section 14. Section 31A-5-506 is amended to read:
1089 31A-5-506. Conversion of a domestic mutual into a stock corporation.
1090 (1) (a) Except as provided in Subsection (1) (b), a domestic mutual may be converted
1091 into a domestic stock corporation under Subsections (2) through (11).
1092 (b) [
1093 into a stock corporation, unless all the affiliated mutuals are converted at the same time, or the
1094 commissioner finds that the interests of the policyholders of the remaining mutuals can be
1095 permanently protected by limitations on the corporate powers of the new stock corporation or
1096 on its authority to do business, or otherwise.
1097 (2) The board shall pass a resolution stating that the conversion is in the best interests
1098 of the policyholders. The resolution shall specify the reasons for and the purposes of the
1099 proposed conversion, and how the conversion is expected to benefit policyholders.
1100 (3) (a) [
1101 to the conversion of a domestic mutual into a stock corporation. In addition, the commissioner
1102 shall order the examination and appraisal of the corporation, unless [
1103 finds that:
1104 (i) the resolution is defective upon its face; or
1105 (ii) the basis or the purposes of the proposed conversion are contrary to law, to the
1106 interests of the policyholders, or to the public.
1107 (b) The commissioner shall examine the company and all of its controlled affiliates
1108 under Section 31A-2-203 to determine their financial condition and whether they are operating
1109 in accordance with law.
1110 (c) The commissioner shall appoint an appraisal committee, consisting of at least three
1111 qualified and disinterested persons with differing expertise, to determine the value of the
1112 corporation on the date of the resolution required by Subsection (2). Members of the appraisal
1113 committee shall receive reasonable compensation and shall be reimbursed for reasonable
1114 expenses in discharging their duties. They may employ consultants to advise them on technical
1115 problems of the appraisal, if necessary. The appraisal committee shall consider the assets and
1116 liabilities of the corporation, adjusting liabilities to take account of:
1117 (i) the amounts of any reserves in excess of or below realistic estimates;
1118 (ii) the value of the marketing organization;
1119 (iii) the value of goodwill;
1120 (iv) the going-concern value; and
1121 (v) any other factor having an influence on the value of the corporation.
1122 (4) When the examination and appraisal reports have been made to the commissioner,
1123 [
1124 and adopt by resolution a plan of conversion. The plan shall be consistent with Subsections
1125 (4)(a) through (e) and shall state how the requirements of those subsections are satisfied.
1126 (a) The plan of conversion shall state the number of shares proposed to be authorized
1127 for the new stock corporation, their par value, if any, and the price per share at which they will
1128 be offered to policyholders. The price per share may not exceed 1/2 of the median equitable
1129 share of all policyholders under Subsection (4)(b).
1130 (b) (i) When an insurer has the type of policies with no investment value to the
1131 policyholders, each person who has been a policyholder and has paid premiums within five
1132 years prior to the resolution under Subsection (2) is entitled, without additional payment, to as
1133 much common stock of the new stock corporation as [
1134 value of the converting corporation will purchase. The equitable share is determined by the
1135 ratio which the net premium [
1136 immediately preceding the resolution required by Subsection (2) bears to the total net
1137 premiums received by the corporation during the same period. The net premium is the gross
1138 premium less the return premium and dividends paid. If the equitable share would only
1139 purchase a fraction of a share of stock, the policyholder has the option of either receiving the
1140 value of the fractional share in cash or purchasing a full share by paying the balance in cash.
1141 (ii) When an insurer has the type of policies with specifically attributable investment
1142 value to the policyholders, each policyholder is entitled, without additional payment, to as
1143 much common stock of the new stock corporation as [
1144 in the converting corporation will purchase, determined by the proportion of [
1145 policyholder's investment value to the aggregate investment values of all policyholders. If the
1146 policyholder's share would only purchase a fraction of a share of stock, the policyholder has the
1147 option of either receiving the value of the fractional share in cash or purchasing a full share by
1148 paying the balance in cash.
1149 (c) A written offer shall be sent to each policyholder indicating [
1150 individual equitable share and the terms upon which the policyholder may subscribe for stock.
1151 (d) [
1152 than policyholders, until all subscriptions by the policyholders have been filled. After those
1153 subscriptions have been filled, any new issue of stock for five years after the conversion shall
1154 first be offered to the persons who have become shareholders under Subsection (4)(b) in
1155 proportion to their interests under Subsection (4)(b).
1156 (e) [
1157 valued under Subsection (4)(b)(i), which distribution is greater than the amount [
1158 policyholder is entitled to under [
1159 excess over the policyholder's entitlement under [
1160 31A-27a-701 shall be distributed [
1161
1162
1163 (5) The plan of conversion shall be submitted to the commissioner for approval,
1164 together with:
1165 (a) the proposed articles and bylaws of the new stock corporation which comply with
1166 Section 31A-5-203 ;
1167 (b) any information specified under Subsection 31A-5-204 (2), which the commissioner
1168 reasonably requires; and
1169 (c) a projection of the planned or anticipated financial situation of the new corporation
1170 for five years after the conversion.
1171 (6) The commissioner shall then hold a hearing. The notice of the hearing shall be
1172 mailed to each person who was a policyholder of the corporation on the date of the resolution
1173 required by Subsection (2). This notice shall include a copy of the plan of conversion and any
1174 comments the commissioner considers necessary to adequately inform the policyholders.
1175 (7) The commissioner shall approve the plan of conversion unless [
1176 commissioner finds that the plan violates the law or is contrary to the interests of policyholders
1177 or the public.
1178 (8) After approval under Subsection (7), the conversion plan shall be submitted to a
1179 vote of:
1180 (a) for mutuals subject to Subsection (4)(b)(i), those persons who were policyholders
1181 of the mutual on the date of the resolution required by Subsection (2); or
1182 (b) for mutuals subject to Subsection (4)(b)(ii), those persons who had investment
1183 values in their policies as of the date of the resolution required by Subsection (2).
1184 (9) If the policyholders approve the conversion under Subsection (8), the
1185 commissioner shall issue a new certificate of authority. The issuance of the certificate is the
1186 conversion of the mutual to a stock corporation. This stock corporation is considered as being
1187 organized at the time the converted mutual was organized. Subject to the plan of conversion,
1188 the directors, officers, agents, and employees of the mutual shall continue in their same
1189 positions with the stock corporation.
1190 (10) In the proposed conversion, the corporation may not pay any person compensation
1191 other than regular salaries to existing personnel and compensation for clerical and mailing
1192 expenses. With the commissioner's approval, the corporation may pay, at reasonable rates, for
1193 printing costs and for legal and other professional fees for services actually rendered. All
1194 expenses of the conversion, including the expenses incurred by the commissioner and the
1195 prorated salaries of any [
1196 corporation being converted.
1197 (11) The commissioner's approval of the plan of conversion satisfies the registration
1198 requirement of Section 31A-5-302 .
1199 Section 15. Section 31A-8-213 is amended to read:
1200 31A-8-213. Certificate of authority.
1201 (1) An organization may apply for a certificate of authority at any time prior to the
1202 expiration of its organization permit. The application shall include:
1203 (a) a detailed statement by a principal officer about any material changes that have
1204 taken place or are likely to take place in the facts on which the issuance of the organization
1205 permit was based; and
1206 (b) if any material changes are proposed in the business plan, the information about the
1207 changes that would be required if an organization permit were then being applied for.
1208 (2) The commissioner shall issue a certificate of authority, if the commissioner finds
1209 that:
1210 (a) the organization's capital and surplus complies with the requirements of Section
1211 31A-8-209 as to the operations proposed under the new certificate of authority;
1212 (b) there is no basis for revoking the organization permit under Section 31A-8-207 ;
1213 (c) the deposit required by Section 31A-8-211 has been made;
1214 (d) the organization satisfies the requirements of Section 31A-8-104 ; and
1215 (e) all other applicable requirements of the law have been met.
1216 (3) The certificate of authority shall specify any limits imposed by the commissioner
1217 upon the organization's business or methods of operation, including the general types of health
1218 care services the organization is authorized to provide.
1219 (4) Upon the issuance of the certificate of authority:
1220 (a) the board shall authorize and direct the issuance of certificates for shares, bonds, or
1221 notes subscribed to under the organization permit, and of insurance policies upon qualifying
1222 applications obtained under the organization permit; and
1223 (b) the commissioner shall authorize the release to the organization of all funds held in
1224 escrow under Section 31A-5-208 , as adopted by Section 31A-8-206 .
1225 (5) (a) An organization may at any time apply to the commissioner for a new or
1226 amended certificate of authority altering the limits on its business or methods of operation.
1227 The application shall contain or be accompanied by that information reasonably required by the
1228 commissioner under Subsections 31A-5-204 (2) and 31A-8-205 (2). The commissioner shall
1229 issue the new certificate as requested if the commissioner finds that the organization continues
1230 to satisfy the requirements specified under Subsection (2).
1231 (b) If the commissioner issues [
1232 Chapter 27, Part 5, Administration Actions, against an organization, the commissioner may
1233 also revoke the organization's certificate and issue a new one with any limitation [
1234 commissioner considers necessary.
1235 Section 16. Section 31A-9-502 is amended to read:
1236 31A-9-502. Voluntary dissolution of solvent domestic fraternals.
1237 (1) Subject to this section, a domestic fraternal may voluntarily dissolve under Sections
1238 16-6a-1401 through 16-6a-1405 .
1239 (2) The proposal for voluntary dissolution shall be filed with the commissioner at least
1240 60 days prior to the submission of that proposal to the supreme governing body or the
1241 members. The commissioner may require the submission of additional information necessary
1242 to establish the financial condition of the fraternal or other facts relevant to the proposed
1243 dissolution. If the supreme governing body or the members adopt the resolution to dissolve, by
1244 a majority of those voting or a larger number as required by the laws of the fraternal, the
1245 commissioner shall, within 30 days after the adoption of the resolution, begin to examine the
1246 fraternal. The commissioner shall approve the dissolution unless [
1247 after the examination and a hearing, that it is insolvent or may become insolvent in the process
1248 of dissolution. Upon approval, the fraternal may provide for a transfer to other fraternals
1249 approved by the commissioner of all its obligations under insurance policies and then may
1250 dissolve under Subsection (1). If the commissioner disapproves, [
1251 petition the court for liquidation under Section [
1252 (3) During the liquidation under Sections 16-6a-1401 through 16-6a-1408 , the fraternal
1253 may apply to the commissioner to have the liquidation continued under the commissioner's
1254 supervision. Upon receiving this request, the commissioner shall apply to the court for
1255 liquidation under Section [
1256 (4) If the fraternal revokes the voluntary dissolution proceedings under Section
1257 16-6a-1404 , a copy of the revocation of voluntary dissolution proceedings shall be filed with
1258 the commissioner.
1259 (5) Subsections 31A-5-504 (6) and (7) apply to the survival of remedies and
1260 continuance of corporate existence of a voluntarily dissolved fraternal.
1261 Section 17. Section 31A-9-504 is amended to read:
1262 31A-9-504. Rehabilitation or involuntary conversion.
1263 (1) (a) If the commissioner believes that a fraternal does not satisfy the requirements of
1264 this chapter, [
1265 that the fraternal does not satisfy the requirements:
1266 [
1267 under Section [
1268 convert the fraternal to a mutual[
1269 [
1270 soon as practicable with the requirements of this chapter or lose its tax exemption. [
1271 (b) An order issued under Subsection (1)(a)(ii) shall specify the ways the nondomestic
1272 fraternal does not comply with this chapter.
1273 (2) If the fraternal does not promptly comply with the requirements of this chapter,
1274 after notice of the adverse results of a hearing under Subsection (1), it is subject to taxation as a
1275 mutual life insurance company. This tax is retroactive to the date on which the commissioner
1276 gave the fraternal notice of the hearing under Subsection (1).
1277 Section 18. Section 31A-11-104 is amended to read:
1278 31A-11-104. Applicability of other portions of this title.
1279 (1) In addition to this chapter, motor clubs are subject to the applicable sections of:
1280 (a) Chapters 1, 2, 4, 16, 21, 22, 26, [
1281 (b) Chapter 3, Part 1;
1282 (c) Chapter 23a, Parts 1, 4, and 5; and
1283 (d) Section 31A-23a-207 .
1284 (2) Sections 31A-14-204 and 31A-14-216 apply to nondomestic motor clubs.
1285 (3) Section 31A-5-401 applies to domestic motor clubs.
1286 (4) Sections 31A-5-105 , 31A-5-106 , and 31A-5-216 apply to both domestic and
1287 nondomestic motor clubs.
1288 (5) Both domestic and nondomestic motor clubs are subject to the [
1289 department fees under Section 31A-3-103 . Other provisions of [
1290 apply to motor clubs only as specifically provided in this chapter.
1291 Section 19. Section 31A-11-109 is amended to read:
1292 31A-11-109. Alteration or revocation of certificate of authority.
1293 If the commissioner issues [
1294 27, Part 5, Administrative Actions, against a motor club, [
1295 certificate of authority or issue a new one with the limits [
1296 necessary.
1297 Section 20. Section 31A-13-107 is amended to read:
1298 31A-13-107. Commissioner's remedies.
1299 If the trustees of any employee welfare fund have failed to register the fund in
1300 accordance with Section 31A-13-103 , or otherwise fail to comply with [
1301 chapter, the commissioner shall notify the employers of the failure. In addition to ordering
1302 compliance under Subsection 31A-2-201 (4), the commissioner may:
1303 (1) order the employers to stop making payments to the trustees until the employers are
1304 notified by the commissioner that the trustees are in compliance with this chapter; or
1305 (2) rehabilitate or liquidate the employee welfare fund under Chapter [
1306 Receivership Act.
1307 Section 21. Section 31A-14-206 is amended to read:
1308 31A-14-206. Commercially domiciled insurers.
1309 (1) As used in this section, and except as to title insurers, the commissioner may
1310 consider a foreign insurer to be "commercially domiciled" in this state if:
1311 (a) during the three immediately preceding calendar years, the foreign insurer wrote
1312 more insurance premiums in this state than it wrote in its state of domicile during the same
1313 period; or
1314 (b) during the same three-year period, the foreign insurer's gross premiums written in
1315 this state constituted 15% or more of the insurer's total gross premiums written in the United
1316 States.
1317 (2) Subject to Subsection (3), an insurer determined by the commissioner to be
1318 commercially domiciled in this state may be subjected to Chapters 16, 17, 18, 27, and 27a, and
1319 Chapter 5, Parts 4, 5, and 6 in the same manner and to the same extent as domestic insurers.
1320 The commissioner shall, by order, notify any commercially domiciled insurer not exempt under
1321 Subsection (3) of the extent to which the insurer is subject to the provisions listed under this
1322 Subsection (2).
1323 (3) The commissioner may exempt from the provisions of this section any
1324 commercially domiciled insurer if [
1325 physically located in this state or an asset to liability ratio sufficient to justify the conclusion
1326 that there is no reasonable danger that the operations or conduct of the business of the insurer
1327 could present a danger of loss to Utah policyholders.
1328 (4) Subsection 31A-14-205 (4) applies to the conflict of the laws of this state with the
1329 laws of the insurer's domicile for foreign insurers, including commercially domiciled insurers,
1330 under this section.
1331 (5) This section does not excuse or exempt any foreign insurer from complying with
1332 the provisions under this title which are otherwise applicable to a foreign insurer.
1333 Section 22. Section 31A-14-215 is amended to read:
1334 31A-14-215. Assessment by foreign company.
1335 Every foreign mutual insurer authorized in this state shall notify the commissioner
1336 immediately after making an assessment upon any of its members in this state. The insurer
1337 shall attach to the notice a statement of the condition of the insurer, giving the facts showing
1338 the necessity for the assessment. Unless the commissioner orders otherwise under a Chapter
1339 27, Part 5, Administrative Actions, proceeding, a foreign mutual insurer authorized in this state
1340 may not make or increase any assessment because of its inability to collect assessments from its
1341 members in other states.
1342 Section 23. Section 31A-14-217 is amended to read:
1343 31A-14-217. Revocation of certificate of authority.
1344 Whenever there would be grounds for delinquency proceedings under Chapter [
1345 Insurer Receivership Act, against a foreign insurer, if the foreign insurer were a domestic
1346 insurer, the commissioner may, after any proceeding authorized by Title 63, Chapter 46b,
1347 Administrative Procedures Act, revoke, suspend, or limit the foreign insurer's certificate of
1348 authority. This action does not affect insurance which has already been issued. The insurer
1349 remains subject to regulation until released under Section 31A-14-216 .
1350 Section 24. Section 31A-15-105 is amended to read:
1351 31A-15-105. Effect of contracts illegal because insurer was unauthorized.
1352 (1) An insurance contract entered into in violation of this chapter is unenforceable by,
1353 but enforceable against, the insurer. In an action against the insurer on the contract, the insured
1354 is bound by the terms of the contract as affected by this title and rules adopted under this title.
1355 (2) An insurance policy entered into in violation of this chapter is voidable by the
1356 policyholder who entered into the transaction without knowing it was illegal. The policyholder
1357 may avoid the contract by notice to the insurer, if no insured has enforced the contract by an
1358 action under Subsection (1), and may recover any consideration paid under the contract.
1359 (3) Any person who assisted in the procurement of an illegal contract under this
1360 chapter, and who knew or should have known the transaction was illegal, is liable to the
1361 insured for the full amount of a claim or loss payable under the contract, if the insurer does not
1362 pay it. The receiver appointed under Chapter [
1363 claims of insureds if the insurer is the subject of a proceeding under Chapter [
1364 Section 25. Section 31A-17-605 is amended to read:
1365 31A-17-605. Authorized control level event.
1366 (1) "Authorized control level event" means any of the following events:
1367 (a) the filing of an RBC report by the insurer or health organization that indicates that
1368 the insurer's or health organization's total adjusted capital is greater than or equal to its
1369 mandatory control level RBC but less than its authorized control level RBC;
1370 (b) the notification by the commissioner to the insurer or health organization of an
1371 adjusted RBC report that indicates the event in Subsection (1)(a), provided the insurer or health
1372 organization does not challenge the adjusted RBC report under Section 31A-17-607 ;
1373 (c) if, pursuant to Section 31A-17-607 , the insurer or health organization challenges an
1374 adjusted RBC report that indicates the event in Subsection (1)(a), notification by the
1375 commissioner to the insurer or health organization that after a hearing the commissioner rejects
1376 the insurer's or health organization's challenge;
1377 (d) the failure of the insurer or health organization to respond, in a manner satisfactory
1378 to the commissioner, to a corrective order, provided the insurer or health organization has not
1379 challenged the corrective order under Section 31A-17-607 ; or
1380 (e) if the insurer or health organization has challenged a corrective order under Section
1381 31A-17-607 and the commissioner after a hearing rejects the challenge or modifies the
1382 corrective order, the failure of the insurer or health organization to respond, in a manner
1383 satisfactory to the commissioner, to the corrective order subsequent to rejection or modification
1384 by the commissioner.
1385 (2) (a) In the event of an authorized control level event with respect to an insurer or
1386 health organization, the commissioner shall:
1387 (i) take any action required under Section 31A-17-604 regarding an insurer or health
1388 organization with respect to which a regulatory action level event has occurred; or
1389 (ii) take any action as is necessary to cause the insurer or health organization to be
1390 placed under regulatory control under [
1391 Actions, if the commissioner considers it to be in the best interests of:
1392 (A) the policyholders or members;
1393 (B) creditors of the insurer or health organization; and
1394 (C) the public.
1395 (b) [
1396 the authorized control level event is sufficient grounds for the commissioner to take action
1397 under [
1398 shall have the rights, powers, and duties with respect to the insurer or health organization set
1399 forth in [
1400 (c) If the commissioner takes an action under Subsection (2)(a) pursuant to an adjusted
1401 RBC report, the insurer or health organization is entitled to the protections afforded to an
1402 insurer or health organization under Section [
1403
1404 Section 26. Section 31A-17-606 is amended to read:
1405 31A-17-606. Mandatory control level event.
1406 (1) "Mandatory control level event" means any of the following events:
1407 (a) the filing of an RBC report that indicates that the insurer's or health organization's
1408 total adjusted capital is less than its mandatory control level RBC;
1409 (b) notification by the commissioner to the insurer or health organization of an adjusted
1410 RBC report that indicates the event in Subsection (1)(a), provided the insurer or health
1411 organization does not challenge the adjusted RBC report under Section 31A-17-607 ; or
1412 (c) if, pursuant to Section 31A-17-607 , the insurer or health organization challenges an
1413 adjusted RBC report that indicates the event in Subsection (1)(a), notification by the
1414 commissioner to the insurer or health organization that after a hearing the commissioner rejects
1415 the insurer's or health organization's challenge.
1416 (2) (a) In the event of a mandatory control level event with respect to an insurer or
1417 health organization, the commissioner shall take any actions necessary to place the insurer
1418 under regulatory control under [
1419 Actions.
1420 (b) The mandatory control level event is sufficient grounds for the commissioner to
1421 take action under [
1422 commissioner shall have the rights, powers, and duties with respect to the insurer or health
1423 organization as are set forth in [
1424 Actions.
1425 (c) If the commissioner takes an action pursuant to an adjusted RBC report, the insurer
1426 or health organization is entitled to the protections of Section [
1427 pertaining to summary proceedings.
1428 (d) Notwithstanding the other provisions of Subsection (2), the commissioner may
1429 forego action for up to 90 days after the mandatory control level event if the commissioner
1430 finds there is a reasonable expectation that the mandatory control level event may be eliminated
1431 within the 90-day period.
1432 Section 27. Section 31A-17-609 is amended to read:
1433 31A-17-609. Alternate adjusted capital.
1434 (1) Except as provided in Section 31A-17-602 , an insurer or health organization
1435 licensed under Chapters 5, 7, 8, 9, and 14 shall maintain total adjusted capital as defined in
1436 Section 31A-1-301 in an amount equal to the greater of:
1437 (a) 175% of the minimum required capital, or of the minimum permanent surplus in the
1438 case of nonassessable mutuals, required by Section 31A-5-211 , 31A-7-201 , 31A-8-209 ,
1439 31A-9-209 , or 31A-14-205 ; or
1440 (b) the net total of:
1441 (i) 10% of net insurance premiums earned during the year; plus
1442 (ii) 5% of the admitted value of common stocks and real estate; plus
1443 (iii) 2% of the admitted value of all other invested assets, exclusive of cash deposits,
1444 short-term investments, policy loans, and premium notes; less
1445 (iv) the amount of any asset valuation reserve being maintained by the insurer or health
1446 organization, but not to exceed the sum of Subsections (1)(b)(ii) and (iii).
1447 (2) As used in Subsection (1)(b), "premiums earned" means premiums and other
1448 consideration earned for insurance in the 12-month period ending on the date the calculation is
1449 made.
1450 (3) The commissioner may consider an insurer or health organization to be financially
1451 hazardous under Subsection [
1452 organization does not have qualified assets in an aggregate value exceeding the sum of the
1453 insurer's or health organization's liabilities and the total adjusted capital required by Subsection
1454 (1).
1455 (4) The commissioner shall consider an insurer or health organization to be financially
1456 hazardous under Subsection [
1457 organization does not have qualified assets in an aggregate value exceeding the sum of the
1458 insurer's or health organization's liabilities and 70% of the total adjusted capital required by
1459 Subsection (1).
1460 Section 28. Section 31A-17-610 is amended to read:
1461 31A-17-610. Foreign insurers or health organizations.
1462 (1) (a) Any foreign insurer or health organization shall, upon the written request of the
1463 commissioner, submit to the commissioner an RBC report as of the end of the most recent
1464 calendar year by the later of:
1465 (i) the date an RBC report would be required to be filed by a domestic insurer or health
1466 organization under this part; or
1467 (ii) 15 days after the request is received by the foreign insurer or health organization.
1468 (b) Any foreign insurer or health organization shall, at the written request of the
1469 commissioner, promptly submit to the commissioner a copy of any RBC plan that is filed with
1470 the insurance commissioner of any other state.
1471 (2) (a) The commissioner may require a foreign insurer or health organization to file an
1472 RBC plan with the commissioner if:
1473 (i) there is a company action level event, regulatory action level event, or authorized
1474 control level event with respect to the foreign insurer or health organization as determined
1475 under:
1476 (A) the RBC statute applicable in the state of domicile of the insurer or health
1477 organization; or
1478 (B) if no RBC statute is in force in that state, under this part; and
1479 (ii) the insurance commissioner of the state of domicile of the foreign insurer or health
1480 organization fails to require the foreign insurer or health organization to file an RBC plan in the
1481 manner specified under:
1482 (A) that state's RBC statute; or
1483 (B) if no RBC statute is in force in that state, under Section 31A-17-603 .
1484 (b) If the commissioner requires a foreign insurer or health organization to file an RBC
1485 plan, the failure of the foreign insurer or health organization to file the RBC plan with the
1486 commissioner is grounds to order the insurer or health organization to cease and desist from
1487 writing new insurance business in this state.
1488 (3) The commissioner may make application to the Third District Court for Salt Lake
1489 County permitted under Section [
1490 property of a foreign insurer or health organization found in this state if:
1491 (a) a mandatory control level event occurs with respect to any foreign insurer or health
1492 organization; and
1493 (b) no domiciliary receiver has been appointed with respect to the foreign insurer or
1494 health organization under the rehabilitation and liquidation statute applicable in the state of
1495 domicile of the foreign insurer or health organization.
1496 Section 29. Section 31A-18-106 is amended to read:
1497 31A-18-106. Investment limitations generally applicable.
1498 (1) The investment limitations listed in Subsections (1)(a) through (m) apply to each
1499 insurer.
1500 (a) (i) Except as provided in Subsection (1)(a)(ii), for investments authorized under
1501 Subsection 31A-18-105 (1) that are not amortizable under applicable valuation rules, the
1502 limitation is 5% of assets.
1503 (ii) The limitation of Subsection (1)(a)(i) and the limitation of Subsection (2) do not
1504 apply to demand deposits and certificates of deposit in solvent banks and savings and loan
1505 institutions to the extent they are insured by a federal deposit insurance agency.
1506 (b) For investments authorized under Subsection 31A-18-105 (2), the limitation is 10%
1507 of assets.
1508 (c) For investments authorized under Subsection 31A-18-105 (3), the limitation is 50%
1509 of assets.
1510 (d) For investments authorized under Subsection 31A-18-105 (4), that are considered to
1511 be investments in kinds of securities or evidences of debt pledged, those investments are
1512 subject to the class limitations applicable to the pledged securities or evidences of debt.
1513 (e) For investments authorized under Subsection 31A-18-105 (5), the limitation is 35%
1514 of assets.
1515 (f) For investments authorized under Subsection 31A-18-105 (6), the limitation is:
1516 (i) 20% of assets for life insurers; and
1517 (ii) 50% of assets for nonlife insurers.
1518 (g) For investments authorized under Subsection 31A-18-105 (7), the limitation is:
1519 (i) 5% of assets; or
1520 (ii) for insurers organized and operating under Chapter 7, Nonprofit Health Service
1521 Insurance Corporations, 25% of assets.
1522 (h) For investments authorized under Subsection 31A-18-105 (8), the limitation is:
1523 (i) 20% of assets, inclusive of home office and branch office properties; or
1524 (ii) for insurers organized and operating under Chapter 7, Nonprofit Health Service
1525 Insurance Corporations, 35% of assets, inclusive of home office and branch office properties.
1526 (i) For investments authorized under Subsection 31A-18-105 (10), the limitation is 1%
1527 of assets.
1528 (j) For investments authorized under Subsection 31A-18-105 (11), the limitation is the
1529 greater of that permitted or required for compliance with Section 31A-18-103 .
1530 (k) Except as provided in Subsection (1)(l), an insurer's investments in subsidiaries is
1531 limited to 50% of the insurer's total adjusted capital. Investments by an insurer in its
1532 subsidiaries includes:
1533 (i) the insurer's loans, advances, and contributions to its subsidiaries; and
1534 (ii) the insurer's holding of bonds, notes, and stocks of its subsidiaries are included.
1535 (l) Under a plan of merger approved by the commissioner, the commissioner may
1536 allow an insurer any portion of its assets invested in an insurance subsidiary. The approved
1537 plan of merger shall require the acquiring insurer to conform its accounting for investments in
1538 subsidiaries to Subsection (1)(k) within a specified period that may not exceed five years.
1539 (m) For investments authorized under Subsections 31A-18-105 (13) and (14), the
1540 aggregate limitation is 10% of assets.
1541 (2) The limits on investments listed in Subsections (2)(a) through (e) apply to each
1542 insurer.
1543 (a) For all investments in a single entity, its affiliates, and subsidiaries, the limitation is
1544 10% of assets, except that the limit imposed by this Subsection (2)(a) does not apply to:
1545 (i) investments in the government of the United States or its agencies;
1546 (ii) investments guaranteed by the government of the United States; or
1547 (iii) investments in the insurer's insurance subsidiaries.
1548 (b) Investments authorized by Subsection 31A-18-105 (3) shall comply with the
1549 requirements listed in this Subsection (2)(b).
1550 (i) (A) Except as provided in this Subsection (2)(b)(i), the amount of any loan secured
1551 by a mortgage or deed of trust may not exceed 80% of the value of the real estate interest
1552 mortgaged, unless the excess over 80%:
1553 (I) is insured or guaranteed by the United States, any state of the United States, any
1554 instrumentality, agency, or political subdivision of the United States, any of its states, or a
1555 combination of any of these; or
1556 (II) insured by an insurer approved by the commissioner and qualified to insure that
1557 type of risk in this state.
1558 (B) Mortgage loans representing purchase money mortgages acquired from the sale of
1559 real estate are not subject to the limitation of Subsection (2)(b)(i)(A).
1560 (ii) Subject to Subsection (2)(b)(v), loans or evidences of debt secured by real estate
1561 may only be secured by:
1562 (A) unencumbered real property that is located in the United States; or
1563 (B) an unencumbered interest in real property that is located in the United States.
1564 (iii) Evidence of debt secured by first mortgages or deeds of trust upon leasehold
1565 estates shall require that:
1566 (A) the leasehold estate exceed the maturity of the loan by not less than 10% of the
1567 lease term;
1568 (B) the real estate not be otherwise encumbered; and
1569 (C) the mortgagee is entitled to be subrogated to all rights under the leasehold.
1570 (iv) Subject to Subsection (2)(b)(v):
1571 (A) participation in any mortgage loan must:
1572 (I) be senior to other participants; and
1573 (II) give the holder substantially the rights of a first mortgagee; or
1574 (B) the interest of the insurer in the evidence of indebtedness must be of equal priority,
1575 to the extent of the interest, with other interests in the real property.
1576 (v) A fee simple or leasehold real estate or any interest in either of them is not
1577 considered to be encumbered within the meaning of this chapter by reason of any prior
1578 mortgage or trust deed held or assumed by the insurer as a lien on the property, if:
1579 (A) the total of the mortgages or trust deeds held does not exceed 70% of the value of
1580 the property; and
1581 (B) the security created by the prior mortgage or trust deed is a first lien.
1582 (c) Loans permitted under Subsection 31A-18-105 (4) may not exceed 75% of the
1583 market value of the collateral pledged, except that loans upon the pledge of United States
1584 government bonds may be equal to the market values of the pledge.
1585 (d) For an equity interest in a single real estate property authorized under Subsection
1586 31A-18-105 (8), the limitation is 5% of assets.
1587 (e) Investments authorized under Subsection 31A-18-105 (10) shall be in connection
1588 with potential changes in the value of specifically identified:
1589 (i) assets which the insurer owns; or
1590 (ii) liabilities which the insurer has incurred.
1591 (3) The restrictions on investments listed in Subsections (3)(a) and (b) apply to each
1592 insurer.
1593 (a) Except for financial futures contracts and real property acquired and occupied by
1594 the insurer for home and branch office purposes, a security or other investment is not eligible
1595 for purchase or acquisition under this chapter unless it is:
1596 (i) interest bearing or income paying; and
1597 (ii) not then in default.
1598 (b) A security is not eligible for purchase at a price above its market value.
1599 (4) Computation of percentage limitations under this section:
1600 (a) is based only upon the insurer's total qualified invested assets described in Section
1601 31A-18-105 and this section, as these assets are valued under Section 31A-17-401 ; and
1602 (b) excludes investments permitted under Section 31A-18-108 and Subsections
1603 31A-17-203 (2) and (3).
1604 (5) An insurer may not make an investment that, because the investment does not
1605 conform to Section 31A-18-105 and this section, has the result of rendering the insurer, under
1606 Chapter 17, Part 6, Risk-Based Capital, subject to proceedings under Chapter [
1607
1608 (6) A pattern of persistent deviation from the investment diversification standards set
1609 forth in Section 31A-18-105 and this section may be grounds for a finding that the person or
1610 persons with authority to make the insurer's investment decisions are "incompetent" as used in
1611 Subsection 31A-5-410 (3).
1612 (7) Section 77r-1 of the Secondary Mortgage Market Enhancement Act of 1984 does
1613 not apply to the purchase, holding, investment, or valuation limitations of assets of insurance
1614 companies subject to this chapter.
1615 Section 30. Section 31A-22-617 is amended to read:
1616 31A-22-617. Preferred provider contract provisions.
1617 Health insurance policies may provide for insureds to receive services or
1618 reimbursement under the policies in accordance with preferred health care provider contracts as
1619 follows:
1620 (1) Subject to restrictions under this section, any insurer or third party administrator
1621 may enter into contracts with health care providers as defined in Section 78-14-3 under which
1622 the health care providers agree to supply services, at prices specified in the contracts, to
1623 persons insured by an insurer.
1624 (a) (i) A health care provider contract may require the health care provider to accept the
1625 specified payment as payment in full, relinquishing the right to collect additional amounts from
1626 the insured person.
1627 (ii) In any dispute involving a provider's claim for reimbursement, the same shall be
1628 determined in accordance with applicable law, the provider contract, the subscriber contract,
1629 and the insurer's written payment policies in effect at the time services were rendered.
1630 (iii) If the parties are unable to resolve their dispute, the matter shall be subject to
1631 binding arbitration by a jointly selected arbitrator. Each party is to bear its own expense except
1632 the cost of the jointly selected arbitrator shall be equally shared. This Subsection (1)(a)(iii)
1633 does not apply to the claim of a general acute hospital to the extent it is inconsistent with the
1634 hospital's provider agreement.
1635 (iv) An organization may not penalize a provider solely for pursuing a claims dispute
1636 or otherwise demanding payment for a sum believed owing.
1637 (v) If an insurer permits another entity with which it does not share common ownership
1638 or control to use or otherwise lease one or more of the organization's networks of participating
1639 providers, the organization shall ensure, at a minimum, that the entity pays participating
1640 providers in accordance with the same fee schedule and general payment policies as the
1641 organization would for that network.
1642 (b) The insurance contract may reward the insured for selection of preferred health care
1643 providers by:
1644 (i) reducing premium rates;
1645 (ii) reducing deductibles;
1646 (iii) coinsurance;
1647 (iv) other copayments; or
1648 (v) any other reasonable manner.
1649 (c) If the insurer is a managed care organization, as defined in Subsection
1650 [
1651 (i) the insurance contract and the health care provider contract shall provide that in the
1652 event the managed care organization becomes insolvent, the rehabilitator or liquidator may:
1653 (A) require the health care provider to continue to provide health care services under
1654 the contract until the earlier of:
1655 (I) 90 days after the date of the filing of a petition for rehabilitation or the petition for
1656 liquidation; or
1657 (II) the date the term of the contract ends; and
1658 (B) subject to Subsection (1)(c)(v), reduce the fees the provider is otherwise entitled to
1659 receive from the managed care organization during the time period described in Subsection
1660 (1)(c)(i)(A);
1661 (ii) the provider is required to:
1662 (A) accept the reduced payment under Subsection (1)(c)(i)(B) as payment in full; and
1663 (B) relinquish the right to collect additional amounts from the insolvent managed care
1664 organization's enrollee, as defined in Subsection [
1665 (iii) if the contract between the health care provider and the managed care organization
1666 has not been reduced to writing, or the contract fails to contain the language required by
1667 Subsection (1)(c)(i), the provider may not collect or attempt to collect from the enrollee:
1668 (A) sums owed by the insolvent managed care organization; or
1669 (B) the amount of the regular fee reduction authorized under Subsection (1)(c)(i)(B);
1670 (iv) the following may not bill or maintain any action at law against an enrollee to
1671 collect sums owed by the insolvent managed care organization or the amount of the regular fee
1672 reduction authorized under Subsection (1)(c)(i)(B):
1673 (A) a provider;
1674 (B) an agent;
1675 (C) a trustee; or
1676 (D) an assignee of a person described in Subsections (1)(c)(iv)(A) through (C); and
1677 (v) notwithstanding Subsection (1)(c)(i):
1678 (A) a rehabilitator or liquidator may not reduce a fee by less than 75% of the provider's
1679 regular fee set forth in the contract; and
1680 (B) the enrollee shall continue to pay the copayments, deductibles, and other payments
1681 for services received from the provider that the enrollee was required to pay before the filing
1682 of:
1683 (I) a petition for rehabilitation; or
1684 (II) a petition for liquidation.
1685 (2) (a) Subject to Subsections (2)(b) through (2)(f), an insurer using preferred health
1686 care provider contracts shall pay for the services of health care providers not under the contract,
1687 unless the illnesses or injuries treated by the health care provider are not within the scope of the
1688 insurance contract. As used in this section, "class of health care providers" means all health
1689 care providers licensed or licensed and certified by the state within the same professional,
1690 trade, occupational, or facility licensure or licensure and certification category established
1691 pursuant to Titles 26, Utah Health Code and 58, Occupations and Professions.
1692 (b) When the insured receives services from a health care provider not under contract,
1693 the insurer shall reimburse the insured for at least 75% of the average amount paid by the
1694 insurer for comparable services of preferred health care providers who are members of the
1695 same class of health care providers. The commissioner may adopt a rule dealing with the
1696 determination of what constitutes 75% of the average amount paid by the insurer for
1697 comparable services of preferred health care providers who are members of the same class of
1698 health care providers.
1699 (c) When reimbursing for services of health care providers not under contract, the
1700 insurer may make direct payment to the insured.
1701 (d) Notwithstanding Subsection (2)(b), an insurer using preferred health care provider
1702 contracts may impose a deductible on coverage of health care providers not under contract.
1703 (e) When selecting health care providers with whom to contract under Subsection (1),
1704 an insurer may not unfairly discriminate between classes of health care providers, but may
1705 discriminate within a class of health care providers, subject to Subsection (7).
1706 (f) For purposes of this section, unfair discrimination between classes of health care
1707 providers shall include:
1708 (i) refusal to contract with class members in reasonable proportion to the number of
1709 insureds covered by the insurer and the expected demand for services from class members; and
1710 (ii) refusal to cover procedures for one class of providers that are:
1711 (A) commonly utilized by members of the class of health care providers for the
1712 treatment of illnesses, injuries, or conditions;
1713 (B) otherwise covered by the insurer; and
1714 (C) within the scope of practice of the class of health care providers.
1715 (3) Before the insured consents to the insurance contract, the insurer shall fully disclose
1716 to the insured that it has entered into preferred health care provider contracts. The insurer shall
1717 provide sufficient detail on the preferred health care provider contracts to permit the insured to
1718 agree to the terms of the insurance contract. The insurer shall provide at least the following
1719 information:
1720 (a) a list of the health care providers under contract and if requested their business
1721 locations and specialties;
1722 (b) a description of the insured benefits, including any deductibles, coinsurance, or
1723 other copayments;
1724 (c) a description of the quality assurance program required under Subsection (4); and
1725 (d) a description of the adverse benefit determination procedures required under
1726 Subsection (5).
1727 (4) (a) An insurer using preferred health care provider contracts shall maintain a quality
1728 assurance program for assuring that the care provided by the health care providers under
1729 contract meets prevailing standards in the state.
1730 (b) The commissioner in consultation with the executive director of the Department of
1731 Health may designate qualified persons to perform an audit of the quality assurance program.
1732 The auditors shall have full access to all records of the organization and its health care
1733 providers, including medical records of individual patients.
1734 (c) The information contained in the medical records of individual patients shall
1735 remain confidential. All information, interviews, reports, statements, memoranda, or other data
1736 furnished for purposes of the audit and any findings or conclusions of the auditors are
1737 privileged. The information is not subject to discovery, use, or receipt in evidence in any legal
1738 proceeding except hearings before the commissioner concerning alleged violations of this
1739 section.
1740 (5) An insurer using preferred health care provider contracts shall provide a reasonable
1741 procedure for resolving complaints and adverse benefit determinations initiated by the insureds
1742 and health care providers.
1743 (6) An insurer may not contract with a health care provider for treatment of illness or
1744 injury unless the health care provider is licensed to perform that treatment.
1745 (7) (a) A health care provider or insurer may not discriminate against a preferred health
1746 care provider for agreeing to a contract under Subsection (1).
1747 (b) Any health care provider licensed to treat any illness or injury within the scope of
1748 the health care provider's practice, who is willing and able to meet the terms and conditions
1749 established by the insurer for designation as a preferred health care provider, shall be able to
1750 apply for and receive the designation as a preferred health care provider. Contract terms and
1751 conditions may include reasonable limitations on the number of designated preferred health
1752 care providers based upon substantial objective and economic grounds, or expected use of
1753 particular services based upon prior provider-patient profiles.
1754 (8) Upon the written request of a provider excluded from a provider contract, the
1755 commissioner may hold a hearing to determine if the insurer's exclusion of the provider is
1756 based on the criteria set forth in Subsection (7)(b).
1757 (9) Insurers are subject to the provisions of Sections 31A-22-613.5 , 31A-22-614.5 , and
1758 31A-22-618 .
1759 (10) Nothing in this section is to be construed as to require an insurer to offer a certain
1760 benefit or service as part of a health benefit plan.
1761 (11) This section does not apply to catastrophic mental health coverage provided in
1762 accordance with Section 31A-22-625 .
1763 Section 31. Section 31A-23a-704 is amended to read:
1764 31A-23a-704. Penalties.
1765 (1) (a) If, after notice and opportunity to be heard, the commissioner finds that the
1766 controlling producer or any other person has not materially complied with this part, or any rule
1767 made or order issued under the part, the commissioner may order the controlling producer to
1768 cease placing business with the controlled insurer.
1769 (b) If the commissioner finds that because of the material noncompliance that the
1770 controlled insurer or any policyholder of the controlled insurer has suffered any loss or damage,
1771 the commissioner may maintain a civil action or may intervene in an action brought by or on
1772 behalf of the insurer or policyholder for recovery of compensatory damages for the benefit of
1773 the insurer or policyholder or [
1774 (2) If an order for liquidation or rehabilitation of the controlled insurer has been
1775 entered pursuant to [
1776 27a, Insurer Receivership Act, and the receiver appointed under that order believes that the
1777 controlling producer or any other person has not materially complied with this part, or any rule
1778 made or order issued under this part, and the insurer suffered any loss or damage as a result of
1779 the noncompliance, the receiver may maintain a civil action for recovery of damages or other
1780 appropriate sanctions for the benefit of the insurer.
1781 (3) Nothing in this section affects the right of the commissioner to impose any other
1782 penalties provided for in this title.
1783 (4) Nothing contained in this section is intended to or shall in any manner alter or
1784 affect the rights of policyholders, claimants, creditors, or other third parties.
1785 Section 32. Section 31A-27-501 , which is renumbered from Section 31A-27-101 is
1786 renumbered and amended to read:
1787
1788
1789 [
1790 (1) This chapter is known as the "Delinquency Administrative Action Provisions."
1791 [
1792 (a) all insurers and reinsurers:
1793 (i) who are doing, or have done, an insurance business in this state[
1794 (ii) against whom claims arising from that business may exist [
1795 (b) all insurers who [
1796 business in this state;
1797 (c) all insurers who have insureds resident in this state; and
1798 (d) all other persons organized or in the process of organizing to do an insurance
1799 business as an insurer in this state.
1800 [
1801 (3) This part shall be liberally construed to protect the interests of insureds, creditors,
1802 and the public generally, with minimum interference with the normal prerogatives of owners,
1803 through:
1804 (a) early detection of any potentially dangerous condition in an insurer[
1805 (b) prompt application of appropriate regulatory corrective measures; and
1806 [
1807
1808 [
1809
1810 [
1811 [
1812
1813
1814 [
1815
1816 [
1817
1818 of law.
1819 Section 33. Section 31A-27-502 is enacted to read:
1820 31A-27-502. Definitions.
1821 As used in this part, "record" is as defined in Section 31A-27a-102 .
1822 Section 34. Section 31A-27-503 , which is renumbered from Section 31A-27-201 is
1823 renumbered and amended to read:
1824 [
1825 (1) (a) [
1826 (1)(b) whenever the commissioner has reasonable cause to believe, and determines after a
1827 hearing that [
1828 (i) has committed or engaged in[
1829 insurer to a formal delinquency proceeding under Chapter 27a, Insurer Receivership Act;
1830 (ii) is committing or engaging in[
1831 the insurer to a formal delinquency proceeding under Chapter 27a, Insurer Receivership Act;
1832 (iii) is about to commit or engage in [
1833 would subject the insurer to a formal delinquency proceeding under Chapter 27a, Insurer
1834 Receivership Act; or
1835 (iv) is in or is about to be in a condition that would subject [
1836 delinquency [
1837 Receivership Act.
1838 (b) If the conditions of Subsection (1)(a) are met, the commissioner may make and
1839 serve upon the insurer and any other persons whose action or forbearance from action is
1840 reasonably necessary, those orders, other than a seizure [
1841 [
1842 [
1843 [
1844 by a supervisor appointed by the commissioner until the act, practice, transaction, or condition
1845 that [
1846 (2) (a) [
1847 (1) without notice and before a hearing if:
1848 (i) the conditions of Subsection (1) are satisfied[
1849 (ii) it appears to the commissioner that irreparable harm to the property or business of
1850 the insurer or to the interests of its policyholders, creditors, or the public may occur unless the
1851 commissioner issues, with immediate effect, the [
1852
1853 (b) The commissioner shall serve the insurer with [
1854 this Subsection (2) and a notice of agency action, containing a statement of the reasons why
1855 irreparable harm is threatened unless the order is issued with immediate effect.
1856 (3) (a) If the commissioner issues an order for supervision of an insurer under
1857 Subsection (1) or (2), [
1858 (i) notify the insurer that [
1859 and [
1860 (ii) explain the reasons for that supervision.
1861 (b) During the period of supervision, the commissioner may prohibit the insurer from
1862 doing any of the following, without the prior approval of the commissioner or [
1863 supervisor appointed by the commissioner:
1864 [
1865 [
1866 [
1867 [
1868 [
1869 [
1870 course of business; or
1871 [
1872 (4) (a) If the commissioner issues a summary order before a hearing under Subsection
1873 (2), the insurer may waive the commissioner's hearing and apply for immediate judicial relief
1874 by any remedy afforded by law, without first exhausting [
1875 remedies.
1876 (b) If the insurer has a hearing before the commissioner, the insurer and any person
1877 whose interests are substantially affected are entitled to judicial review of any order issued by
1878 the commissioner.
1879 Section 35. Section 31A-27-504 , which is renumbered from Section 31A-27-203 is
1880 renumbered and amended to read:
1881 [
1882 (1) The commissioner shall hold [
1883 conducted under Section 31A-27-503 privately unless the insurer requests a public hearing.
1884 [
1885
1886 [
1887
1888 [
1889 (2) All records of the insurer, other documents, and all [
1890
1891
1892 (a) except as is necessary to obtain compliance with [
1893
1894 conducted under Section 31A-27-503 ; or
1895 (b) unless the insurer requests that the matter be made public. [
1896
1897
1898 [
1899
1900
1901
1902 [
1903 [
1904
1905 in accordance with a hearing conducted under Section 31A-27-503 subject to Section
1906 31A-2-308 .
1907 Section 36. Section 31A-27a-101 is enacted to read:
1908
1909
1910 31A-27a-101. Title -- Construction -- Commissioner's powers.
1911 (1) This chapter is known as the "Insurer Receivership Act."
1912 (2) The proceedings authorized by this chapter may be applied to:
1913 (a) all insurers and reinsurers:
1914 (i) who are doing, or have done, an insurance business in this state; and
1915 (ii) against whom claims arising from that business may exist;
1916 (b) all insurers who have the appearance of or claim they do an insurance business in
1917 this state;
1918 (c) all insurers who have insureds resident in this state; and
1919 (d) all other persons organized or in the process of organizing to do an insurance
1920 business as an insurer in this state.
1921 (3) This chapter shall be liberally construed to protect the interests of insureds,
1922 claimants, creditors, and the public generally through:
1923 (a) early detection of any potentially hazardous condition in an insurer;
1924 (b) prompt application of appropriate corrective measures;
1925 (c) improved methods for conserving and rehabilitating insurers;
1926 (d) enhanced efficiency and economy of liquidation, through clarification of the law, to
1927 minimize legal uncertainty and litigation;
1928 (e) apportionment of any unavoidable loss in accordance with the statutory priorities
1929 set out in this chapter;
1930 (f) lessening the problems of interstate receivership by:
1931 (i) facilitating cooperation among states in delinquency proceedings; and
1932 (ii) extending the scope of personal jurisdiction over debtors of the insurer outside this
1933 state;
1934 (g) regulation of the business of insurance by the impact of the law relating to
1935 delinquency procedures and by substantive rules; and
1936 (h) providing for a comprehensive scheme for the receivership of insurance companies
1937 and those subject to this chapter as part of the regulation of the business of insurance in this
1938 state.
1939 (4) A proceeding in the case of insurer insolvency and delinquency are integral aspects
1940 of the business of insurance and are of vital public interest and concern.
1941 (5) This chapter does not limit the powers granted the commissioner by other
1942 provisions of law.
1943 (6) All powers and authority of a receiver under this chapter are:
1944 (a) cumulative; and
1945 (b) in addition to any power or authority available to a receiver under a law other than
1946 this chapter.
1947 Section 37. Section 31A-27a-102 is enacted to read:
1948 31A-27a-102. Definitions.
1949 As used in this chapter:
1950 (1) "Admitted assets" is as defined by and is measured in accordance with the National
1951 Association of Insurance Commissioner's Statements of Statutory Accounting Principles, as
1952 incorporated in this state by rules made by the department in accordance with Title 63, Chapter
1953 46a, Utah Administrative Rulemaking Act, for the purposes of Subsection 31A-4-113 (1)(b)(ii).
1954 (2) "Affected guaranty association" means a guaranty association that is or may
1955 become liable for payment of a covered claim.
1956 (3) "Affiliate" is as defined in Section 31A-1-301 .
1957 (4) Notwithstanding Section 31A-1-301 , "alien insurer" means an insurer incorporated
1958 or organized under the laws of a jurisdiction that is not a state.
1959 (5) Notwithstanding Section 31A-1-301 , "claimant" or "creditor" means a person
1960 having a claim against an insurer whether the claim is:
1961 (a) matured or not matured;
1962 (b) liquidated or unliquidated;
1963 (c) secured or unsecured;
1964 (d) absolute; or
1965 (e) fixed or contingent.
1966 (6) "Commissioner" is as defined in Section 31A-1-301 .
1967 (7) "Commodity contract" means:
1968 (a) a contract for the purchase or sale of a commodity for future delivery on, or subject
1969 to the rules of:
1970 (i) a board of trade or contract market under the Commodity Exchange Act, 7 U.S.C.
1971 Sec. 1 et seq.; or
1972 (ii) a board of trade outside the United States;
1973 (b) an agreement that is:
1974 (i) subject to regulation under Section 19 of the Commodity Exchange Act, 7 U.S.C.
1975 Sec. 1 et seq.; and
1976 (ii) commonly known to the commodities trade as:
1977 (A) a margin account;
1978 (B) a margin contract;
1979 (C) a leverage account; or
1980 (D) a leverage contract;
1981 (c) an agreement or transaction that is:
1982 (i) subject to regulation under Section 4c(b) of the Commodity Exchange Act, 7 U.S.C.
1983 Sec. 1 et seq.; and
1984 (ii) commonly known to the commodities trade as a commodity option;
1985 (d) a combination of the agreements or transactions referred to in this Subsection (7);
1986 or
1987 (e) an option to enter into an agreement or transaction referred to in this Subsection (7).
1988 (8) "Control" is as defined in Section 31A-1-301 .
1989 (9) "Delinquency proceeding" means a:
1990 (a) proceeding instituted against an insurer for the purpose of rehabilitating or
1991 liquidating the insurer; and
1992 (b) summary proceeding under Section 31A-27a-201 .
1993 (10) "Department" is as defined in Section 31A-1-301 unless the context requires
1994 otherwise.
1995 (11) "Doing business," "doing insurance business," and "business of insurance"
1996 includes any of the following acts, whether effected by mail, electronic means, or otherwise:
1997 (a) issuing or delivering a contract, certificate, or binder relating to insurance or
1998 annuities:
1999 (i) to a person who is resident in this state; or
2000 (ii) covering a risk located in this state;
2001 (b) soliciting an application for the contract, certificate, or binder described in
2002 Subsection (11)(a);
2003 (c) negotiating preliminary to the execution of the contract, certificate, or binder
2004 described in Subsection (11)(a);
2005 (d) collecting premiums, membership fees, assessments, or other consideration for the
2006 contract, certificate, or binder described in Subsection (11)(a);
2007 (e) transacting matters:
2008 (i) subsequent to execution of the contract, certificate, or binder described in
2009 Subsection (11)(a); and
2010 (ii) arising out of the contract, certificate, or binder described in Subsection (11)(a);
2011 (f) operating as an insurer under a license or certificate of authority issued by the
2012 department; or
2013 (g) engaging in an act identified in Chapter 15, Unauthorized Insurers, Surplus Lines,
2014 and Risk Retention Groups.
2015 (12) Notwithstanding Section 31A-1-301 , "domiciliary state" means the state in which
2016 an insurer is incorporated or organized, except that "domiciliary state" means:
2017 (a) in the case of an alien insurer, its state of entry; or
2018 (b) in the case of a risk retention group, the state in which the risk retention group is
2019 chartered as contemplated in the Liability Risk Retention Act, 15 U.S.C. Sec. 3901 et seq.
2020 (13) "Estate" has the same meaning as "property of the insurer" as defined in
2021 Subsection (30).
2022 (14) "Fair consideration" is given for property or an obligation:
2023 (a) when in exchange for the property or obligation, as a fair equivalent for it, and in
2024 good faith:
2025 (i) property is conveyed;
2026 (ii) services are rendered;
2027 (iii) an obligation is incurred; or
2028 (iv) an antecedent debt is satisfied; or
2029 (b) when the property or obligation is received in good faith to secure a present
2030 advance or an antecedent debt in amount not disproportionately small compared to the value of
2031 the property or obligation obtained.
2032 (15) Notwithstanding Section 31A-1-301 , "foreign insurer" means an insurer domiciled
2033 in another state.
2034 (16) "Formal delinquency proceeding" means a rehabilitation or liquidation
2035 proceeding.
2036 (17) "Forward contract" is as defined in the Federal Deposit Insurance Act, 12 U.S.C.
2037 Sec. 1821(e)(8)(D).
2038 (18) (a) "General assets" include all property of the estate that is not:
2039 (i) subject to a properly perfected secured claim;
2040 (ii) subject to a valid and existing express trust for the security or benefit of a specified
2041 person or class of person; or
2042 (iii) required by the insurance laws of this state or any other state to be held for the
2043 benefit of a specified person or class of person.
2044 (b) "General assets" include all property of the estate or its proceeds in excess of the
2045 amount necessary to discharge a claim described in Subsection (18)(a).
2046 (19) "Good faith" means honesty in fact and intention, and in regard to Part 5, Asset
2047 Recovery, also requires the absence of:
2048 (a) information that would lead a reasonable person in the same position to know that
2049 the insurer is financially impaired or insolvent; and
2050 (b) knowledge regarding the imminence or pendency of a delinquency proceeding
2051 against the insurer.
2052 (20) "Guaranty association" means:
2053 (a) a mechanism mandated by Chapter 28, Guaranty Associations; or
2054 (b) a similar mechanism in another state that is created for the payment of claims or
2055 continuation of policy obligations of a financially impaired or insolvent insurer.
2056 (21) "Impaired" means that an insurer:
2057 (a) does not have admitted assets at least equal to the sum of:
2058 (i) all its liabilities; and
2059 (ii) the minimum surplus required to be maintained by Section 31A-5-211 or
2060 31A-8-209 ; or
2061 (b) has a total adjusted capital that is less than its authorized control level RBC, as
2062 defined in Section 31A-17-601 .
2063 (22) "Insolvency" or "insolvent" means that an insurer:
2064 (a) is unable to pay its obligations when they are due;
2065 (b) does not have admitted assets at least equal to all of its liabilities; or
2066 (c) has a total adjusted capital that is less than its mandatory control level RBC, as
2067 defined in Section 31A-17-601 .
2068 (23) Notwithstanding Section 31A-1-301 , "insurer" means a person who:
2069 (a) is doing, has done, purports to do, or is licensed to do the business of insurance;
2070 (b) is or has been subject to the authority of, or to rehabilitation, liquidation,
2071 reorganization, supervision, or conservation by an insurance commissioner; or
2072 (c) is included under Section 31A-27a-104 .
2073 (24) "Liabilities" is as defined by and is measured in accordance with the National
2074 Association of Insurance Commissioner's Statements of Statutory Accounting Principles, as
2075 incorporated in this state by rules made by the department in accordance with Title 63, Chapter
2076 46a, Utah Administrative Rulemaking Act, for the purposes of Subsection 31A-4-113 (1)(b)(ii).
2077 (25) (a) Subject to Subsection (21)(b), "netting agreement" means:
2078 (i) a contract or agreement that:
2079 (A) documents one or more transactions between the parties to the agreement for or
2080 involving one or more qualified financial contracts; and
2081 (B) provides for the netting, liquidation, setoff, termination, acceleration, or close out
2082 under or in connection with:
2083 (I) one or more qualified financial contracts; or
2084 (II) present or future payment or delivery obligations or payment or delivery
2085 entitlements under the agreement, including liquidation or close-out values relating to the
2086 obligations or entitlements, among the parties to the netting agreement;
2087 (ii) a master agreement or bridge agreement for one or more master agreements
2088 described in Subsection (25)(a)(i); or
2089 (iii) any of the following related to a contract or agreement described in Subsection
2090 (25)(a)(i) or (ii):
2091 (A) a security agreement;
2092 (B) a security arrangement;
2093 (C) other credit enhancement or guarantee; or
2094 (D) a reimbursement obligation.
2095 (b) If a contract or agreement described in Subsection (25)(a)(i) or (ii) relates to an
2096 agreement or transaction that is not a qualified financial contract, the contract or agreement
2097 described in Subsection (25)(a)(i) or (ii) is considered a netting agreement only with respect to
2098 an agreement or transaction that is a qualified financial contract.
2099 (c) "Netting agreement" includes:
2100 (i) a term or condition incorporated by reference in the contract or agreement described
2101 in Subsection (25)(a); or
2102 (ii) a master agreement described in Subsection (25)(a).
2103 (d) A master agreement described in Subsection (25)(a), together with all schedules,
2104 confirmations, definitions, and addenda to that master agreement and transactions under any of
2105 the items described in this Subsection (25)(d), are treated as one netting agreement.
2106 (26) (a) "New value" means:
2107 (i) money;
2108 (ii) money's worth in goods, services, or new credit; or
2109 (iii) release by a transferee of property previously transferred to the transferee in a
2110 transaction that is neither void nor voidable by the insurer or the receiver under any applicable
2111 law, including proceeds of the property.
2112 (b) "New value" does not include an obligation substituted for an existing obligation.
2113 (27) "Party in interest" means:
2114 (a) the commissioner;
2115 (b) a nondomiciliary commissioner in whose state the insurer has outstanding claims
2116 liabilities;
2117 (c) an affected guaranty association; and
2118 (d) the following parties if the party files a request with the receivership court for
2119 inclusion as a party in interest and to be on the service list:
2120 (i) an insurer that ceded to or assumed business from the insurer;
2121 (ii) a policyholder;
2122 (iii) a third party claimant;
2123 (iv) a creditor;
2124 (v) a 10% or greater equity security holder in the insolvent insurer; and
2125 (vi) a person, including an indenture trustee, with a financial or regulatory interest in
2126 the delinquency proceeding.
2127 (28) (a) Notwithstanding Section 31A-1-301 , "policy" means, notwithstanding what it
2128 is called:
2129 (i) a written contract of insurance;
2130 (ii) a written agreement for or affecting insurance; or
2131 (iii) a certificate of a written contract or agreement described in this Subsection (28)(a).
2132 (b) "Policy" includes all clauses, riders, endorsements, and papers that are a part of a
2133 policy.
2134 (c) "Policy" does not include a contract of reinsurance.
2135 (29) "Preference" means a transfer of property of an insurer to or for the benefit of a
2136 creditor:
2137 (a) for or on account of an antecedent debt, made or allowed by the insurer within one
2138 year before the day on which a successful petition for rehabilitation or liquidation is filed under
2139 this chapter;
2140 (b) the effect of which transfer may enable the creditor to obtain a greater percentage of
2141 the creditor's debt than another creditor of the same class would receive; and
2142 (c) if a liquidation order is entered while the insurer is already subject to a
2143 rehabilitation order and the transfer otherwise qualifies, that is made or allowed within the
2144 shorter of:
2145 (i) one year before the day on which a successful petition for rehabilitation is filed; or
2146 (ii) two years before the day on which a successful petition for liquidation is filed.
2147 (30) "Property of the insurer" or "property of the estate" includes:
2148 (a) a right, title, or interest of the insurer in property:
2149 (i) whether:
2150 (A) legal or equitable;
2151 (B) tangible or intangible; or
2152 (C) choate or inchoate; and
2153 (ii) including choses in action, contract rights, and any other interest recognized under
2154 the laws of this state;
2155 (b) entitlements that exist before the entry of an order of rehabilitation or liquidation;
2156 (c) entitlements that may arise by operation of this chapter or other provisions of law
2157 allowing the receiver to avoid prior transfers or assert other rights; and
2158 (d) (i) records or data that is otherwise the property of the insurer; and
2159 (ii) records or data similar to those described in Subsection (30)(d)(i) that are within
2160 the possession, custody, or control of a managing general agent, a third party administrator, a
2161 management company, a data processing company, an accountant, an attorney, an affiliate, or
2162 other person.
2163 (31) Subject to Subsection 31A-27a-611 (10), "qualified financial contract" means any
2164 of the following:
2165 (a) a commodity contract;
2166 (b) a forward contract;
2167 (c) a repurchase agreement;
2168 (d) a securities contract;
2169 (e) a swap agreement; or
2170 (f) any similar agreement that the commissioner determines by rule or order to be a
2171 qualified financial contract for purposes of this chapter.
2172 (32) As the context requires, "receiver" means a rehabilitator, liquidator, or ancillary
2173 receiver.
2174 (33) As the context requires, "receivership" means a rehabilitation, liquidation, or
2175 ancillary receivership.
2176 (34) Unless the context requires otherwise, "receivership court" refers to the court in
2177 which a delinquency proceeding is pending.
2178 (35) "Reciprocal state" means any state other than this state that:
2179 (a) enforces a law substantially similar to this chapter;
2180 (b) requires the commissioner to be the receiver of a delinquent insurer; and
2181 (c) has laws for the avoidance of fraudulent conveyances and preferential transfers by
2182 the receiver of a delinquent insurer.
2183 (36) "Record," when used as a noun, means any information or data, in whatever form
2184 maintained, including:
2185 (a) a book;
2186 (b) a document;
2187 (c) a paper;
2188 (d) a file;
2189 (e) an application file;
2190 (f) a policyholder list;
2191 (g) policy information;
2192 (h) a claim or claim file;
2193 (i) an account;
2194 (j) a voucher;
2195 (k) a litigation file;
2196 (l) a premium record;
2197 (m) a rate book;
2198 (n) an underwriting manual;
2199 (o) a personnel record;
2200 (p) a financial record; or
2201 (q) other material.
2202 (37) "Reinsurance" means a transaction or contract under which an assuming insurer
2203 agrees to indemnify a ceding insurer against all, or a part, of any loss that the ceding insurer
2204 may sustain under the one or more policies that the ceding insurer issues or will issue.
2205 (38) "Repurchase agreement" is as defined in the Federal Deposit Insurance Act, 12
2206 U.S.C. Sec. 1821(e)(8)(D).
2207 (39) (a) "Secured claim" means, subject to Subsection (39)(b):
2208 (i) a claim secured by an asset that is not a general asset; or
2209 (ii) the right to set off as provided in Section 31A-27a-510 .
2210 (b) "Secured claim" does not include:
2211 (i) a special deposit claim;
2212 (ii) a claim based on mere possession; or
2213 (iii) a claim arising from a constructive or resulting trust.
2214 (40) "Securities contract" is as defined in the Federal Deposit Insurance Act, 12 U.S.C.
2215 Sec. 1821(e)(8)(D).
2216 (41) "Special deposit" means a deposit established pursuant to statute for the security
2217 or benefit of a limited class or classes of persons.
2218 (42) (a) Subject to Subsection (42)(b), "special deposit claim" means a claim secured
2219 by a special deposit.
2220 (b) "Special deposit claim" does not include a claim against the general assets of the
2221 insurer.
2222 (43) "State" means a state, district, or territory of the United States.
2223 (44) "Subsidiary" is as defined in Section 31A-1-301 .
2224 (45) "Swap agreement" is as defined in the Federal Deposit Insurance Act, 12 U.S.C.
2225 Sec. 1821(e)(8)(D).
2226 (46) (a) "Transfer" includes the sale and every other and different mode of disposing of
2227 or parting with property or with an interest in property, whether:
2228 (i) directly or indirectly;
2229 (ii) absolutely or conditionally;
2230 (iii) voluntarily or involuntarily; or
2231 (iv) by or without judicial proceedings.
2232 (b) An interest in property includes:
2233 (i) a set off;
2234 (ii) having possession of the property; or
2235 (iii) fixing a lien on the property or on an interest in the property.
2236 (c) The retention of a security title in property delivered to an insurer and foreclosure
2237 of the insurer's equity of redemption is considered a transfer suffered by the insurer.
2238 (47) Notwithstanding Section 31A-1-301 , "unauthorized insurer" means an insurer
2239 transacting the business of insurance in this state that has not received a certificate of authority
2240 from this state, or some other type of authority that allows for the transaction of the business of
2241 insurance in this state.
2242 Section 38. Section 31A-27a-103 is enacted to read:
2243 31A-27a-103. Insurer receivership laws.
2244 (1) The state's insurer receivership laws consists of:
2245 (a) this chapter; and
2246 (b) Chapter 28, Guaranty Associations.
2247 (2) The laws listed in Subsection (1) shall be construed together in a manner that is
2248 consistent.
2249 Section 39. Section 31A-27a-104 is enacted to read:
2250 31A-27a-104. Persons covered.
2251 (1) This chapter applies to:
2252 (a) an insurer who:
2253 (i) is doing, or has done, an insurance business in this state; and
2254 (ii) against whom a claim arising from that business may exist;
2255 (b) a person subject to examination by the commissioner;
2256 (c) an insurer who purports to do an insurance business in this state;
2257 (d) an insurer who has an insured who is resident in this state; and
2258 (e) in addition to Subsections (1)(a) through (d), a person doing business as follows:
2259 (i) under Chapter 6a, Service Contracts;
2260 (ii) under Chapter 7, Nonprofit Health Service Insurance Corporations;
2261 (iii) under Chapter 8a, Health Discount Program Consumer Protection Act;
2262 (iv) under Chapter 9, Insurance Fraternals;
2263 (v) under Chapter 11, Motor Clubs;
2264 (vi) under Chapter 13, Employee Welfare Funds and Plans;
2265 (vii) under Chapter 15, Unauthorized Insurers, Surplus Lines, and Risk Retention
2266 Groups;
2267 (viii) as a bail bond surety company under Chapter 35, Bail Bond Act;
2268 (ix) under Chapter 37, Captive Insurance Companies Act;
2269 (x) a title insurance company;
2270 (xi) a prepaid health care delivery plan; and
2271 (xii) a person not described in Subsections (1)(e)(i) through (xi) that is organized or
2272 doing insurance business, or in the process of organizing with the intent to do insurance
2273 business in this state.
2274 (2) Notwithstanding Sections 31A-1-301 and 31A-27a-102 , this chapter does not apply
2275 to a person licensed by the insurance commissioner as one or more of the following in this state
2276 unless the person engages in the business of insurance as an insurer:
2277 (a) an insurance agency;
2278 (b) an insurance producer;
2279 (c) a limited line producer;
2280 (d) a customer service representative;
2281 (e) an insurance consultant;
2282 (f) a managing general agent;
2283 (g) reinsurance intermediary;
2284 (h) a title insurance producer;
2285 (i) a third party administrator;
2286 (j) an insurance adjustor;
2287 (k) a provider of viatical settlements; or
2288 (l) a producer of viatical settlements.
2289 Section 40. Section 31A-27a-105 is enacted to read:
2290 31A-27a-105. Jurisdiction -- Venue.
2291 (1) (a) A delinquency proceeding under this chapter may not be commenced by a
2292 person other than the commissioner of this state.
2293 (b) No court has jurisdiction to entertain, hear, or determine a delinquency proceeding
2294 commenced by any person other than the commissioner of this state.
2295 (2) Other than in accordance with this chapter, a court of this state has no jurisdiction
2296 to entertain, hear, or determine any complaint:
2297 (a) requesting the liquidation, rehabilitation, seizure, sequestration, or receivership of
2298 an insurer; or
2299 (b) requesting a stay, an injunction, a restraining order, or other relief preliminary to,
2300 incidental to, or relating to a delinquency proceeding.
2301 (3) (a) The receivership court, as of the commencement of a delinquency proceeding
2302 under this chapter, has exclusive jurisdiction of all property of the insurer, wherever located,
2303 including property located outside the territorial limits of the state.
2304 (b) The receivership court has original but not exclusive jurisdiction of all civil
2305 proceedings arising:
2306 (i) under this chapter; or
2307 (ii) in or related to a delinquency proceeding under this chapter.
2308 (4) In addition to other grounds for jurisdiction provided by the law of this state, a
2309 court of this state having jurisdiction of the subject matter has jurisdiction over a person served
2310 pursuant to the Utah Rules of Civil Procedure or other applicable provisions of law in an action
2311 brought by the receiver if the person served:
2312 (a) in an action resulting from or incident to a relationship with the insurer described in
2313 this Subsection (4)(a), is or has been an agent, broker, or other person who has at any time:
2314 (i) written a policy of insurance for an insurer against which a delinquency proceeding
2315 is instituted; or
2316 (ii) acted in any manner whatsoever on behalf of an insurer against which a
2317 delinquency proceeding is instituted;
2318 (b) in an action on or incident to a reinsurance contract described in this Subsection
2319 (4)(b):
2320 (i) is or has been an insurer or reinsurer who has at any time entered into the contract of
2321 reinsurance with an insurer against which a delinquency proceeding is instituted; or
2322 (ii) is an intermediary, agent, or broker of or for the reinsurer, or with respect to the
2323 contract;
2324 (c) in an action resulting from or incident to a relationship with the insurer described in
2325 this Subsection (4)(c), is or has been an officer, director, manager, trustee, organizer, promoter,
2326 or other person in a position of comparable authority or influence over an insurer against which
2327 a delinquency proceeding is instituted;
2328 (d) in an action concerning assets described in this Subsection (4)(d), is or was at the
2329 time of the institution of the delinquency proceeding against the insurer, holding assets in
2330 which the receiver claims an interest on behalf of the insurer; or
2331 (e) in any action on or incident to the obligation described in this Subsection (4)(e), is
2332 obligated to the insurer in any way whatsoever.
2333 (5) (a) Subject to Subsection (5)(b), service shall be made upon the person named in
2334 the petition in accordance with the Utah Rules of Civil Procedure.
2335 (b) In lieu of service under Subsection (5)(a), upon application to the receivership
2336 court, service may be made in such a manner as the receivership court directs whenever it is
2337 satisfactorily shown by the commissioner's affidavit:
2338 (i) in the case of a corporation, that the officers of the corporation cannot be served
2339 because they have departed from the state or have otherwise concealed themselves with intent
2340 to avoid service;
2341 (ii) in the case of an insurer whose business is conducted, at least in part, by an
2342 attorney-in-fact, managing general agent, or other similar entity including a reciprocal, Lloyd's
2343 association, or interinsurance exchange, that the individual attorney-in-fact, managing general
2344 agent, or other entity, or its officers of the corporate attorney-in-fact cannot be served because
2345 of the individual's departure or concealment; or
2346 (iii) in the case of a natural person, that the person cannot be served because of the
2347 person's departure or concealment.
2348 (6) If the receivership court on motion of any party finds that an action should as a
2349 matter of substantial justice be tried in a forum outside this state, the receivership court may
2350 enter an appropriate order to stay further proceedings on the action in this state.
2351 (7) (a) Nothing in this chapter deprives a reinsurer of any contractual right to pursue
2352 arbitration except:
2353 (i) as to a claim against the estate; and
2354 (ii) in regard to a contract rejected by the receiver under Section 31A-27a-113 .
2355 (b) A party in arbitration may bring a claim or counterclaim against the estate, but the
2356 claim or counterclaim is subject to this chapter.
2357 (8) An action authorized by this chapter shall be brought in the Third District Court for
2358 Salt Lake County.
2359 (9) (a) At any time after an order is entered pursuant to Section 31A-27a-201 ,
2360 31A-27a-301 , or 31A-27a-401 , the commissioner or receiver may transfer the case to the
2361 county of the principal office of the person proceeded against.
2362 (b) In the event of a transfer under this Subsection (9), the court in which the
2363 proceeding is commenced shall, upon application of the commissioner or receiver, direct its
2364 clerk to transmit the court's file to the clerk of the court to which the case is to be transferred.
2365 (c) After a transfer under this Subsection (9), the proceeding shall be conducted in the
2366 same manner as if it had been commenced in the court to which the matter is transferred.
2367 (10) (a) Except as provided in Subsection (10)(c), a person may not intervene in a
2368 liquidation proceeding in this state for the purpose of seeking or obtaining payment of a
2369 judgment, lien, or other claim of any kind.
2370 (b) Except as provided in Subsection (10)(c), the claims procedure set for this chapter
2371 constitute the exclusive means for obtaining payment of claims from the liquidation estate.
2372 (c) (i) An affected guaranty association or the affected guaranty association's
2373 representative may intervene as a party as a matter of right and otherwise appear and participate
2374 in any court proceeding concerning a liquidation proceeding against an insurer.
2375 (ii) Intervention by an affected guaranty association or by an affected guaranty
2376 association's designated representative conferred by this Subsection (10)(c) may not constitute
2377 grounds to establish general personal jurisdiction by the courts of this state.
2378 (iii) An intervening affected guaranty association or the affected guaranty association's
2379 representative are subject to the receivership court's jurisdiction for the limited purpose for
2380 which the affected guaranty association intervenes.
2381 (11) (a) Notwithstanding the other provisions of this section, this chapter does not
2382 confer jurisdiction on the receivership court to resolve coverage disputes between an affected
2383 guaranty association and those asserting claims against the affected guaranty association
2384 resulting from the initiation of a receivership proceeding under this chapter except to the extent
2385 that the affected guaranty association otherwise expressly consents to the jurisdiction of the
2386 receivership court pursuant to a plan of rehabilitation or liquidation that resolves its obligations
2387 to covered policyholders.
2388 (b) The determination of a dispute with respect to the statutory coverage obligations of
2389 an affected guaranty association by a court or administrative agency or body with jurisdiction
2390 in the affected guaranty association's state of domicile is binding and conclusive as to the
2391 affected guaranty association's claim in the liquidation proceeding.
2392 (12) Upon the request of the receiver, the receivership court or the presiding judge of
2393 the Third District Court for Salt Lake County may order that one judge hear all cases and
2394 controversies arising out of or related to the delinquency proceeding.
2395 (13) A delinquency proceeding is exempt from any program maintained for the early
2396 closure of civil actions.
2397 Section 41. Section 31A-27a-106 is enacted to read:
2398 31A-27a-106. Exemption from fees.
2399 The receiver may not be required to pay any of the following fees to a public officer of
2400 this state:
2401 (1) filing fees;
2402 (2) recording fees;
2403 (3) transcript fees;
2404 (4) copying fees;
2405 (5) certification fees; or
2406 (6) authentication fees.
2407 Section 42. Section 31A-27a-107 is enacted to read:
2408 31A-27a-107. Notice and hearing on matters submitted by the receiver for
2409 receivership court approval.
2410 (1) (a) Upon written request to the receiver, a person shall be placed on the service list
2411 to receive notice of matters filed by the receiver.
2412 (b) It is the responsibility of the person requesting notice to:
2413 (i) inform the receiver in writing of any changes in the person's address; or
2414 (ii) request that the person's name be deleted from the service list.
2415 (c) (i) The receiver may serve on a person on the service list a request to confirm
2416 continuation on the service list by returning a form.
2417 (ii) The request to confirm continuation may be served periodically but not more
2418 frequently than every 12 months.
2419 (iii) A person who fails to return the form described in this Subsection (1)(c) may be
2420 removed from the service list.
2421 (d) Inclusion on the service list does not confer standing in the delinquency proceeding
2422 to raise, appear, or be heard on any issue.
2423 (e) The receiver shall:
2424 (i) file a copy of the service list with the receivership court; and
2425 (ii) periodically provide to the receivership court notice of changes to the service list.
2426 (2) Except as otherwise provided by this chapter, notice and hearing of any matter
2427 submitted by the receiver to the receivership court for approval under this chapter shall be
2428 conducted in accordance with this Subsection (2).
2429 (a) The receiver:
2430 (i) shall file a motion:
2431 (A) explaining the proposed action; and
2432 (B) the basis for the proposed action; and
2433 (ii) may include any evidence in support of the motion.
2434 (b) If a document, material, or other information supporting the motion is confidential,
2435 the document, material, or other information may be submitted to the receivership court under
2436 seal for in camera inspection.
2437 (c) (i) The receiver shall provide notice and a copy of the motion to:
2438 (A) all persons on the service list; and
2439 (B) any other person as may be required by the receivership court.
2440 (ii) Notice may be provided by first-class mail postage paid, electronic mail, or
2441 facsimile transmission, at the receiver's discretion.
2442 (iii) For purposes of this section, notice is considered to be given on the day on which
2443 it is deposited with the United States Postmaster or transmitted, as applicable, to the
2444 last-known address as shown on the service list.
2445 (d) (i) A party in interest objecting to the motion shall:
2446 (A) file an objection specifying the grounds for the objection within:
2447 (I) ten days of the day on which the notice of the filing of the motion is sent; or
2448 (II) such other time as the receivership court may specify; and
2449 (B) serve copies on:
2450 (I) the receiver; and
2451 (II) any other person served with the motion within the time period described in
2452 Subsection (2)(d)(i).
2453 (ii) In accordance with the Utah Rules of Civil Procedure, days may be added to the
2454 time for filing an objection if the notice of the motion is sent only by way of United States
2455 mail.
2456 (iii) An objecting party has the burden of showing why the receivership court should
2457 not authorize the proposed action.
2458 (e) (i) If no objection to the motion is timely filed:
2459 (A) the receivership court may:
2460 (I) enter an order approving the motion without a hearing; or
2461 (II) hold a hearing to determine if the receiver's motion should be approved; and
2462 (B) the receiver may request that the receivership court enter an order or hold a hearing
2463 on an expedited basis.
2464 (ii) (A) If an objection is timely filed, the receivership court may hold a hearing.
2465 (B) If the receivership court approves the motion and, upon a motion by the receiver,
2466 determines that the objection is frivolous or filed merely for delay or for other improper
2467 purpose, the receivership court may order the objecting party to pay the receiver's reasonable
2468 costs and fees of defending against the objection.
2469 Section 43. Section 31A-27a-108 is enacted to read:
2470 31A-27a-108. Injunctions and orders.
2471 (1) The receivership court may issue an order, process, or judgment including stays,
2472 injunctions, or other orders necessary or appropriate to carry out:
2473 (a) this chapter; or
2474 (b) an approved rehabilitation plan.
2475 (2) This chapter may not be construed to limit the ability of the receiver to apply to a
2476 court other than the receivership court in any jurisdiction:
2477 (a) to carry out this chapter; or
2478 (b) for the purpose of pursuing claims against any person.
2479 (3) Except as provided in Subsections (5) and (6) or as otherwise provided in this
2480 chapter, the commencement of a delinquency proceeding under this chapter operates as a stay,
2481 applicable to all persons, of:
2482 (a) the commencement or continuation, including the issuance or employment of
2483 process, of a judicial, administrative, an arbitration proceeding, or other action or proceeding
2484 against the insurer:
2485 (i) that was or could have been commenced before the commencement of the
2486 delinquency proceeding under this chapter; or
2487 (ii) to recover a claim against the insurer that arises before the commencement of the
2488 delinquency proceeding under this chapter;
2489 (b) the enforcement against the insurer or against property of the insurer of a judgment
2490 obtained before the commencement of the delinquency proceeding under this chapter;
2491 (c) an act to:
2492 (i) obtain or retain possession of:
2493 (A) property of the insurer; or
2494 (B) property from the insurer; or
2495 (ii) exercise control over property or records of the insurer;
2496 (d) an act to create, perfect, or enforce a lien against property of the insurer;
2497 (e) an act to collect, assess, or recover a claim against the insurer that arises before the
2498 commencement of a delinquency proceeding under this chapter;
2499 (f) the commencement or continuation of an action or proceeding against a reinsurer of
2500 the insurer:
2501 (i) by the holder of a claim against the insurer; and
2502 (ii) seeking a reinsurance recovery that is contractually due to the insurer;
2503 (g) the commencement or continuation of an action or proceeding by a governmental
2504 unit to terminate or revoke an insurance license; and
2505 (h) (i) an action described in Subsection (3)(h)(ii):
2506 (A) with respect to a contract, agreement, or lease including:
2507 (I) a policy;
2508 (II) an insurance or reinsurance contract;
2509 (III) a surety bond; or
2510 (IV) a surety undertaking;
2511 (B) whether or not the insurer is a party to the contract, agreement, lease, policy, bond,
2512 or undertaking; and
2513 (C) if the sole basis for the action is:
2514 (I) that the insurer is the subject of a delinquency proceeding;
2515 (II) that one or more of the insurer's licenses have been suspended or revoked because
2516 the insurer is the subject of a delinquency proceeding; or
2517 (III) both Subsections (3)(h)(i)(C)(I) and (II); and
2518 (ii) as to a contract, agreement, lease, policy, bond, or undertaking described in
2519 Subsection (3)(h)(i), an action for:
2520 (A) termination;
2521 (B) failure to renew;
2522 (C) suspension of performance;
2523 (D) declaration of default;
2524 (E) demand for additional, substitute, or replacement security or performance; or
2525 (F) other adverse action.
2526 (4) (a) Except as provided in Subsections (5) and (6) or as otherwise provided in this
2527 chapter, the commencement of a delinquency proceeding under this chapter operates as a stay,
2528 applicable to all persons, of the commencement or continuation, including the issuance or
2529 employment of process, of a judicial, administrative, or other action or proceeding, including
2530 the enforcement of any judgment:
2531 (i) against an insured that is or could have been commenced before the commencement
2532 of the delinquency proceeding under this chapter; or
2533 (ii) (A) to recover a claim against the insured that arises before or after the
2534 commencement of the delinquency proceeding under this chapter; and
2535 (B) for which the insurer:
2536 (I) is or may be liable under a policy of insurance; or
2537 (II) is obligated to defend a party.
2538 (b) Subject to Subsection (4)(c), the stay provided by this Subsection (4) terminates 90
2539 days after the day on which the receiver is appointed unless extended by order of the
2540 receivership court:
2541 (i) for good cause shown; and
2542 (ii) after notice to any affected parties and any hearing the receivership court
2543 determines is appropriate.
2544 (c) Notwithstanding the other provisions of this Subsection (4), any applicable statute
2545 of limitations with respect to any claim against an insured is tolled during the period of the stay
2546 provided by this Subsection (4) and any extensions.
2547 (5) Notwithstanding Subsection (3), the commencement of a delinquency proceeding
2548 under this chapter does not operate as a stay or prohibition of:
2549 (a) except as provided in Subsection (3)(g), a regulatory action by a commissioner of a
2550 nondomiciliary state, including the suspension of a license;
2551 (b) a criminal action;
2552 (c) an act to perfect, or to maintain or continue the perfection of, an interest in property
2553 to the extent that the act is accomplished within any relation back period under applicable law;
2554 (d) a set off as permitted by Section 31A-27a-510 ;
2555 (e) pursuit and enforcement of a nonmonetary governmental claim, judgment, or
2556 proceeding;
2557 (f) (i) presentment of a negotiable instrument; and
2558 (ii) the giving of notice of and protesting dishonor of the negotiable instrument;
2559 (g) enforcement of a right against a single beneficiary trust established pursuant to and
2560 in compliance with Section 31A-17-404 ;
2561 (h) under or in connection with a netting agreement or qualified financial contract as
2562 provided for in Section 31A-27a-611 , a right to cause:
2563 (i) the netting, liquidation, set off, termination, acceleration, or close out of an
2564 obligation; or
2565 (ii) enforcement of a:
2566 (A) security agreement;
2567 (B) security arrangement; or
2568 (C) other credit enhancement or guarantee or reimbursement obligation;
2569 (i) discharge by an affected guaranty association of statutory responsibilities under any
2570 statute applicable to the affected guaranty association; or
2571 (j) any of the following actions:
2572 (i) an audit by a governmental unit to determine tax liability;
2573 (ii) the issuance to the insurer by a governmental unit of a notice of tax deficiency;
2574 (iii) a demand for a tax return; or
2575 (iv) the making of an assessment for any tax and issuance of a notice and demand for
2576 payment of the assessment.
2577 (6) Except as provided in Subsection (7):
2578 (a) the stay of an act against property of the insurer under Subsection (3) continues
2579 until the property is no longer property of the receivership; and
2580 (b) the stay of any other act under Subsection (3) continues until the earlier of the day
2581 on which the delinquency proceeding is closed or the day on which the delinquency proceeding
2582 is dismissed.
2583 (7) (a) The receivership court may grant relief from a stay of Subsection (3) or (4), by
2584 terminating, annulling, modifying, or conditioning the stay:
2585 (i) on request of a party in interest;
2586 (ii) after notice and any hearing the receivership court determines appropriate; and
2587 (iii) (A) for cause; or
2588 (B) with respect to a stay of an act against property under Subsection (3) if:
2589 (I) the insurer does not have any equity in the property; and
2590 (II) the property is not necessary to an effective plan.
2591 (b) For the purposes of this Subsection (7), "cause" includes if:
2592 (i) the receiver cancels a policy, a surety bond, or a surety undertaking;
2593 (ii) the creditor is entitled, by contract or law, to require the insured or the principal to
2594 have a policy, a surety bond, or a surety undertaking; and
2595 (iii) the insured or the principal fails to obtain a replacement policy, surety bond, or
2596 surety undertaking within 30 days from the date of cancellation.
2597 (8) In a hearing under Subsection (7), the party seeking relief from the stay has the
2598 burden of proof on each issue, which shall be established by clear and convincing evidence.
2599 (9) (a) The estate of an insurer that is injured by a willful violation of a stay provided
2600 by this section is entitled to actual damages, including costs and attorney fees.
2601 (b) In appropriate circumstances, the receivership court may impose sanctions in
2602 addition to those under Subsection (9)(a).
2603 (10) Notwithstanding any other provision of law, in relation to any stay or injunction
2604 under this section, a bond may not be required of:
2605 (a) the commissioner; or
2606 (b) a receiver.
2607 Section 44. Section 31A-27a-109 is enacted to read:
2608 31A-27a-109. Statutes of limitations.
2609 (1) If applicable law, an order, or an agreement fixes a period within which the insurer
2610 may commence an action, and this period is not expired before the day on which the initial
2611 petition in a delinquency proceeding is filed, the receiver may not by reason of the filing of the
2612 initial petition in a delinquency proceeding be barred from commencing the action if the
2613 receiver commences the action on or before the later of:
2614 (a) the end of the period, including any suspension of the period occurring on or after
2615 the day on which the initial petition in a delinquency proceeding is filed; or
2616 (b) six years after the day on which the most recent receivership order is entered.
2617 (2) (a) Except as provided in Subsection (1), if applicable law, an order, or an
2618 agreement fixes a period within which the insurer may do an act described in Subsection (2)(b)
2619 and the period described in this Subsection (2)(a) is not expired before the date on which the
2620 initial petition in a delinquency proceeding is filed, the receiver may not by reason of the filing
2621 of the petition initiating a formal delinquency proceeding be barred from taking the act if the
2622 receiver does the act on or before the later of:
2623 (i) the end of the period, including any suspension of the period occurring on or after
2624 the day on which the initial petition in a delinquency proceeding is filed; or
2625 (ii) 60 days after the day on which the most recent receivership order is entered.
2626 (b) This Subsection (2) applies to:
2627 (i) filing, curing, or performing:
2628 (A) a pleading;
2629 (B) a demand;
2630 (C) a notice; or
2631 (D) a proof of claim or loss;
2632 (ii) curing a default in a case or proceeding; or
2633 (iii) performing any act similar to one described in Subsection (2)(b)(i) or (ii).
2634 (3) If applicable law, an order, or an agreement fixes a period for commencing or
2635 continuing a civil action in a court other than the receivership court on a claim against the
2636 insurer, and the period has not expired before the day on which the initial petition in a
2637 delinquency proceeding is filed, the period does not expire until the later of:
2638 (a) the end of the period, including any suspension of the period occurring on or after
2639 the day on which the initial petition in a delinquency proceeding is filed; or
2640 (b) 30 days after the day on which the stay pursuant to this section with respect to the
2641 claim is terminated or expires.
2642 Section 45. Section 31A-27a-110 is enacted to read:
2643 31A-27a-110. Cooperation of officers, owners, and employees.
2644 (1) As used in this section:
2645 (a) "Cooperate" includes to:
2646 (i) reply promptly in writing to an inquiry from the commissioner or receiver
2647 requesting a reply; and
2648 (ii) promptly make available to the commissioner or receiver any record, account,
2649 information, or property:
2650 (A) of or pertaining to the insurer; and
2651 (B) in the person's possession, custody, or control.
2652 (b) "Person" includes a person who exercises control directly or indirectly over
2653 activities of the insurer through:
2654 (i) a holding company; or
2655 (ii) other affiliate of the insurer.
2656 (2) The following shall cooperate with the commissioner or receiver in a proceeding
2657 under this chapter or an investigation preliminary to a proceeding under this chapter:
2658 (a) a present or former officer, manager, director, trustee, owner, or employee of an
2659 insurer;
2660 (b) a present or former agent of an insurer; or
2661 (c) a person with authority over or in charge of any segment of the insurer's affairs.
2662 (3) A person may not obstruct or interfere with the commissioner or receiver in the
2663 conduct of:
2664 (a) a delinquency proceeding; or
2665 (b) an investigation preliminary or incidental to a delinquency proceeding.
2666 (4) This section may not be construed to abridge otherwise existing legal rights,
2667 including the right to resist:
2668 (a) a petition for liquidation or other delinquency proceeding; or
2669 (b) other orders.
2670 (5) (a) A person described in Subsection (5)(b) is:
2671 (i) guilty of a class B misdemeanor, except that the fine may exceed $1,000 but may
2672 not exceed $10,000; or
2673 (ii) after a hearing, subject to:
2674 (A) the commissioner imposing a civil penalty that may not exceed $10,000;
2675 (B) the revocation or suspension of an insurance license issued by the commissioner;
2676 or
2677 (C) a combination of Subsections (5)(a)(ii)(A) and (B).
2678 (b) This Subsection (5) applies to:
2679 (i) a person described in Subsection (2) who fails to cooperate with the commissioner
2680 or receiver;
2681 (ii) a person who obstructs or interferes with the commissioner or receiver in the
2682 conduct of a delinquency proceeding or an investigation preliminary or incidental to a
2683 delinquency proceeding; or
2684 (iii) a person who violates an order validly issued under this chapter.
2685 Section 46. Section 31A-27a-111 is enacted to read:
2686 31A-27a-111. Actions by and against the receiver.
2687 (1) (a) An allegation by the receiver of improper or fraudulent conduct against a person
2688 may not be the basis of a defense to the enforcement of a contractual obligation owed to the
2689 insurer by a third party.
2690 (b) Notwithstanding Subsection (1)(a), a third party described in this Subsection (1) is
2691 not barred by this section from seeking to establish independently as a defense that the conduct
2692 is materially and substantially related to the contractual obligation for which enforcement is
2693 sought.
2694 (2) (a) Subject to Subsection (2)(b), a prior wrongful or negligent action of any present
2695 or former officer, manager, director, trustee, owner, employee, or agent of the insurer may not
2696 be asserted as a defense to a claim by the receiver:
2697 (i) under a theory of:
2698 (A) estoppel;
2699 (B) comparative fault;
2700 (C) intervening cause;
2701 (D) proximate cause;
2702 (E) reliance; or
2703 (F) mitigation of damages; or
2704 (ii) otherwise.
2705 (b) Notwithstanding Subsection (2)(a):
2706 (i) the affirmative defense of fraud in the inducement may be asserted against the
2707 receiver in a claim based on a contract; and
2708 (ii) a principal under a surety bond or a surety undertaking is entitled to credit against
2709 any reimbursement obligation to the receiver for the value of any property pledged to secure the
2710 reimbursement obligation to the extent that:
2711 (A) the receiver has possession or control of the property; or
2712 (B) the insurer or its agents misappropriated, including commingling, the property.
2713 (c) Evidence of fraud in the inducement is admissible only if it is contained in the
2714 records of the insurer.
2715 (3) Action or inaction by an insurance regulatory authority may not be asserted as a
2716 defense to a claim by the receiver.
2717 (4) (a) Subject to Subsection (4)(b), a judgment or order entered against an insured or
2718 the insurer in contravention of a stay or injunction under this chapter, or at any time by default
2719 or collusion, may not be considered as evidence of liability or of the quantum of damages in
2720 adjudicating claims filed in the estate arising out of the subject matter of the judgment or order.
2721 (b) Subsection (4)(a) does not apply to an affected guaranty association's claim for
2722 amounts paid on a settlement or judgment in pursuit of the affected guaranty association's
2723 statutory obligations.
2724 (5) The receiver may not be considered a governmental entity for the purposes of any
2725 state law awarding fees to a litigant who prevails against a governmental entity.
2726 Section 47. Section 31A-27a-112 is enacted to read:
2727 31A-27a-112. Unrecorded obligations and defenses of affiliates.
2728 (1) This section applies to a person who in relation to an insurer is:
2729 (a) an affiliate;
2730 (b) a controlled or controlling person; or
2731 (c) a present or former officer, manager, director, trustee, or shareholder.
2732 (2) In a proceeding or claim by the receiver, a person described in Subsection (1) may
2733 not assert a defense unless evidence of the defense:
2734 (a) is recorded in the records of the insurer at or about the time the event giving rise to
2735 the defense occurs; and
2736 (b) if required by statutory accounting practices and procedures, is timely reported on
2737 the insurer's official financial statements filed with the commissioner.
2738 (3) A person described in Subsection (1) may not assert a claim, unless the obligation:
2739 (a) is recorded in the records of the insurer at or about the time the obligation is
2740 incurred; and
2741 (b) if required by statutory accounting practices and procedures, is timely reported on
2742 the insurer's official financial statements filed with the commissioner.
2743 (4) A claim by the receiver against a person described in Subsection (1) that is made on
2744 the basis of an unrecorded or unreported transaction is not barred by this section.
2745 Section 48. Section 31A-27a-113 is enacted to read:
2746 31A-27a-113. Executory contracts.
2747 (1) Subject to the other provisions of this section, the receiver may assume or reject an
2748 executory contract or unexpired lease of the insurer.
2749 (2) (a) If there is a default in an executory contract or unexpired lease of the insurer, the
2750 receiver may not assume the contract or lease unless, at the time of the assumption of the
2751 contract or lease, the receiver:
2752 (i) cures or provides adequate assurance that the receiver will promptly cure the
2753 default; and
2754 (ii) provides adequate assurance of future performance under the contract or lease.
2755 (b) This Subsection (2) does not apply to a default that is a breach of a provision
2756 relating to:
2757 (i) the insolvency or financial condition of the insurer at any time before the closing of
2758 the delinquency proceeding;
2759 (ii) the appointment of or taking possession by:
2760 (A) a receiver in a case under this chapter; or
2761 (B) a custodian before the commencement of the delinquency proceeding; or
2762 (iii) the satisfaction of a penalty rate or provision relating to a default arising from a
2763 failure of the insurer to perform a nonmonetary obligation under the executory contract or
2764 unexpired lease.
2765 (3) A claim arising from a rejection under this section or under a plan of rehabilitation
2766 or liquidation of an executory contract or unexpired lease of the insurer that is not assumed
2767 shall be determined, and shall be treated and classified as though the claim arose before the day
2768 on which a successful petition commencing the delinquency proceeding is filed.
2769 Section 49. Section 31A-27a-114 is enacted to read:
2770 31A-27a-114. Immunity and indemnification.
2771 (1) For purposes of this section:
2772 (a) "Receiver's assistant" includes:
2773 (i) a present or former special deputy or assistant special deputy engaged by contract or
2774 otherwise;
2775 (ii) a person whom the receiver, a special deputy, or an assistant special deputy
2776 employs to assist in a delinquency proceeding under this chapter; and
2777 (iii) a state employee acting with respect to a delinquency proceeding under this
2778 chapter.
2779 (b) "Receiver's contractor" includes a person with whom the receiver, a special deputy,
2780 or an assistant special deputy contracts to assist in a delinquency proceeding under this chapter
2781 such as:
2782 (i) an attorney;
2783 (ii) an accountant;
2784 (iii) an auditor;
2785 (iv) an actuary;
2786 (v) an investment banker;
2787 (vi) a financial advisor;
2788 (vii) any other professional or firm who is retained or contracted with by the receiver as
2789 an independent contractor; and
2790 (viii) an employee of a person described in this Subsection (1)(b).
2791 (2) For the purposes of this section, the following persons are entitled to immunity and
2792 indemnification, or only immunity, as applicable:
2793 (a) a present or former receiver responsible for the conduct of a delinquency
2794 proceeding under this chapter;
2795 (b) a present or former receiver's assistant; and
2796 (c) a present or former receiver's contractor.
2797 (3) The receiver, a receiver's assistant, and a receiver's contractor have immunity under
2798 this chapter, as follows:
2799 (a) the receiver, a receiver's assistant, and a receiver's contractor have official immunity
2800 and are immune from suit and liability, both personally and in their official capacities, for any
2801 claim for damage to or loss of property, personal injury, or other civil liability caused by or
2802 resulting from an alleged act, error, or omission of the receiver, a receiver's assistant, or a
2803 receiver's contractor arising out of or by reason of the receiver's, receiver's assistant's, or
2804 receiver's contractor's duties or employment;
2805 (b) the receiver, a receiver's assistant, and a receiver's contractor have absolute judicial
2806 immunity and are immune from suit and liability, both personally and in their official
2807 capacities, for any claim for damage to or loss of property, personal injury, or other civil
2808 liability caused by or resulting from any alleged act, error, or omission of the receiver, a
2809 receiver's assistant, or a receiver's contractor arising out of or by reason of any matter that is
2810 subject to review by the receivership court after notice and opportunity to be heard, if the
2811 alleged act, error, or omission is not disapproved or disallowed by the receivership court; and
2812 (c) this chapter may not be construed to provide official immunity, to provide judicial
2813 immunity, or to otherwise hold the receiver, a receiver's assistant, or a receiver's contractor
2814 immune from suit and liability for any damage, loss, injury, or liability caused by the
2815 intentional or willful and wanton misconduct of the receiver, a receiver's assistant, or a
2816 receiver's contractor.
2817 (4) The receiver or a receiver's assistant is entitled to indemnification under this
2818 chapter, as follows:
2819 (a) the receiver and a receiver's assistant shall be indemnified from the assets of the
2820 insurer:
2821 (i) if any legal action is commenced against the receiver or a receiver's assistant:
2822 (A) whether against the receiver or receiver's assistant personally or in the official
2823 capacity; and
2824 (B) alleging property damage, property loss, personal injury, or other civil liability
2825 caused by or resulting from any alleged act, error, or omission of the receiver or a receiver's
2826 assistant arising out of or by reason of the receiver's or receiver's assistant's duties or
2827 employment;
2828 (ii) for all expenses, attorney fees, judgments, settlements, decrees, or amounts due and
2829 owing or paid in satisfaction of or incurred in the defense of the legal action; and
2830 (iii) unless it is determined upon a final adjudication on the merits that the alleged act,
2831 error, or omission of the receiver or receiver's assistant giving rise to the claim:
2832 (A) does not arise out of or by reason of the receiver's or receiver's assistant's duties or
2833 employment; or
2834 (B) is caused by intentional or willful and wanton misconduct;
2835 (b) attorney fees and related expenses incurred in defending a legal action for which
2836 immunity or indemnity is available under this section shall be paid from the assets of the
2837 insurer as they are incurred, in advance of the final disposition of the action upon receipt of an
2838 agreement by or on behalf of the receiver or receiver's assistant to repay the attorney fees and
2839 expenses if it is ultimately determined upon a final adjudication on the merits that the receiver
2840 or receiver's assistant is not entitled to immunity or indemnity under this section;
2841 (c) the following paid pursuant to this section are an administrative expense of the
2842 insurer, an indemnification for:
2843 (i) an expense payment;
2844 (ii) a judgment;
2845 (iii) a settlement;
2846 (iv) a decree;
2847 (v) attorney fees;
2848 (vi) a surety bond premium; or
2849 (vii) other amounts paid or to be paid from the insurer's assets pursuant to this section;
2850 (d) in the event of actual or threatened litigation against a receiver or a receiver's
2851 assistant for which immunity or indemnity may be available under this section, a reasonable
2852 amount of funds which in the judgment of the receiver may be needed to provide immunity or
2853 indemnity shall be segregated and reserved from the assets of the insurer:
2854 (i) as security for the payment of indemnity; and
2855 (ii) until:
2856 (A) all applicable statutes of limitations run;
2857 (B) all actual or threatened actions against the receiver or a receiver's assistant are
2858 completely and finally resolved; and
2859 (C) all obligations under this section are satisfied;
2860 (e) in lieu of segregation and reserving of funds, the receiver may, in the receiver's
2861 discretion, obtain a surety bond or make other arrangements that will enable the receiver to
2862 fully secure the payment of all obligations under this section;
2863 (f) if a legal action against a receiver's assistant for which indemnity may be available
2864 under this section is settled before final adjudication on the merits, the receiver shall pay the
2865 settlement amount on behalf of the receiver's assistant, or indemnify the receiver's assistant for
2866 the settlement amount, unless the receiver determines that the claim:
2867 (i) does not arise out of or by reason of the receiver's assistant's duties or employment;
2868 or
2869 (ii) is caused by the intentional or willful and wanton misconduct of the receiver's
2870 assistant; and
2871 (g) in a legal action in which a claim is asserted against the receiver:
2872 (i) that portion of any settlement relating to the alleged act, error, or omission of the
2873 receiver is subject to the approval of the receivership court; and
2874 (ii) the receivership court may not approve that portion of the settlement if the
2875 receivership court determines that the claim:
2876 (A) does not arise out of or by reason of the receiver's duties or employment; or
2877 (B) is caused by the intentional or willful and wanton misconduct of the receiver.
2878 (5) Nothing contained or implied in this section shall operate, or be construed or
2879 applied to deprive the receiver, a receiver's assistant, or a receiver's contractor of any immunity,
2880 indemnity, benefits of law, rights, or any defense otherwise available.
2881 (6) The immunity and indemnification provided to a receiver's assistant and the
2882 immunity provided to a receiver's contractor under this section does not apply to an action by
2883 the receiver against the receiver's assistant or receiver's contractor.
2884 (7) (a) Subsection (3) applies to any suit based in whole or in part on an alleged act,
2885 error, or omission that takes place on or after April 30, 2007.
2886 (b) A legal action may not lie against the receiver or a receiver's assistant based in
2887 whole or in part on an alleged act, error, or omission that takes place before April 30, 2007,
2888 unless suit is filed and valid service of process is obtained on or after April 30, 2007, but on or
2889 before April 30, 2008.
2890 (8) Subsection (4) applies to a suit that is pending on or filed after April 30, 2007,
2891 without regard to when the alleged act, error, or omission takes place.
2892 Section 50. Section 31A-27a-115 is enacted to read:
2893 31A-27a-115. Approval and payment of expenses.
2894 (1) The receiver may pay an expense under a contract, lease, employment agreement,
2895 or other arrangement entered into by the insurer before receivership, as the receiver considers
2896 necessary for the purposes of this chapter. The receiver:
2897 (a) is not required to pay an expense described in this Subsection (1) that the receiver
2898 determines is not necessary; and
2899 (b) may reject a contract pursuant to Section 31A-27a-113 .
2900 (2) Receivership expenses other than those described in Subsection (1) shall be paid as
2901 follows:
2902 (a) unless the court orders otherwise in the rehabilitation or liquidation order, the
2903 receiver may submit a motion pursuant to Section 31A-27a-107 to the receivership court to
2904 approve:
2905 (i) the terms of compensation of each special deputy or contractor; or
2906 (ii) any other expense in excess of an amount established by this chapter;
2907 (b) the receiver may, as the receiver considers appropriate, submit a motion to approve
2908 any other compensation, anticipated expense, or incurred expense not described in Subsection
2909 (2)(a);
2910 (c) the receiver may pay as incurred:
2911 (i) an expense not requiring receivership court approval; and
2912 (ii) an expense approved in the rehabilitation or liquidation order; and
2913 (d) the approval of an expense by the receivership court may not prejudice the right of
2914 the receiver to seek recovery, recoupment, disgorgement, or reimbursement of a fee based on
2915 contract or a cause of action recognized in law or in equity.
2916 (3) On an annual or more frequent basis, the receiver shall submit to the receivership
2917 court a report summarizing the expenses incurred in the prior period.
2918 (4) Receivership court approval is not required to pay expenses incurred by the receiver
2919 in connection with the appeal of an order of the receivership court.
2920 (5) All expenses of receivership shall be paid from the assets of the insurer, except as
2921 provided in this Subsection (5).
2922 (a) If the property of the insurer does not contain sufficient cash or liquid assets to
2923 defray the expenses incurred, the commissioner may advance funds from the account
2924 established under Subsection 31A-27a-705 (3).
2925 (b) An amount advanced shall be repaid to the account out of the first available moneys
2926 of the insurer.
2927 Section 51. Section 31A-27a-116 is enacted to read:
2928 31A-27a-116. Financial reporting.
2929 (1) (a) The receiver shall comply with all requirements for receivership financial
2930 reporting as specified by the commissioner by rule within:
2931 (i) 180 days after the day on which the receivership court enters an order of
2932 receivership; and
2933 (ii) 45 days following each calendar quarter after the period specified in Subsection
2934 (1)(a)(i).
2935 (b) The rule described in this Subsection (1) shall:
2936 (i) comply with this section;
2937 (ii) be made in accordance with Title 63, Chapter 46a, Utah Administrative
2938 Rulemaking Act; and
2939 (iii) require the receiver to file any financial report with the receivership court in
2940 addition to any other person specified in the rule.
2941 (c) A financial report shall include, at a minimum, a statement of:
2942 (i) the assets and liabilities of the insurer;
2943 (ii) the changes in those assets and liabilities; and
2944 (iii) all funds received or disbursed by the receiver during that reporting period.
2945 (d) The receiver may qualify a financial report or provide notes to the financial
2946 statement for further explanation.
2947 (e) The receivership court may order the receiver to provide any additional information
2948 as the receivership court considers appropriate.
2949 (2) Each affected guaranty association shall file one or more reports with the liquidator:
2950 (a) (i) within 180 days after the day on which the receivership court enters an order of
2951 liquidation; and
2952 (ii) (A) within 45 days following each calendar quarter after the period described in
2953 Subsection (2)(a); or
2954 (B) at an interval:
2955 (I) agreed to between the liquidator and the affected guaranty association; or
2956 (II) required by the receivership court; and
2957 (b) in no event less than annually.
2958 (3) For good cause shown, the receivership court may grant:
2959 (a) relief for an extension or modification of time to comply with Subsection (1) or (2);
2960 or
2961 (b) such other relief as may be appropriate.
2962 Section 52. Section 31A-27a-117 is enacted to read:
2963 31A-27a-117. Records.
2964 (1) (a) Upon entry of an order of rehabilitation or liquidation, the receiver is vested
2965 with title to all of the records of the insurer:
2966 (i) of whatever nature;
2967 (ii) in whatever medium;
2968 (iii) wherever located; and
2969 (iv) regardless of whether the item is in the custody and control of:
2970 (A) a third party administrator;
2971 (B) a managing general agent;
2972 (C) an attorney; or
2973 (D) other representatives of the insurer.
2974 (b) The receiver may immediately take possession and control of:
2975 (i) all of the records of the insurer; and
2976 (ii) the premises where the records are located.
2977 (c) At the request of the receiver, a third party administrator, managing general agent,
2978 attorney, or other representatives of the insurer shall release all records of the insurer to:
2979 (i) the receiver; or
2980 (ii) the receiver's designee.
2981 (d) With the receiver's approval, an affected guaranty association with an obligation
2982 under a policy issued by the insurer may take actions necessary to obtain directly from a third
2983 party administrator, managing general agent, attorney, or other representative of the insurer all
2984 records pertaining to the insurer's business that are appropriate or necessary for the affected
2985 guaranty association to fulfill its statutory obligations.
2986 (2) The receiver may certify a record of a delinquent insurer described in Subsection
2987 (1) and a record of the receiver's office created and maintained in connection with a delinquent
2988 insurer, as follows:
2989 (a) a record of a delinquent insurer may be certified by the receiver in an affidavit
2990 stating that the record is a true and correct copy of the record of the insurer that is received
2991 from the custody of the insurer, or found among the insurer's effects; or
2992 (b) a record created by or filed with the receiver's office in connection with a
2993 delinquent insurer may be certified by the receiver's affidavit stating that the record is a true
2994 and correct copy of the record maintained by the receiver's office.
2995 (3) (a) An original record or copy of a record certified under Subsection (2):
2996 (i) when admitted in evidence is prima facie evidence of the facts disclosed; and
2997 (ii) is admissible in evidence in the same manner as a document described in Utah
2998 Rules of Evidence, Rule 902(1).
2999 (b) The receivership court may consider the certification of a record by the receiver
3000 pursuant to this section as satisfying the requirements of Utah Rules of Evidence, Rule 803(6).
3001 (4) A record of a delinquent insurer held by the receiver:
3002 (a) is not a record of the department for any purposes; and
3003 (b) not subject to Title 63, Chapter 2, Government Records Access and Management
3004 Act.
3005 Section 53. Section 31A-27a-118 , which is renumbered from Section 31A-27-107 is
3006 renumbered and amended to read:
3007 [
3008 (1) The commissioner shall include in [
3009 (a) the names of the insurers proceeded against under Sections [
3010
3011 (b) those [
3012 proceedings under this chapter; and
3013 [
3014 proceedings under [
3015 Part 5, Administrative Actions, and Section 31A-27a-901 .
3016 (2) The commissioner as receiver shall make and file annual reports and any other
3017 required reports for [
3018
3019 the manner [
3020 authorized to do business in this state.
3021 Section 54. Section 31A-27a-119 is enacted to read:
3022 31A-27a-119. Delinquency proceeding commenced before April 30, 2007.
3023 This chapter does not apply to a delinquency proceeding ongoing on April 30, 2007.
3024 Section 55. Section 31A-27a-120 is enacted to read:
3025 31A-27a-120. Severability.
3026 If any provision of this chapter or the application of this chapter to any person or
3027 circumstance is for any reason held invalid, the remainder of the chapter and the application of
3028 the provision to other persons or circumstances shall be given effect without the invalid
3029 provision or application. The provisions of this chapter are severable.
3030 Section 56. Section 31A-27a-201 is enacted to read:
3031
3032 31A-27a-201. Receivership court's seizure order.
3033 (1) The commissioner may file in the Third District Court for Salt Lake County a
3034 petition:
3035 (a) with respect to:
3036 (i) an insurer domiciled in this state;
3037 (ii) an unauthorized insurer; or
3038 (iii) pursuant to Section 31A-27a-901 , a foreign insurer;
3039 (b) alleging that:
3040 (i) there exists grounds that would justify a court order for a formal delinquency
3041 proceeding against the insurer under this chapter; and
3042 (ii) the interests of policyholders, creditors, or the public will be endangered by delay;
3043 and
3044 (c) setting forth the contents of a seizure order considered necessary by the
3045 commissioner.
3046 (2) (a) Upon a filing under Subsection (1), the receivership court may issue the
3047 requested seizure order:
3048 (i) immediately, ex parte, and without notice or hearing;
3049 (ii) that directs the commissioner to take possession and control of:
3050 (A) all or a part of the property, accounts, and records of an insurer; and
3051 (B) the premises occupied by the insurer for transaction of the insurer's business; and
3052 (iii) that until further order of the receivership court, enjoins the insurer and its officers,
3053 managers, agents, and employees from disposition of its property and from the transaction of
3054 its business except with the written consent of the commissioner.
3055 (b) Any person having possession or control of and refusing to deliver any of the
3056 records or assets of a person against whom a seizure order is issued under this Subsection (2) is
3057 guilty of a class B misdemeanor.
3058 (3) (a) A petition that requests injunctive relief:
3059 (i) shall be verified by the commissioner or the commissioner's designee; and
3060 (ii) is not required to plead or prove irreparable harm or inadequate remedy at law.
3061 (b) The commissioner shall provide only the notice that the receivership court may
3062 require.
3063 (4) (a) The receivership court shall specify in the seizure order the duration of the
3064 seizure, which shall be the time the receivership court considers necessary for the
3065 commissioner to ascertain the condition of the insurer.
3066 (b) The receivership court may from time to time:
3067 (i) hold a hearing that the receivership court considers desirable:
3068 (A) (I) on motion of the commissioner;
3069 (II) on motion of the insurer; or
3070 (III) on its own motion; and
3071 (B) after the notice the receivership court considers appropriate; and
3072 (ii) extend, shorten, or modify the terms of the seizure order.
3073 (c) The receivership court shall vacate the seizure order if the commissioner fails to
3074 commence a formal proceeding under this chapter after having had a reasonable opportunity to
3075 commence a formal proceeding under this chapter.
3076 (d) An order of the receivership court pursuant to a formal proceeding under this
3077 chapter vacates the seizure order.
3078 (5) Entry of a seizure order under this section does not constitute a breach or an
3079 anticipatory breach of any contract of the insurer.
3080 (6) (a) An insurer subject to an ex parte seizure order under this section may petition
3081 the receivership court at any time after the issuance of a seizure order for a hearing and review
3082 of the seizure order.
3083 (b) The receivership court shall hold the hearing and review requested under this
3084 Subsection (6) not more than 15 days after the day on which the request is received.
3085 (c) A hearing under this Subsection (6):
3086 (i) may be held privately in chambers; and
3087 (ii) shall be held privately in chambers if the insurer proceeded against requests that it
3088 be private.
3089 (7) (a) If, at any time after the issuance of a seizure order, it appears to the receivership
3090 court that a person whose interest is or will be substantially affected by the seizure order did
3091 not appear at the hearing and has not been served, the receivership court may order that notice
3092 be given to the person.
3093 (b) An order under this Subsection (7) that notice be given may not stay the effect of
3094 any seizure order previously issued by the receivership court.
3095 (8) Whenever the commissioner makes a seizure as provided in Subsection (2), on the
3096 demand of the commissioner, it shall be the duty of the sheriff of a county of this state, and of
3097 the police department of a municipality in the state to furnish the commissioner with necessary
3098 deputies or officers to assist the commissioner in making and enforcing the seizure order.
3099 Section 57. Section 31A-27a-202 is enacted to read:
3100 31A-27a-202. Commencement of formal delinquency proceeding.
3101 (1) A formal delinquency proceeding against a person shall be commenced by filing a
3102 petition in the name of the commissioner or department.
3103 (2) (a) The petition required by Subsection (1):
3104 (i) shall state:
3105 (A) the grounds upon which the proceeding is based; and
3106 (B) the relief requested; and
3107 (ii) may include a request for restraining orders and injunctive relief as described in
3108 Section 31A-27a-108 .
3109 (b) Upon the filing of a petition, the commissioner shall forward a notice of the petition
3110 by first-class mail or electronic communication, as permitted by the receivership court, to the
3111 commissioners and guaranty associations in states in which the insurer did business.
3112 (3) (a) A petition that requests injunctive relief:
3113 (i) shall be verified by the commissioner or the commissioner's designee; and
3114 (ii) is not required to plead or prove irreparable harm or inadequate remedy at law.
3115 (b) The commissioner shall provide only the notice the receivership court requires.
3116 (4) If a temporary restraining order is requested:
3117 (a) the receivership court may issue an initial order containing the relief requested;
3118 (b) the order shall state the time and date of its issuance;
3119 (c) the receivership court shall set a time and date for the return of summons:
3120 (i) not more than ten days from the time and date the initial order is issued; and
3121 (ii) at which time the person proceeded against may appear before the receivership
3122 court for a summary hearing; and
3123 (d) the order may not continue in effect beyond the time and date set for the return of
3124 summons, unless the receivership court expressly enters one or more orders extending the
3125 restraining order.
3126 (5) (a) If no temporary restraining order is requested, the receivership court shall cause
3127 summons to be issued.
3128 (b) The summons shall specify:
3129 (i) a return date not more than 30 days after the day on which the summons is issued;
3130 and
3131 (ii) that an answer must be filed at or before the return date.
3132 Section 58. Section 31A-27a-203 is enacted to read:
3133 31A-27a-203. Return of summons and summary hearing.
3134 (1) The receivership court shall hold a summary hearing at the time and date for the
3135 return of summons on a petition to commence a formal delinquency proceeding.
3136 (2) If a person is not served with summons on a petition to commence a formal
3137 delinquency proceeding and fails to appear for the summary hearing, the receivership court
3138 shall:
3139 (a) continue the summary hearing not more than ten days;
3140 (b) provide for alternative service of summons upon the person; and
3141 (c) extend any restraining order.
3142 (3) Upon a showing of good faith efforts to effect personal service upon a person who
3143 fails to appear for a continued summary hearing, the receivership court shall order notice of the
3144 petition to commence a formal delinquency proceeding to be published. The order and notice
3145 shall specify:
3146 (a) a return date not less than 10 nor more than 20 days after the day on which notice is
3147 published; and
3148 (b) that the restraining order is extended to the continued hearing date.
3149 (4) If a person fails to appear for a summary hearing on a petition to commence a
3150 formal delinquency proceeding after service of summons, the receivership court shall enter
3151 judgment in favor of the commissioner against that person.
3152 (5) (a) A person who appears for the summary hearing on a petition to commence a
3153 formal delinquency proceeding shall file its answer at the hearing and the receivership court
3154 shall:
3155 (i) determine whether to extend any temporary restraining order pending final
3156 judgment; and
3157 (ii) set the case for trial on a date not more than ten days from the day on which the
3158 summary hearing is held.
3159 (b) The receivership court may not grant a continuance for filing an answer.
3160 Section 59. Section 31A-27a-204 is enacted to read:
3161 31A-27a-204. Proceedings for expedited trial -- Continuance -- Evidence --
3162 Discovery.
3163 (1) (a) The receivership court shall proceed to hear the case on the petition to
3164 commence a formal delinquency proceeding:
3165 (i) at the time and date set forth for trial;
3166 (ii) without a jury; and
3167 (iii) without unnecessary delay.
3168 (b) To the extent practicable, the receivership court shall give precedence to the matter
3169 over all other matters.
3170 (c) To the extent authorized by law, the receivership court may assign the matter to
3171 another judge if necessary to comply with the need for expedited proceedings under this
3172 chapter.
3173 (2) A continuance for trial shall be granted only in extreme circumstances.
3174 (3) The receivership court shall admit as self authenticated a certified copy of the
3175 following when offered by the commissioner:
3176 (a) a financial statement made by the insurer or an affiliate;
3177 (b) an examination report of the insurer or an affiliate made by or on behalf of the
3178 commissioner; or
3179 (c) any other document filed with any insurance department by the insurer or an
3180 affiliate.
3181 (4) The facts contained in an examination report of the insurer or an affiliate made by
3182 or on behalf of the commissioner is presumed to be true as of the date of the hearing if the
3183 examination is made as of a date not more than 270 days before the day on which the petition is
3184 filed. The presumption:
3185 (a) is rebuttable; and
3186 (b) shifts the burden of production and persuasion to the insurer.
3187 (5) Discovery:
3188 (a) is limited to grounds alleged in the petition; and
3189 (b) shall be concluded on an expedited basis.
3190 Section 60. Section 31A-27a-205 is enacted to read:
3191 31A-27a-205. Decision and appeals.
3192 (1) The receivership court shall enter judgment on the petition to commence formal
3193 delinquency proceeding within 15 days after the day on which the evidence is concluded.
3194 (2) (a) An order entered pursuant to Subsection (1) is final when entered.
3195 (b) An appeal shall be:
3196 (i) handled on an expedited basis; and
3197 (ii) taken within five days of the day on which judgment is entered.
3198 (3) (a) Absent entry of an order staying the order pursuant to Subsection (4), the order
3199 has full force and effect and the receiver shall carry out the order's terms and this chapter.
3200 (b) A request for reconsideration, review, or appeal, or posting of a bond, may not
3201 dissolve or stay the judgment.
3202 (4) (a) The following motions must first be presented to the receivership court:
3203 (i) a motion for a stay of a judgment;
3204 (ii) a motion for approval of a supersedes bond; or
3205 (iii) a motion for other relief pending appeal.
3206 (b) Except for a grant of a petition for rehabilitation which shall remain in effect
3207 pending a decision on appeal, during the pendency of an appeal the receivership court may do
3208 any of the following in accordance with the Utah Rules of Civil Procedure:
3209 (i) suspend an order entered under Subsection (1);
3210 (ii) modify an order entered under Subsection (1); or
3211 (iii) make any other appropriate order governing the enforceability of an order entered
3212 under Subsection (1).
3213 (c) The receivership court or an appellate court to which the matter is presented may
3214 condition any relief it grants under this Subsection (4) on the filing of a bond or other
3215 appropriate security with the receivership court.
3216 (5) Section 31A-27a-114 applies to all acts taken during the pendency of an appeal
3217 regardless of the appeal's ultimate disposition.
3218 (6) The reversal or modification on appeal of an order of rehabilitation or liquidation
3219 does not affect the validity of an act of the receiver pursuant to the order unless the order is
3220 stayed pending appeal.
3221 Section 61. Section 31A-27a-206 is enacted to read:
3222 31A-27a-206. Confidentiality.
3223 (1) (a) Except as provided in Subsection (1)(b), in a delinquency proceeding or a
3224 judicial review under Section 31A-27a-201 :
3225 (i) all records of the insurer, department files, court records and papers, and other
3226 documents, so far as they pertain to or are a part of the record of the proceedings, are
3227 confidential; and
3228 (ii) a paper filed with the clerk of the Third District Court for Salt Lake County shall be
3229 held by the clerk in a confidential file as permitted by law.
3230 (b) The items listed in Subsection (1)(a) are subject to Subsection (1)(a):
3231 (i) except to the extent necessary to obtain compliance with an order entered in
3232 connection with the proceeding; and
3233 (ii) unless and until:
3234 (A) the Third District Court for Salt Lake County, after hearing argument in chambers,
3235 orders otherwise;
3236 (B) the insurer requests that the matter be made public; or
3237 (C) the commissioner applies for an order under Section 31A-27a-207 .
3238 (2) (a) If the recipient agrees to maintain the confidentiality of the document, material,
3239 or other information, the commissioner or rehabilitator may share a document, materials, or
3240 other information in the possession, custody, or control of the department, pertaining to an
3241 insurer that is the subject of a delinquency proceeding under this chapter with:
3242 (i) another state, federal, and international regulatory agency;
3243 (ii) the National Association of Insurance Commissioners and its affiliates or
3244 subsidiaries;
3245 (iii) a state, federal, and international law enforcement authority;
3246 (iv) an auditor appointed by the receivership court in accordance with Section
3247 31A-27a-805 ; or
3248 (v) a representative of an affected guaranty association.
3249 (b) If the domiciliary receiver believes that certain information is sensitive, the receiver
3250 may share that information subject to a continuation of the confidentiality obligations beyond
3251 the period allowed in Subsection (3).
3252 (c) This section does not limit the power of the commissioner to disclose information
3253 under other applicable law.
3254 (3) (a) A domiciliary receiver shall permit a commissioner or a guaranty association of
3255 another state to obtain a listing of policyholders and certificate holders residing in the
3256 requestor's state, including current addresses and summary policy information, if the
3257 commissioner or the guaranty association of another state agrees:
3258 (i) to maintain the confidentiality of the record; and
3259 (ii) that the record will be used only for regulatory or guaranty association purposes.
3260 (b) Access to a record under this Subsection (3) may be limited to normal business
3261 hours.
3262 (c) If the domiciliary receiver believes that certain information described in Subsection
3263 (3) is sensitive and disclosure might cause a diminution in recovery, the receiver may apply for
3264 a protective order imposing additional restrictions on access.
3265 (4) (a) The confidentiality obligations imposed by this section shall end upon the entry
3266 of an order of liquidation against the insurer, unless:
3267 (i) otherwise agreed to by the parties; or
3268 (ii) pursuant to an order of the receivership court.
3269 (b) A continuation of confidentiality as provided in Subsection (2) does not apply to an
3270 insurer record necessary for a guaranty association to discharge its statutory responsibilities.
3271 (5) A waiver of an applicable privilege or claim of confidentiality does not occur as a
3272 result of a disclosure, or any sharing of documents, materials, or other information, made
3273 pursuant to this section.
3274 Section 62. Section 31A-27a-207 is enacted to read:
3275 31A-27a-207. Grounds for rehabilitation or liquidation.
3276 (1) The commissioner may file in the Third District Court for Salt Lake County a
3277 petition with respect to an insurer domiciled in this state or an unauthorized insurer for an order
3278 of rehabilitation or liquidation on any one or more of the following grounds:
3279 (a) the insurer is impaired;
3280 (b) the insurer is insolvent;
3281 (c) subject to Subsection (2), the insurer is about to become insolvent;
3282 (d) (i) the insurer neglects or refuses to comply with an order of the commissioner to
3283 make good within the time prescribed by law any deficiency;
3284 (ii) if a stock company, if its capital and minimum required surplus is impaired; or
3285 (iii) if a company other than a stock company, if its surplus is impaired;
3286 (e) the insurer, its parent company, its subsidiary, or its affiliate:
3287 (i) converts, wastes, or conceals property of the insurer; or
3288 (ii) otherwise improperly disposes of, dissipates, uses, releases, transfers, sells, assigns,
3289 hypothecates, or removes the property of the insurer;
3290 (f) the insurer is in such condition that the insurer could not meet the requirements for
3291 organization and authorization as required by law, except as to the amount of:
3292 (i) the original surplus required of a stock company under Sections 31A-5-211 and
3293 31A-8-209 ; and
3294 (ii) the surplus required of a company other than a stock company in excess of the
3295 minimum surplus required to be maintained;
3296 (g) the insurer, its parent company, its subsidiary, or its affiliate:
3297 (i) conceals, removes, alters, destroys, or fails to establish and maintain records and
3298 other pertinent material adequate for the determination of the financial condition of the insurer
3299 by examination under Section 31A-2-203 ; or
3300 (ii) fails to properly administer claims or maintain claims records that are adequate for
3301 the determination of its outstanding claims liability;
3302 (h) at any time after the issuance of an order under Subsection 31A-2-201 (4), or at the
3303 time of instituting a proceeding under this chapter, it appears to the commissioner that upon
3304 good cause shown, it is not in the best interest of the policyholders, creditors, or the public to
3305 proceed with the conduct of the business of the insurer;
3306 (i) the insurer is in such condition that the further transaction of business would be
3307 hazardous financially, according to Subsection 31A-17-609 (3) or otherwise, to its
3308 policyholders, creditors, or the public;
3309 (j) there is reasonable cause to believe that:
3310 (i) there has been:
3311 (A) embezzlement from the insurer;
3312 (B) wrongful sequestration or diversion of the insurer's property;
3313 (C) forgery or fraud affecting the insurer; or
3314 (D) other illegal conduct in, by, or with respect to the insurer; and
3315 (ii) the act described in Subsection (1)(j)(i) if established would endanger assets in an
3316 amount threatening the solvency of the insurer;
3317 (k) control of the insurer is in a person who is:
3318 (i) dishonest;
3319 (ii) untrustworthy; or
3320 (iii) so lacking in insurance company managerial experience or capability as to be
3321 hazardous to policyholders, creditors, or the public;
3322 (l) if:
3323 (i) a person who in fact has executive authority in the insurer, whether an officer,
3324 manager, general agent, director, trustee, employee, shareholder, or other person:
3325 (A) refuses to be examined under oath by the commissioner concerning the insurer's
3326 affairs, whether in this state or elsewhere; or
3327 (B) if examined under oath, refuses to divulge pertinent information reasonably known
3328 to the person; and
3329 (ii) after reasonable notice of the facts described in Subsection (1)(l)(i), the insurer fails
3330 promptly and effectively to terminate:
3331 (A) the employment or status of the person; and
3332 (B) all of the person's influence on management;
3333 (m) after demand by the commissioner under Section 31A-2-203 or under this chapter,
3334 the insurer fails to promptly make available for examination:
3335 (i) any of its own property, accounts, or records; or
3336 (ii) so far as it pertains to the insurer, property, accounts, or records of:
3337 (A) a subsidiary or related company within the control of the insurer; or
3338 (B) a person having executive authority in the insurer;
3339 (n) without first obtaining the written consent of the commissioner, the insurer:
3340 (i) transfers, or attempts to transfer, in a manner contrary to Section 31A-5-508 or
3341 31A-16-103 , substantially its entire property or business; or
3342 (ii) enters into a transaction the effect of which is to merge, consolidate, or reinsure
3343 substantially its entire property or business in or with the property or business of any other
3344 person;
3345 (o) the insurer or its property has been or is the subject of an application for the
3346 appointment of a receiver, trustee, custodian, conservator, sequestrator, or similar fiduciary of
3347 the insurer or its property otherwise than as authorized under the insurance laws of this state;
3348 (p) within the previous five years the insurer willfully and continuously violates:
3349 (i) its charter or articles of incorporation;
3350 (ii) its bylaws;
3351 (iii) an insurance law of this state; or
3352 (iv) a valid order of the commissioner;
3353 (q) the insurer fails to pay within 60 days after the due date:
3354 (i) (A) an obligation to any state or any subdivision of a state; or
3355 (B) a judgment entered in any state, if the court in which the judgment is entered has
3356 jurisdiction over the subject matter; and
3357 (ii) except that nonpayment is not a ground until 60 days after a good faith effort by the
3358 insurer to contest the obligation has been terminated, whether it is before the commissioner or
3359 in the courts;
3360 (r) the insurer systematically:
3361 (i) engages in the practice of:
3362 (A) reaching settlements with and obtaining releases from claimants; and
3363 (B) unreasonably delaying payment, or failing to pay the agreed-upon settlements; or
3364 (ii) attempts to compromise with claimants or other creditors on the ground that it is
3365 financially unable to pay its claims or obligations in full;
3366 (s) the insurer fails to file its annual report or other financial report required by statute
3367 within the time allowed by law;
3368 (t) the board of directors or the holders of a majority of the shares entitled to vote, or a
3369 majority of those individuals entitled to the control of those entities specified in Section
3370 31A-27a-104 , request or consent to rehabilitation or liquidation under this chapter;
3371 (u) (i) the insurer does not comply with its domiciliary state's requirements for issuance
3372 to it of a certificate of authority; or
3373 (ii) the insurer's certificate of authority is revoked by its state of domicile; or
3374 (v) when authorized by Chapter 17, Part 6, Risk-Based Capital.
3375 (2) For purposes of this section, an insurer is about to become insolvent if it is
3376 reasonably anticipated that the insurer will not have liquid assets to meet its current obligations
3377 for the next 90 days.
3378 Section 63. Section 31A-27a-208 is enacted to read:
3379 31A-27a-208. Entry of order.
3380 (1) If the commissioner establishes any of the grounds provided in Section
3381 31A-27a-207 , the receivership court shall:
3382 (a) grant the petition; and
3383 (b) issue the order of rehabilitation or liquidation requested in the petition.
3384 (2) Upon the issuance of the order, the commissioner shall forward a copy of the order
3385 by first-class mail or electronic communication as permitted by the receivership court to the
3386 commissioners and guaranty associations in states in which the insurer did business.
3387 Section 64. Section 31A-27a-209 is enacted to read:
3388 31A-27a-209. Effect of order of rehabilitation or liquidation.
3389 (1) The filing or recording of an order of receivership with the following imparts the
3390 same notice as a deed, bill of sale, or other evidence of title filed or recorded would have
3391 imparted:
3392 (a) the Third District Court for Salt Lake County;
3393 (b) the recorder of deeds of the county in which the principal business of the insurer is
3394 conducted; or
3395 (c) in the case of real estate, with the recorder of deeds of the county where the
3396 property is located.
3397 (2) The filing of a petition commencing delinquency proceedings under this chapter or
3398 the entry of an order of seizure, rehabilitation, or liquidation does not constitute a breach or an
3399 anticipatory breach of any contract or lease of the insurer.
3400 (3) (a) The receiver may appoint one or more special deputies.
3401 (b) A special deputy:
3402 (i) has the powers and responsibilities of the receiver granted under this section, unless
3403 specifically limited by the receiver; and
3404 (ii) serves at the pleasure of the receiver.
3405 (c) The receiver may employ or contract with:
3406 (i) legal counsel;
3407 (ii) one or more actuaries;
3408 (iii) one or more accountants;
3409 (iv) one or more appraisers;
3410 (v) one or more consultants;
3411 (vi) one or more clerks;
3412 (vii) one or more assistants; and
3413 (viii) other personnel as may be considered necessary.
3414 (d) A special deputy or other person with whom the receiver contracts under this
3415 Subsection (3):
3416 (i) is considered to be an agent of the commissioner only in the commissioner's
3417 capacity as receiver; and
3418 (ii) is not considered an agent of the state.
3419 (e) The provisions of any law governing the procurement of goods and services by the
3420 state do not apply to a contract entered into by the commissioner as receiver.
3421 (f) The compensation of a special deputy, employee, or contractor and all expenses of
3422 taking possession of the insurer and of conducting the receivership shall be:
3423 (i) determined by the receiver, with the approval of the receivership court in
3424 accordance with Section 31A-27a-115 ; and
3425 (ii) paid out of the property of the insurer.
3426 (g) (i) If the receiver, in the receiver's sole discretion, considers it necessary to the
3427 proper performance of the receiver's duties under this chapter, the receiver may appoint an
3428 advisory committee of policyholders, claimants, or other creditors including guaranty
3429 associations.
3430 (ii) The committee described in this Subsection (3)(g) serves:
3431 (A) at the pleasure of the receiver; and
3432 (B) without compensation and without reimbursement for expenses.
3433 (iii) The receiver or the receivership court in proceedings conducted under this chapter
3434 may not appoint any other committee of any nature.
3435 Section 65. Section 31A-27a-301 is enacted to read:
3436
3437 31A-27a-301. Rehabilitation orders.
3438 (1) (a) An order to rehabilitate the business of an insurer shall:
3439 (i) appoint the commissioner and the commissioner's successors in office as the
3440 rehabilitator;
3441 (ii) direct the rehabilitator to:
3442 (A) take possession and title of the assets of the insurer; and
3443 (B) administer the assets of the insurer under the general supervision of the court; and
3444 (iii) require accountings to the receivership court by the rehabilitator.
3445 (b) Accountings shall be at the intervals the receivership court specifies in its order, but
3446 no less frequently than semi annually.
3447 (c) Each accounting shall include a report concerning the rehabilitator's opinion as to:
3448 (i) the likelihood that a plan under Section 31A-27a-303 will be prepared by the
3449 rehabilitator; and
3450 (ii) the timetable for preparing the plan described in Subsection (1)(c)(i).
3451 (2) (a) In recognition of the need for a prompt and final resolution for all persons
3452 affected by a plan of rehabilitation, any appeal from an order of rehabilitation or an order
3453 approving a plan of rehabilitation shall be heard on an expedited basis.
3454 (b) A stay of an order of rehabilitation or an order approving a plan of rehabilitation
3455 may not be granted unless the appellant demonstrates that extraordinary circumstances warrant
3456 delaying the recovery under the plan of rehabilitation of all other persons, including
3457 policyholders.
3458 (c) If a plan of rehabilitation provides an appropriate mechanism for adjustment in the
3459 event of an adverse ruling from an appeal, a stay may not be granted.
3460 Section 66. Section 31A-27a-302 is enacted to read:
3461 31A-27a-302. Powers and duties of the rehabilitator.
3462 (1) (a) With court approval, the rehabilitator may take an action the rehabilitator
3463 considers necessary or appropriate to reform and revitalize the insurer, including:
3464 (i) canceling:
3465 (A) a policy;
3466 (B) an insurance or reinsurance contract, other than life insurance, health insurance, or
3467 an annuity;
3468 (C) a surety bond; or
3469 (D) a surety undertaking; or
3470 (ii) transferring to a solvent assuming insurer:
3471 (A) a policy;
3472 (B) an insurance or reinsurance contract;
3473 (C) a surety bond; or
3474 (D) a surety undertaking.
3475 (b) The rehabilitator has all the powers of the directors, officers, and managers of the
3476 insurer, whose authority is suspended, except as redelegated by the rehabilitator.
3477 (c) The rehabilitator has full power to:
3478 (i) direct and manage the insurer;
3479 (ii) hire and discharge employees; and
3480 (iii) deal with the property and business of the insurer.
3481 (d) The rehabilitator is not liable as the result of good faith issuance or renewal of a
3482 policy while in rehabilitation.
3483 (2) The rehabilitator may pursue all appropriate legal remedies on behalf of the insurer
3484 if it appears to the rehabilitator that there is or has been criminal or tortious conduct, or breach
3485 of a contractual or fiduciary obligation detrimental to the insurer by an officer, a manager, an
3486 agent, a broker, an employee, an affiliate, or other person.
3487 (3) (a) The rehabilitator may assert all defenses available to the insurer as against a
3488 third person, including statutes of limitations, statutes of frauds, and the defense of usury.
3489 (b) A waiver of a defense by the insurer after a petition pursuant to Section
3490 31A-27a-201 or 31A-27a-207 is filed does not bind the rehabilitator.
3491 (4) The enumeration of the powers and authority of the rehabilitator in this section:
3492 (a) may not be construed as a limitation upon the rehabilitator; and
3493 (b) does not exclude in any manner the right to do other acts:
3494 (i) not specifically enumerated or otherwise provided for; and
3495 (ii) as may be necessary or appropriate for the accomplishment of or in aid of the
3496 purpose of rehabilitation.
3497 Section 67. Section 31A-27a-303 is enacted to read:
3498 31A-27a-303. Filing of rehabilitation plans.
3499 (1) (a) The rehabilitator shall prepare and file a plan to effect rehabilitation with the
3500 receivership court within:
3501 (i) one year after the day on which the rehabilitation order is entered; or
3502 (ii) such further time as the receivership court may allow.
3503 (b) The receivership court may take an action described in Subsection (1)(c):
3504 (i) upon application of the rehabilitator for approval of a plan; and
3505 (ii) after the notice and hearings the receivership court may prescribe.
3506 (c) If the conditions of Subsection (1)(b) are met, the receivership court may:
3507 (i) approve the plan proposed;
3508 (ii) disapprove the plan proposed; or
3509 (iii) (A) modify the plan proposed; and
3510 (B) approve the plan as modified.
3511 (d) If the plan is approved, the rehabilitator shall carry out the plan.
3512 (e) In the case of a life insurer, the plan proposed may:
3513 (i) include the imposition of a lien upon a policy of the insurer, if all rights of
3514 shareholders are relinquished; and
3515 (ii) propose imposition of a moratorium upon loan and cash surrender rights under a
3516 policy for a period not to exceed one year from the day on which the order approving the
3517 rehabilitation plan is entered, unless the receivership court, for good cause shown, extends the
3518 moratorium.
3519 (2) Once a plan is filed, any party in interest may object to the plan.
3520 (3) A plan shall:
3521 (a) except as provided in Subsection (5), provide no less favorable treatment of a claim
3522 or class of claims than would occur in liquidation, unless the holder of a particular claim or
3523 interest agrees to a less favorable treatment of that particular claim or interest;
3524 (b) provide adequate means for the plan's implementation;
3525 (c) contain information concerning the financial condition of the insurer and the
3526 operation and effect of the plan, as far as is reasonably practicable in light of:
3527 (i) the nature and history of the insurer;
3528 (ii) the condition of the insurer's records; and
3529 (iii) the nature of the plan; and
3530 (d) provide for the disposition of the records relevant to the duties and obligations
3531 covered by the plan.
3532 (4) A plan may include any other provisions not inconsistent with this chapter,
3533 including:
3534 (a) payment of distributions;
3535 (b) (i) assumption or reinsurance of all or a portion of the insurer's remaining liabilities
3536 by a licensed insurer or other entity; and
3537 (ii) transfer of assets and related records to the licensed insurer or other entity;
3538 (c) to the extent appropriate, application of insurance company regulatory market
3539 conduct standards to any entity administering claims on behalf of the receiver or assuming
3540 direct liabilities of the insurer;
3541 (d) contracting with a guaranty association or any other qualified entity to perform the
3542 administration of claims;
3543 (e) annual independent financial and performance audits of any entity administering
3544 claims on behalf of the receiver that is not otherwise subject to examination pursuant to state
3545 insurance law; and
3546 (f) termination of the insurer's liabilities other than those under policies of insurance as
3547 of a date certain.
3548 (5) (a) A plan may designate and separately treat one or more separate subclasses
3549 consisting only of those claims within the subclasses that are for or reduced to de minimis
3550 amounts.
3551 (b) For purposes of this Subsection (5), a "de minimis amount" is an amount equal to
3552 or less than a maximum de minimis amount approved by the receivership court as being
3553 reasonable and necessary for administrative convenience.
3554 Section 68. Section 31A-27a-304 is enacted to read:
3555 31A-27a-304. Termination of rehabilitation.
3556 (1) (a) The rehabilitator may move for an order of liquidation whenever the
3557 rehabilitator believes further attempts to rehabilitate an insurer would:
3558 (i) substantially increase the risk of loss to creditors, policyholders, or the public; or
3559 (ii) be futile.
3560 (b) In accordance with Section 31A-27a-305 , the rehabilitator or the rehabilitator's
3561 designated representative shall coordinate with an affected guaranty association and any
3562 national association of guaranty associations to plan for transition to liquidation.
3563 (2) The rehabilitator shall petition the receivership court for an order of liquidation or
3564 seek an order, on good cause shown, for a longer suspension period if:
3565 (a) the payment of a policy obligation is suspended in substantial part for a period of
3566 six months at any time after the appointment of the rehabilitator; and
3567 (b) the rehabilitator has not filed an application for approval of a plan under Section
3568 31A-27a-303 .
3569 (3) (a) The receivership court may enter an order terminating rehabilitation of an
3570 insurer:
3571 (i) on petition from the rehabilitator, which may be made at any time;
3572 (ii) on petition from the directors of the insurer, which may be made at any time; or
3573 (iii) on the receivership court's own motion.
3574 (b) Subject to Section 31A-27a-801 , if the receivership court finds that rehabilitation is
3575 accomplished and that grounds for rehabilitation under Section 31A-27a-207 no longer exist,
3576 the receivership court shall order that the insurer be restored to:
3577 (i) title and possession of its property; and
3578 (ii) the control of the business.
3579 Section 69. Section 31A-27a-305 is enacted to read:
3580 31A-27a-305. Coordination with guaranty associations and orderly transition to
3581 liquidation.
3582 (1) No later than 30 days following the day on which an order of rehabilitation is
3583 entered the rehabilitator or the rehabilitator's designated representative shall:
3584 (a) consult with any potentially affected guaranty association or the affected guaranty
3585 association's designated representative to determine the extent to which the affected guaranty
3586 association will be impacted by or may assist in the efforts to rehabilitate the insurer; and
3587 (b) provide appropriate information to the affected guaranty association described in
3588 Subsection (1)(a) to allow the affected guaranty association to evaluate and discharge its
3589 statutory responsibilities.
3590 (2) (a) The rehabilitator shall begin appropriate contingency planning and organizing
3591 so that an orderly transition to liquidation occurs, if liquidation is necessary.
3592 (b) An orderly transition to liquidation requires, among other things, that the
3593 rehabilitator:
3594 (i) to the fullest extent possible, reserve sufficient assets to continue to meet
3595 obligations under insurance policies of the insolvent insurer until guaranty associations are
3596 triggered; and
3597 (ii) conduct affairs in such a way and cooperate as necessary with affected guaranty
3598 associations:
3599 (A) to ensure that affected guaranty associations are provided with:
3600 (I) appropriate information;
3601 (II) necessary updates at reasonable intervals; and
3602 (III) a reasonable period of time to plan and organize; and
3603 (B) so that affected guaranty associations are able to properly discharge statutory
3604 responsibilities upon being triggered.
3605 (3) Appropriate information as referred to in this section:
3606 (a) at a minimum includes the following for lines of business written by the insurer,
3607 whether covered or not covered by a guaranty association:
3608 (i) a general description of the different types of business written or assumed by the
3609 insurer;
3610 (ii) claim counts and policy counts by state and by line of business;
3611 (iii) claim and policy reserves;
3612 (iv) account values;
3613 (v) cash surrender values;
3614 (vi) policy loans;
3615 (vii) interest crediting history;
3616 (viii) premiums and mode of payment;
3617 (ix) unpaid claims and amounts;
3618 (x) sample policies and endorsements;
3619 (xi) listing of different locations of claim files;
3620 (xii) if a third party administrator is used, a copy of an executed contract and a
3621 description of the contractual arrangements; and
3622 (xiii) information concerning claims in litigation or dispute, including a listing of
3623 claims with assigned defense counsel for those claims going to trial in the near future after a
3624 possible liquidation date;
3625 (b) includes information concerning states in which the insurer is or was licensed;
3626 (c) includes information concerning time periods for which the insurer is or was
3627 licensed; and
3628 (d) includes other information reasonably requested by an affected guaranty association
3629 necessary for the affected guaranty association to fulfill its statutory duties.
3630 (4) (a) The listing of information in Subsection (3) is not necessarily an exclusive list.
3631 (b) To ensure that an orderly transition to liquidation occurs, information not listed in
3632 Subsection (3) may be needed and may be appropriately provided by the receiver.
3633 (5) In the case of a property and casualty insurer, the rehabilitator, in cooperation with
3634 affected guaranty associations, shall make all reasonable efforts to prepare the insurer's
3635 electronic policy and claims data so that, upon the entry of an order of liquidation, the data will
3636 be ready for transmission using the Uniform Data Standards as promulgated by the National
3637 Association of Insurance Commissioners.
3638 Section 70. Section 31A-27a-401 is enacted to read:
3639
3640 31A-27a-401. Liquidation orders.
3641 (1) (a) An order to liquidate the business of an insurer shall:
3642 (i) appoint the commissioner and any successor in office as the liquidator; and
3643 (ii) direct the liquidator to:
3644 (A) take possession of the property of the insurer; and
3645 (B) administer the property subject to this chapter.
3646 (b) As of the entry of the final order of liquidation, the liquidator is vested by operation
3647 of law with the title to the following, wherever located, of the insurer ordered liquidated:
3648 (i) all property;
3649 (ii) all contracts;
3650 (iii) all rights of action; and
3651 (iv) all records.
3652 (2) Upon issuance of the order of liquidation, the rights and liabilities of the insurer
3653 and of its creditors, policyholders, shareholders, members, and all other persons interested in its
3654 estate shall become fixed as of the day on which the order of liquidation is entered:
3655 (a) except as provided in Sections 31A-27a-402 , 31A-27a-403 , and 31A-27a-605 ; and
3656 (b) unless otherwise fixed by the liquidation court.
3657 (3) An order to liquidate the business of an alien insurer in this state shall be in the
3658 same terms and have the same legal effect as an order to liquidate a domestic insurer.
3659 (4) (a) Whenever applicable, a petition for liquidation should include a request for a
3660 judicial declaration or finding of insolvency.
3661 (b) After providing proper notice and hearing, the receivership court may at any time
3662 make the declaration of insolvency.
3663 (5) If an order of liquidation is set aside upon appeal, the insurer is not released from
3664 delinquency proceedings except in accordance with Section 31A-27a-801 .
3665 Section 71. Section 31A-27a-402 is enacted to read:
3666 31A-27a-402. Continuance of coverage.
3667 (1) Notwithstanding any policy or contract language or any other statute, and unless
3668 ordered otherwise by the receivership court upon application by the receiver, a reinsurance
3669 contract by which the insurer assumes the insurance obligations of another insurer is cancelled
3670 upon entry of an order of liquidation.
3671 (2) (a) Notwithstanding any policy or contract language or any other statute, and
3672 subject to Subsection (2)(c), the following in effect at the time of issuance of an order of
3673 liquidation shall continue in force as provided in this section until the time period specified in
3674 Subsection (2)(b):
3675 (i) a policy;
3676 (ii) an insurance contract, other than reinsurance by which the insurer has ceded
3677 insurance obligations to another person;
3678 (iii) a surety bond; or
3679 (iv) a surety undertaking.
3680 (b) Any item listed in Subsection (2)(a) continues in force:
3681 (i) until the earlier of:
3682 (A) 30 days from the day on which the liquidation order is entered;
3683 (B) the day on which the policy coverage expires;
3684 (C) the day on which the insured:
3685 (I) replaces the insurance coverage with equivalent insurance with another insurer; or
3686 (II) otherwise terminates the policy;
3687 (D) the day on which the liquidator effects a transfer of the policy obligation pursuant
3688 to Subsection 31A-27a-405 (1)(i); or
3689 (E) the date proposed by the liquidator and approved by the receivership court to cancel
3690 coverage; or
3691 (ii) unless further extended by the receiver with the approval of the receivership court.
3692 (c) This Subsection (2) does not apply to:
3693 (i) life insurance;
3694 (ii) disability income insurance;
3695 (iii) long-term care insurance;
3696 (iv) health insurance; or
3697 (v) an annuity.
3698 (3) An order of liquidation under Section 31A-27a-401 terminates coverages at the
3699 time specified in Subsections (1) and (2) for purposes of any other statute.
3700 (4) (a) A life insurance policy, disability income insurance policy, long-term care
3701 insurance policy, health insurance policy, or an annuity continues in force:
3702 (i) if covered by an affected guaranty association or portions are covered by one or
3703 more affected guaranty associations, under applicable law;
3704 (ii) subject to the terms of the policy or annuity, including any terms restructured
3705 pursuant to a court-approved rehabilitation plan; and
3706 (iii) to the extent necessary to permit an affected guaranty association to discharge its
3707 statutory obligations.
3708 (b) A life insurance policy, disability income insurance policy, long-term care
3709 insurance policy, health insurance policy, or an annuity not covered by one or more guaranty
3710 associations, or those portions not covered by one or more guaranty associations terminates as
3711 provided under Subsection (2), except to the extent that the liquidator proposes and the
3712 receivership court approves the use of property of the estate, consistent with Section
3713 31A-27a-701 , for the purpose of continuing the contract or coverage by transferring the
3714 contract or coverage to an assuming reinsurer.
3715 (5) The cancellation of a bond or surety undertaking does not release any cosurety or
3716 guarantor.
3717 (6) Except as otherwise provided in this chapter, the obligations of the insolvent
3718 insurer's reinsurers may not be released or discharged of a policy ceded to a reinsurer by a
3719 termination under this section.
3720 (7) A contract by which the insurer reinsures obligations arising under a life insurance
3721 policy, disability income insurance policy, long-term care insurance policy, or an annuity
3722 continues or terminates as provided in Section 31A-27a-513 .
3723 Section 72. Section 31A-27a-403 is enacted to read:
3724 31A-27a-403. Continuance of coverage -- Health maintenance organizations.
3725 (1) As used in this section:
3726 (a) "Basic health care services" is as defined in Section 31A-8-101 .
3727 (b) "Enrollee" is as defined in Section 31A-8-101 .
3728 (c) "Health care" is as defined in Section 31A-1-301 .
3729 (d) "Health maintenance organization" is as defined in Section 31A-8-101 .
3730 (e) "Limited health plan" is as defined in Section 31A-8-101 .
3731 (f) (i) "Managed care organization" means an entity licensed by, or holding a certificate
3732 of authority from, the department to furnish health care services or health insurance.
3733 (ii) "Managed care organization" includes:
3734 (A) a limited health plan;
3735 (B) a health maintenance organization;
3736 (C) a preferred provider organization;
3737 (D) a fraternal benefit society; or
3738 (E) an entity similar to an entity described in Subsections (1)(f)(ii)(A) through (D).
3739 (iii) "Managed care organization" does not include:
3740 (A) an insurer or other person that is eligible for membership in a guaranty association
3741 under Chapter 28, Guaranty Associations;
3742 (B) a mandatory state pooling plan;
3743 (C) a mutual assessment company or an entity that operates on an assessment basis; or
3744 (D) an entity similar to an entity described in Subsections (1)(f)(iii)(A) through (C).
3745 (g) "Participating provider" means a provider who, under a contract with a managed
3746 care organization authorized under Section 31A-8-407 , agrees to provide health care services to
3747 enrollees with an expectation of receiving payment:
3748 (i) directly or indirectly, from the managed care organization; and
3749 (ii) other than a copayment.
3750 (h) "Participating provider contract" means the agreement between a participating
3751 provider and a managed care organization authorized under Section 31A-8-407 .
3752 (i) "Preferred provider" means a provider who agrees to provide health care services
3753 under an agreement authorized under Subsection 31A-22-617 (1).
3754 (j) "Preferred provider contract" means the written agreement between a preferred
3755 provider and a managed care organization authorized under Subsection 31A-22-617 (1).
3756 (k) (i) Except as provided in Subsection (1)(k)(ii), "preferred provider organization"
3757 means a person that:
3758 (A) furnishes at a minimum, through a preferred provider, basic health care services to
3759 an enrollee in return for prepaid periodic payments in an amount agreed to before the time
3760 during which the health care may be furnished;
3761 (B) is obligated to the enrollee to arrange for the services described in Subsection
3762 (1)(k)(i)(A); and
3763 (C) permits the enrollee to obtain health care services from a provider who is not a
3764 preferred provider.
3765 (ii) "Preferred provider organization" does not include:
3766 (A) an insurer licensed under Chapter 7, Nonprofit Health Service Insurance
3767 Corporations; or
3768 (B) an individual who contracts to render professional or personal services that the
3769 individual performs.
3770 (l) "Provider" is as defined in Section 31A-8-101 .
3771 (m) "Uncovered expenditure" means a cost of health care services that is covered by an
3772 organization for which an enrollee is liable in the event of the managed care organization's
3773 insolvency.
3774 (2) The rehabilitator or liquidator may take one or more of the actions described in
3775 Subsections (2)(a) through (g) to assure continuation of health care coverage for enrollees of an
3776 insolvent managed care organization.
3777 (a) (i) Subject to Subsection (2)(a)(ii), a rehabilitator or liquidator may require a
3778 participating provider or preferred provider to continue to provide the health care services the
3779 provider is required to provide under the provider's participating provider contract or preferred
3780 provider contract until the earlier of:
3781 (A) 90 days after the day on which the following is filed:
3782 (I) a petition for rehabilitation; or
3783 (II) a petition for liquidation; or
3784 (B) the day on which the term of the contract ends.
3785 (ii) A requirement by the rehabilitator or liquidator under Subsection (2)(a)(i) that a
3786 participating provider or preferred provider continue to provide health care services under the
3787 provider's participating provider contract or preferred provider contract expires when health
3788 care coverage for all enrollees of the insolvent managed care organization is obtained from
3789 another managed care organization or insurer.
3790 (b) (i) Subject to Subsection (2)(b)(ii), a rehabilitator or liquidator may reduce the fees
3791 a participating provider or preferred provider is otherwise entitled to receive from the managed
3792 care organization under the provider's participating provider contract or preferred provider
3793 contract during the time period in Subsection (2)(a)(i).
3794 (ii) Notwithstanding Subsection (2)(b)(i), a rehabilitator or liquidator may not reduce a
3795 fee to less than 75% of the regular fee set forth in the provider's participating provider contract
3796 or preferred provider contract.
3797 (iii) An enrollee shall continue to pay the same copayments, deductibles, and other
3798 payments for services received from a participating provider or preferred provider that the
3799 enrollee is required to pay before the day on which the following is filed:
3800 (A) the petition for rehabilitation; or
3801 (B) the petition for liquidation.
3802 (c) A participating provider or preferred provider shall:
3803 (i) accept the amounts specified in Subsection (2)(b) as payment in full; and
3804 (ii) relinquish the right to collect additional amounts from the insolvent managed care
3805 organization's enrollee.
3806 (d) Subsections (2)(b) and (c) apply to the fees paid to a provider who agrees to
3807 provide health care services to an enrollee but is not a preferred or participating provider.
3808 (e) If the managed care organization is a health maintenance organization, Subsections
3809 (2)(e)(i) through (vi) apply.
3810 (i) A solvent health maintenance organization licensed under Chapter 8, Health
3811 Maintenance Organizations and Limited Health Plans, shall extend to the enrollees of an
3812 insolvent health maintenance organization all rights, privileges, and obligations of being an
3813 enrollee in the accepting health maintenance organization:
3814 (A) subject to Subsections (2)(e)(ii), (iii), and (v);
3815 (B) upon notification from and subject to the direction of the rehabilitator or liquidator
3816 of an insolvent health maintenance organization licensed under Chapter 8, Health Maintenance
3817 Organizations and Limited Health Plans; and
3818 (C) if the solvent health maintenance organization operates within a portion of the
3819 insolvent health maintenance organization's service area.
3820 (ii) Notwithstanding Subsection (2)(e)(i), the accepting health maintenance
3821 organization shall give credit to an enrollee for any waiting period already satisfied under the
3822 enrollee's contract with the insolvent health maintenance organization.
3823 (iii) A health maintenance organization accepting an enrollee of an insolvent health
3824 maintenance organization under Subsection (2)(e)(i) shall charge the enrollee the premiums
3825 applicable to the existing business of the accepting health maintenance organization.
3826 (iv) A health maintenance organization's obligation to accept an enrollee under
3827 Subsection (2)(e)(i) is limited in number to the accepting health maintenance organization's pro
3828 rata share of all health maintenance organization enrollees in this state, as determined after
3829 excluding the enrollees of the insolvent insurer.
3830 (v) (A) The rehabilitator or liquidator of an insolvent health maintenance organization
3831 shall take those measures that are possible to ensure that no health maintenance organization is
3832 required to accept more than its pro rata share of the adverse risk represented by the enrollees
3833 of the insolvent health maintenance organization.
3834 (B) If the methodology used by the rehabilitator or liquidator to assign an enrollee is
3835 one that can be expected to produce a reasonably equitable distribution of adverse risk, that
3836 methodology and its results are acceptable under this Subsection (2)(e)(v).
3837 (vi) (A) Notwithstanding Section 31A-27a-402 , the rehabilitator or liquidator may
3838 require all solvent health maintenance organizations to pay for the covered claims incurred by
3839 the enrollees of the insolvent health maintenance organization.
3840 (B) As determined by the rehabilitator or liquidator, payments required under this
3841 Subsection (2)(e)(vi) may:
3842 (I) begin as of the day on which the following is filed:
3843 (Aa) the petition for rehabilitation; or
3844 (Bb) the petition for liquidation; and
3845 (II) continue for a maximum period through the time all enrollees are assigned pursuant
3846 to this section.
3847 (C) If the rehabilitator or liquidator makes an assessment under this Subsection
3848 (2)(e)(vi), the rehabilitator or liquidator shall assess each solvent health maintenance
3849 organization its pro rata share of the total assessment based upon its premiums from the
3850 previous calendar year.
3851 (D) (I) A solvent health maintenance organization required to pay for covered claims
3852 under this Subsection (2)(e)(vi) may file a claim against the estate of the insolvent health
3853 maintenance organization.
3854 (II) Any claim described in Subsection (2)(e)(vi)(D)(I), if allowed by the rehabilitator
3855 or liquidator, shall share in any distributions from the estate of the insolvent health
3856 maintenance organization as a Class 3 claim.
3857 (f) (i) A rehabilitator or liquidator may transfer, through sale or otherwise, the group
3858 and individual health care obligations of the insolvent managed care organization to one or
3859 more other managed care organizations or other insurers, if those other managed care
3860 organizations and other insurers:
3861 (A) are licensed to provide the same health care services in this state that are held by
3862 the insolvent managed care organization; or
3863 (B) have a certificate of authority to provide the same health care services in this state
3864 that is held by the insolvent managed care organization.
3865 (ii) The rehabilitator or liquidator may combine group and individual health care
3866 obligations of the insolvent managed care organization in any manner the rehabilitator or
3867 liquidator considers best to provide for continuous health care coverage for the maximum
3868 number of enrollees of the insolvent managed care organization.
3869 (iii) If the terms of a proposed transfer of the same combination of group and
3870 individual policy obligations to more than one other managed care organization or insurer are
3871 otherwise equal, the rehabilitator or liquidator shall give preference to the transfer of the group
3872 and individual policy obligations of an insolvent managed care organization as follows:
3873 (A) from one category of managed care organization to another managed care
3874 organization of the same category, as follows:
3875 (I) from a limited health plan to a limited health plan;
3876 (II) from a health maintenance organization to a health maintenance organization;
3877 (III) from a preferred provider organization to a preferred provider organization;
3878 (IV) from a fraternal benefit society to a fraternal benefit society; and
3879 (V) from an entity similar to an entity described in this Subsection (2)(f)(iii)(A) to a
3880 category that is similar;
3881 (B) from one category of managed care organization to another managed care
3882 organization, regardless of the category of the transferee managed care organization; and
3883 (C) from a managed care organization to a nonmanaged care provider of health care
3884 coverage, including insurers.
3885 (g) If an insolvent managed care organization has required surplus, a rehabilitator or
3886 liquidator may use the insolvent managed care organization's required surplus to continue to
3887 provide coverage for the insolvent managed care organization's enrollees, including paying
3888 uncovered expenditures.
3889 Section 73. Section 31A-27a-404 is enacted to read:
3890 31A-27a-404. Sale or dissolution of the insurer's corporate entity.
3891 (1) Notwithstanding the entry of a liquidation order, the liquidator may apply for an
3892 order to sell or dissolve the corporate entity or charter of a domestic insurer, or the United
3893 States branch of an alien insurer domiciled in this state:
3894 (a) at any time after an order of liquidation of the insurer is granted; and
3895 (b) consistent with this section.
3896 (2) Upon an application to sell the corporate entity or charter, with notice as prescribed
3897 in this chapter, the receivership court may enter an order:
3898 (a) separating the corporate entity or charter, together with any of its licenses to do
3899 business and the assets the liquidator considers appropriate to the transaction, from:
3900 (i) the remaining estate in liquidation;
3901 (ii) all of the remaining estate's assets; and
3902 (iii) the claims or interests of all claimants, creditors, policyholders, and stockholders;
3903 (b) canceling all outstanding stock and other securities of, and other equity interests in,
3904 the corporate entity or charter, except that the cancellation may not affect any claim against the
3905 estate by holders of the equity interests;
3906 (c) authorizing the issuance and sale of new stock or other securities for the purpose of
3907 transferring to one or more buyers control and ownership of the corporate entity or charter; and
3908 (d) authorizing the sale of the corporate entity or charter, together with any of its
3909 licenses to do business and the general assets the liquidator considers appropriate to the
3910 transaction, free and clear from the claims or interests of all claimants, creditors, policyholders,
3911 and stockholders.
3912 (3) (a) The sale of the corporate entity or charter may be made in the manner and on the
3913 terms and conditions:
3914 (i) applied for by the liquidator; and
3915 (ii) ordered by the receivership court.
3916 (b) A sale is subject to the domiciliary state's laws regarding acquisition of an insurer
3917 under Chapter 16, Insurance Holding Companies.
3918 (c) Upon the sale of a corporate entity or chapter:
3919 (i) the proceeds from the sale become a part of the property of the estate in liquidation;
3920 and
3921 (ii) the then separate corporate entity or charter, together with any of its licenses to do
3922 business and the assets the liquidator considers appropriate to the transaction, is free and clear
3923 from the claims or interests of all claimants, creditors, policyholders, and stockholders of the
3924 insurer in liquidation.
3925 (d) The court has broad powers to effect the disposition of a corporate entity and its
3926 charter including, without limiting the statement of broad powers, a reorganization or
3927 conversion of the corporate entity.
3928 (4) This section shall be liberally construed to:
3929 (a) accomplish its purposes to provide an expeditious and effective procedure to realize
3930 the maximum proceeds possible from the sale of a corporate entity or charter separated from an
3931 estate in liquidation; and
3932 (b) ensure that a purchaser receives clear and marketable title.
3933 (5) If permission to sell the corporate entity or charter is not granted before discharge
3934 of the liquidator, in accordance with this section or otherwise with receivership court approval:
3935 (a) the receivership court may order dissolution of the corporate entity or charter;
3936 (b) dissolution is considered complete by operation of law upon the discharge of the
3937 liquidator if the insurer is insolvent; or
3938 (c) dissolution may be ordered by the receivership court upon the discharge of the
3939 liquidator if the insurer is under a liquidation order for some other reason.
3940 Section 74. Section 31A-27a-405 is enacted to read:
3941 31A-27a-405. Powers of the liquidator.
3942 (1) The liquidator may:
3943 (a) (i) hold hearings, subpoena a witness to compel the witness' attendance, administer
3944 oaths, examine a person under oath, and compel a person to subscribe to that person's
3945 testimony after the testimony is correctly reduced to writing; and
3946 (ii) in connection with a power listed in Subsection (1)(a)(i), require the production of
3947 a record that the liquidator considers relevant to the inquiry;
3948 (b) audit the records of all agents of the insurer to the extent that those records relate to
3949 the business activities of the insurer;
3950 (c) collect all debts and moneys due and claims belonging to the insurer, wherever
3951 located, and for this purpose to:
3952 (i) institute action in another jurisdiction, to forestall garnishment and attachment
3953 proceedings against the debt;
3954 (ii) pay Class 1 administrative costs of the estate:
3955 (A) at the liquidator's sole discretion;
3956 (B) upon approval of the receivership court; and
3957 (C) where the payment assists or results in the collection or recovery of property of the
3958 insurer that provides a net benefit to creditors of the estate;
3959 (iii) do any other act as is necessary or expedient to collect, conserve, or protect the
3960 insurer's property, including the power to sell, compound, compromise, or assign a debt for
3961 purposes of collection upon the terms and conditions that the liquidator considers consistent
3962 with this chapter; and
3963 (iv) pursue any creditor's remedies available to enforce a claim of the insurer;
3964 (d) conduct public and private sales of the property of the insurer;
3965 (e) subject to Subsection (6), use property of the estate of an insurer under a liquidation
3966 order to transfer:
3967 (i) (A) a policy obligation; or
3968 (B) (I) the insurer's obligations under a surety bond or a surety undertaking; and
3969 (II) collateral held by the insurer with respect to the reimbursement obligations of the
3970 principals under the surety bond or surety undertaking;
3971 (ii) to a solvent assuming insurer; and
3972 (iii) if the transfer can be arranged without prejudice to applicable priorities under
3973 Section 31A-27a-701 ;
3974 (f) subject to Subsection (4), acquire, hypothecate, encumber, lease, improve, sell,
3975 transfer, abandon, or otherwise dispose of or deal with, any property of the estate:
3976 (i) at its market value; or
3977 (ii) upon terms and conditions that are fair and reasonable;
3978 (g) execute, acknowledge, and deliver any deed, assignment, release, or other
3979 instrument necessary or proper to effectuate a sale of property or other transaction in
3980 connection with the liquidation;
3981 (h) (i) subject to Subsection (7), borrow money for the purpose of facilitating the
3982 liquidation:
3983 (A) on the security of the property of the estate; or
3984 (B) without security; and
3985 (ii) execute and deliver a document necessary to the transaction to borrow money;
3986 (i) (i) enter into a contract necessary to carry out the order to liquidate; and
3987 (ii) subject to Section 31A-27a-113 , assume or reject an executory contract or
3988 unexpired lease to which the insurer is a party;
3989 (j) (i) continue to prosecute or to institute in the name of the insurer or in the
3990 liquidator's own name a suit or other legal proceeding, in this state or elsewhere; and
3991 (ii) abandon the prosecution of a claim the liquidator considers unprofitable to pursue
3992 further;
3993 (k) if the insurer is dissolved under Section 31A-27a-404 , apply to a court in this state
3994 or elsewhere for leave to substitute the liquidator for the insurer as a party;
3995 (l) subject to Subsection (8), prosecute or assert with exclusive standing an action that
3996 may exist on behalf of the public or a creditor, member, policyholder, or shareholder of the
3997 insurer against a person, except to the extent that:
3998 (i) a claim is personal to a specific creditor, member, policyholder, or shareholder; and
3999 (ii) recovery on the claim would not inure to the benefit of the estate;
4000 (m) subject to Subsection (8), take possession of a record or property of the insurer as
4001 may be convenient for the purposes of efficient and orderly execution of the liquidation;
4002 (n) deposit in one or more banks in this state sums required for meeting current
4003 administration expenses and dividend distributions;
4004 (o) invest all sums not currently needed, unless the receivership court orders otherwise;
4005 (p) file any necessary document for record in the office of a recorder of deeds or record
4006 office in this state or elsewhere where property of the insurer is located;
4007 (q) subject to Subsection (9), assert all defenses available to the insurer as against a
4008 third person, including statutes of limitations, statutes of frauds, and the defense of usury;
4009 (r) exercise and enforce all the rights, remedies, and powers of a creditor, shareholder,
4010 policyholder, or member, including any power to avoid a transfer or lien that may be voidable
4011 under this chapter or otherwise;
4012 (s) (i) intervene in a proceeding wherever instituted that might lead to the appointment
4013 of a receiver or trustee for the insurer or any of its property; and
4014 (ii) act as the receiver or trustee whenever the appointment is offered;
4015 (t) enter into an agreement with a receiver or commissioner of any other state; and
4016 (u) exercise all powers held on or conferred after April 30, 2007, on a receiver by the
4017 laws of this state not inconsistent with this chapter.
4018 (2) The liquidator is vested with all the rights of the one or more entities in
4019 receivership.
4020 (3) The enumeration of the powers and authority of the liquidator in this section:
4021 (a) may not be construed as a limitation upon the liquidator; and
4022 (b) does not exclude in any manner the right to do other acts:
4023 (i) not specifically enumerated or otherwise provided for; and
4024 (ii) to the extent necessary or appropriate for the accomplishment of or in aid of the
4025 purpose of liquidation.
4026 (4) (a) The liquidator may take the following actions as provided in this Subsection (4):
4027 (i) hypothecate, encumber, lease, sell, transfer, abandon, or otherwise dispose of or
4028 deal with property of the insurer;
4029 (ii) settle or resolve a claim brought by the liquidator on behalf of the insurer; or
4030 (iii) commute or settle a claim of reinsurance under a contract of reinsurance.
4031 (b) The liquidator may take an action described in Subsection (4)(a) at the liquidator's
4032 discretion if the property or claim has a market or settlement value, as shown on the
4033 receivership's financial statements, that does not exceed:
4034 (i) the lesser of:
4035 (A) $1,000,000; or
4036 (B) 10% of the general assets of the estate; or
4037 (ii) an amount increased from the amount described in Subsection (4)(b)(i), if the
4038 receivership court increases the amount upon a petition of the liquidator and a showing that
4039 compliance with this Subsection (4)(b) is:
4040 (A) burdensome to the liquidator in administering the estate; and
4041 (B) unnecessary to protect the material interests of creditors.
4042 (c) In all instances other than those described in Subsection (4)(b), the liquidator may
4043 take an action described in Subsection (4)(a) only after obtaining approval of the receivership
4044 court as provided in Section 31A-27a-107 .
4045 (d) The liquidator may, at the liquidator's discretion, request the receivership court to
4046 approve a proposed action as provided in Section 31A-27a-107 :
4047 (i) if the value of the property or claim appears to be less than the threshold provided in
4048 Subsection (4)(b) but cannot be ascertained with certainty; or
4049 (ii) for any other reason as determined by the liquidator.
4050 (e) (i) After obtaining approval of the receivership court as provided in Section
4051 31A-27a-107 , the liquidator may transfer rights to payment under a ceding reinsurance
4052 agreement covering policy to a third party transferee.
4053 (ii) The transferee has the rights to collect and enforce collection of the reinsurance for
4054 the amount payable to the ceding insurer or to its receiver:
4055 (A) without diminution because:
4056 (I) of the insolvency; or
4057 (II) the receiver failed to pay all or a portion of the claim; and
4058 (B) on the basis of the amounts paid or allowed pursuant to Section 31A-27a-511 .
4059 (iii) The transfer of the rights described in Subsection (4)(e)(ii) does not give rise to
4060 any defense regarding the reinsurer's obligations under the reinsurance agreement regardless of
4061 whether the agreement or other applicable law prohibits the transfer of rights under the
4062 reinsurance agreement.
4063 (iv) Except as provided in this Subsection (4), a transfer of rights pursuant to this
4064 Subsection (4)(e) may not impair any right or defense of the reinsurer that:
4065 (A) exists before the transfer; or
4066 (B) would have existed in the absence of the transfer.
4067 (v) Except as otherwise provided in this Subsection (4), a transfer of rights pursuant to
4068 this Subsection (4)(e) does not relieve the transferee or the liquidator from an obligation owed
4069 to the reinsurer pursuant to the reinsurance or other agreement.
4070 (5) (a) The liquidator is not obligated to defend an action against the insurer or insured.
4071 (b) If a defense is an obligation of the insurer, an insured not defended by a guaranty
4072 association may:
4073 (i) provide its own defense; and
4074 (ii) include the cost of the defense as part of the insured's claim.
4075 (c) The right of the liquidator to contest coverage on a particular claim is preserved
4076 without the necessity for an express reservation of rights.
4077 (6) Once a liquidator makes a transfer described in Subsection (1)(e), the estate has no
4078 further liability under a transferred policy, surety bond, or surety undertaking after the transfer
4079 is made if:
4080 (a) all insureds, principals, third party claimants, and obligees under the policy, surety
4081 bond, or surety undertaking consent; or
4082 (b) the receivership court so orders.
4083 (7) Funds borrowed under Subsection (1)(h):
4084 (a) may be repaid as an administrative expense; and
4085 (b) have priority over any other claims in Class 1 under the priority of distribution.
4086 (8) (a) Subsection (1)(l) does not infringe or impair any of the rights provided to an
4087 affected guaranty association pursuant to its enabling statute or otherwise.
4088 (b) Notwithstanding Subsection (1)(m), an affected guaranty association shall have
4089 reasonable access to the records of the insurer necessary for the affected guaranty association to
4090 carry out its statutory obligations.
4091 (9) (a) A waiver of a defense by the insurer after a petition pursuant to Section
4092 31A-27a-201 or 31A-27a-207 is filed does not bind the liquidator.
4093 (b) Notwithstanding Subsection (1)(q), when an affected guaranty association
4094 determines it has an obligation to defend a suit, the liquidator:
4095 (i) shall defer to that obligation; and
4096 (ii) may defend only in cooperation with the affected guaranty association.
4097 Section 75. Section 31A-27a-406 is enacted to read:
4098 31A-27a-406. Notice to creditors and others.
4099 (1) Unless the receivership court otherwise directs, the liquidator shall give or cause to
4100 be given notice of the liquidation order as soon as possible:
4101 (a) by first-class mail or electronic communication as permitted by the receivership
4102 court to the following at their last-known address:
4103 (i) all of the insurer's agents, brokers, or producers of record with a current
4104 appointment or current license to represent the insurer; and
4105 (ii) all other agents, brokers, or producers that the liquidator considers appropriate;
4106 (b) by first-class mail or electronic communication as permitted by the receivership
4107 court to:
4108 (i) all current policyholders;
4109 (ii) all pending claimants; and
4110 (iii) as determined by the receivership court, former policyholders and other creditors;
4111 and
4112 (c) by one time publication in a newspaper of general circulation in:
4113 (i) the county in which the insurer has its principal place of business; and
4114 (ii) other locations that the liquidator considers appropriate.
4115 (2) The notice of the entry of an order of liquidation shall contain or provide directions
4116 for obtaining the following information:
4117 (a) a statement that the insurer has been placed in liquidation;
4118 (b) a statement:
4119 (i) explaining that certain acts are stayed under Section 31A-27a-108 ; and
4120 (ii) describing any additional injunctive relief ordered by the receivership court;
4121 (c) a statement whether, and to what extent, the insurer's policies continue in effect;
4122 (d) to the extent applicable, a statement that coverage by guaranty associations may be
4123 available for all or part of policy benefits in accordance with applicable state guaranty laws;
4124 (e) a statement of:
4125 (i) the deadline for filing claims, if established; and
4126 (ii) the requirements for filing a proof of claim pursuant to Section 31A-27a-601 on or
4127 before that date;
4128 (f) a statement of the date, time, and location of any initial status hearing scheduled at
4129 the time the notice is sent;
4130 (g) a description of the process for obtaining notice of matters before the receivership
4131 court; and
4132 (h) other information as the liquidator or the receivership court considers appropriate.
4133 (3) If notice is given in accordance with this section, the distribution of property of the
4134 insurer under this chapter is conclusive with respect to all claimants, whether or not the
4135 claimant received notice.
4136 (4) (a) Notwithstanding the other provisions of this section, the liquidator has no duty
4137 to locate any person if:
4138 (i) no address is found in the records of the insurer; or
4139 (ii) a mailing is returned to the liquidator because of inability to deliver at the address
4140 shown in the insurer's records.
4141 (b) In the circumstances described in Subsection (4)(a), the notice by publication as
4142 required by this chapter or actual notice received is sufficient notice.
4143 (c) Written certification by the liquidator or other knowledgeable person acting for the
4144 liquidator that a notice is deposited in the United States mail, postage prepaid, or that the notice
4145 is electronically transmitted is prima facie evidence of mailing and receipt.
4146 (d) A claimant has a duty to keep the liquidator informed of any change of address.
4147 (5) Notwithstanding Subsection (1):
4148 (a) upon application of the liquidator, the receivership court may find that notice by
4149 publication as required in this section is sufficient notice to those persons holding an
4150 occurrence policy:
4151 (i) that expired more than four years before the day on which the order of liquidation is
4152 entered; and
4153 (ii) under which there are no pending claims; or
4154 (b) the receivership court may order other notice to those persons that the receivership
4155 court considers appropriate.
4156 Section 76. Section 31A-27a-407 is enacted to read:
4157 31A-27a-407. Duties of agents.
4158 (1) (a) At the request of the liquidator, an agent receiving notice of the entry of the
4159 liquidation order shall provide notice of that order:
4160 (i) on a form prescribed by the liquidator;
4161 (ii) to:
4162 (A) each policyholder of a policy issued through the agent; and
4163 (B) other person named in a policy issued through the agent; and
4164 (iii) within:
4165 (A) 15 days of the day on which the agent receives the notice; or
4166 (B) a longer time as the liquidator may require.
4167 (b) Within 30 days of the mailing required by Subsection (1)(a), the agent shall provide
4168 as prescribed by the liquidator:
4169 (i) a certification of mailing; and
4170 (ii) a list of insureds to which notice is provided.
4171 (2) (a) A person who represents the insurer as an agent and receives notice in the form
4172 prescribed in Section 31A-27a-406 , shall, within 30 days of the day on which the notice being
4173 sent, provide to the liquidator:
4174 (i) the information the agent is required to provide pursuant to Section 31A-27a-110 , if
4175 any;
4176 (ii) the information in the agent's records related to any policy issued by the insurer
4177 through the agent; and
4178 (iii) if the agent is a general agent, the information in the general agent's records related
4179 to any policy issued by the insurer through an agent under contract to the general agent,
4180 including the name and address of the subagent.
4181 (b) Except where the ownership of the expiration of the policy is transferred to another,
4182 a policy is considered issued through an agent if the agent:
4183 (i) has a property interest in the expiration of the policy; or
4184 (ii) has had in the agent's possession a copy of the declarations of the policy at any time
4185 during the life of the policy.
4186 (3) If an agent fails to provide information to the liquidator as required in Subsection
4187 (2), the commissioner after holding a hearing may:
4188 (a) impose against the agent a penalty of not more than $1,000; and
4189 (b) suspend the agent's license.
4190 (4) Notwithstanding an agent's property interest, if any, in the expiration of a policy,
4191 the liquidator has the exclusive power to determine whether, and under what terms, to cancel or
4192 transfer the policy.
4193 Section 77. Section 31A-27a-501 is enacted to read:
4194
4195 31A-27a-501. Turnover of assets.
4196 (1) (a) If the receiver determines that funds or property in the possession of another
4197 person are rightfully the property of the estate, the receiver shall deliver to the person a written
4198 demand for immediate delivery of the funds or property:
4199 (i) referencing this section by number;
4200 (ii) referencing the court and docket number of the receivership action; and
4201 (iii) notifying the person that any claim of right to the funds or property by the person
4202 shall be presented to the receivership court within 20 days of the day on which the person
4203 receives the written demand.
4204 (b) (i) A person who holds funds or other property belonging to an entity subject to an
4205 order of receivership under this chapter shall deliver the funds or other property to the receiver
4206 on demand.
4207 (ii) If the person described in Subsection (1)(b)(i) alleges a right to retain the funds or
4208 other property, the person shall:
4209 (A) file a pleading with the receivership court setting out that right within 20 days of
4210 the day on which the person receives the demand that the funds or property be delivered to the
4211 receiver; and
4212 (B) serve a copy of the pleading on the receiver.
4213 (iii) The pleading described in Subsection (1)(b)(ii) shall inform the receivership court
4214 as to:
4215 (A) the nature of the claim to the funds or property;
4216 (B) the alleged value of the property or amount of funds held; and
4217 (C) what action has been taken by the person to preserve any funds or to preserve and
4218 protect the property pending determination of the dispute.
4219 (c) The relinquishment of possession of funds or property by a person who receives a
4220 demand pursuant to this section is not a waiver of a right to make a claim in the receivership.
4221 (2) (a) If requested by the receiver, the receivership court shall hold a hearing to
4222 determine where and under what conditions the funds or property shall be held by a person
4223 described in Subsection (1) pending determination of a dispute concerning the funds or
4224 property.
4225 (b) The receivership court may impose the conditions the receivership court considers
4226 necessary or appropriate for the preservation of the funds or property until the receivership
4227 court can determine the validity of the person's claim to the funds or property.
4228 (c) If funds or property are allowed to remain in the possession of the person after
4229 demand made by the receiver, that person is strictly liable to the estate for any waste, loss, or
4230 damage to or diminution of value of the funds or property retained.
4231 (3) If a person files a pleading alleging a right to retain funds or property as provided in
4232 Subsection (1), the receivership court shall hold a subsequent hearing to determine the
4233 entitlement of the person to the funds or property claimed by the receiver.
4234 (4) If a person fails to deliver the funds or property or to file the pleading described by
4235 Subsection (1) within the 20-day period, the receivership court may issue a summary order:
4236 (a) upon:
4237 (i) petition of the receiver; and
4238 (ii) a copy of the petition being served by the petitioner to that person;
4239 (b) directing the immediate delivery of the funds or property to the receiver; and
4240 (c) finding that the person waived all claims of right to the funds or property.
4241 (5) The liquidator shall reduce the assets to a degree of liquidity that is consistent with
4242 the effective execution of the liquidation.
4243 Section 78. Section 31A-27a-502 is enacted to read:
4244 31A-27a-502. Recovery from affiliates.
4245 (1) (a) If a receivership order is entered under this chapter, the receiver appointed under
4246 the receivership order may recover on behalf of the insurer from an affiliate as defined in
4247 Subsection 31A-1-301 (5) the value received by the affiliate at any time during the five years
4248 preceding the filing date of the delinquency proceedings.
4249 (b) A person disputing that person's status as an affiliate must prove by clear and
4250 convincing evidence the person's nonaffiliate status.
4251 (c) Recovery from an affiliate is subject to the limitations of Subsections (2) and (6).
4252 (2) If the insurer is a stock corporation, a stock dividend distribution to an affiliate is
4253 not recoverable if the recipient shows by a preponderance of the evidence that:
4254 (a) when paid, the stock dividend distribution to an affiliate is lawful and reasonable;
4255 (b) the department had notice to and approved the stock dividend; and
4256 (c) the insurer did not know and could not reasonably have known that the stock
4257 dividend distribution to the affiliate might adversely affect the solvency of the insurer.
4258 (3) The maximum amount recoverable under this section is the amount needed to pay
4259 all claims under the receivership:
4260 (a) in excess of all other available recoverable assets; and
4261 (b) reduced for each recipient affiliate by any amount that the recipient affiliate pays to
4262 any receiver under similar laws of other states.
4263 (4) (a) A person who is an affiliate at the time value is received is liable up to the
4264 amount of value received by the affiliate.
4265 (b) If two or more affiliates are liable regarding the same value received, they are
4266 jointly and severally liable.
4267 (5) If any affiliate liable under Subsection (4) is insolvent or unable to pay within one
4268 year, all affiliates at the time the value is received are jointly and severally liable for any
4269 resulting deficiency in the amount that would have been recovered from the nonpaying
4270 affiliate.
4271 (6) This section does not enlarge the personal liability of a director under existing law.
4272 (7) An action or proceeding under this section may not be commenced after the earlier
4273 of:
4274 (a) six years after the day on which a receiver is appointed; or
4275 (b) the day on which the receivership is terminated.
4276 Section 79. Section 31A-27a-503 is enacted to read:
4277 31A-27a-503. Unauthorized postpetition transfers.
4278 (1) Except as otherwise provided in this section, the receiver may avoid a transfer of an
4279 interest of the insurer in property, or an obligation incurred by the insurer, that is:
4280 (a) made or incurred after the day on which a petition for receivership is filed; and
4281 (b) not authorized by the receiver and approved by the receivership court.
4282 (2) Except to the extent that a transfer or obligation voidable under this section is
4283 otherwise voidable under this chapter, a transferee or obligee of a transfer or obligation
4284 described in Subsection (1) has a lien on or may retain, at the option of the receivership court,
4285 an interest transferred or may enforce an obligation incurred, as the case may be:
4286 (a) if the transferee or obligee takes it for value and in good faith; and
4287 (b) to the extent that the transferee or obligee gave value to the insurer in exchange for
4288 the transfer or obligation.
4289 Section 80. Section 31A-27a-504 is enacted to read:
4290 31A-27a-504. Voidable preferences and liens.
4291 (1) (a) A preference may be avoided by the rehabilitator or liquidator, if:
4292 (i) the insurer is insolvent at the time of the transfer;
4293 (ii) the transfer is made within four months before the day on which the petition is
4294 filed;
4295 (iii) with reference to the transfer, one of the following at the time the transfer is made
4296 has reasonable cause to believe that the insurer is or is about to become insolvent:
4297 (A) a creditor receiving the transfer;
4298 (B) a creditor to be benefitted by the transfer; or
4299 (C) an agent of a creditor described in this Subsection (1)(a)(iii); or
4300 (iv) the creditor receiving the transfer is an officer, employee, attorney, or other person
4301 who is in fact in a position of comparable influence on the insurer to:
4302 (A) an officer of the insurer;
4303 (B) a shareholder holding directly or indirectly more than 5% of any class of equity
4304 security issued by the insurer; or
4305 (C) any other person with whom the insurer did not deal at arm's length.
4306 (b) (i) Subject to the other provisions of this Subsection (1)(b), if a preference is
4307 voidable, the rehabilitator or liquidator may recover the property or, if the property is
4308 converted, the property's value, from any person who receives or converts the property.
4309 (ii) Notwithstanding Subsection (1)(b)(i), the rehabilitator or liquidator may not
4310 recover from a bona fide purchaser or lienor of the debtor's transferee for present fair
4311 consideration.
4312 (iii) If a bona fide purchaser or lienor gives less than fair consideration, the bona fide
4313 purchaser or lienor has a lien upon the property to the extent of the consideration actually given
4314 by the bona fide purchaser or lienor.
4315 (c) If a preference by way of lien or security title is voidable, the court may, on due
4316 notice, order the lien or title to be preserved for the benefit of the estate, in which event the lien
4317 or title passes to the liquidator.
4318 (d) A payment to which Subsection 31A-5-415 (2) applies is a preference and is
4319 voidable under Subsection (1)(a):
4320 (i) if it is made within the time period specified in Subsection 31A-27a-102 (29); and
4321 (ii) except that a payment made by an insurer for the purchase of insurance under
4322 Section 16-10a-302 is not a preference.
4323 (2) Section 31A-27a-506 applies to the perfection of a transfer.
4324 (3) Section 31A-27a-506 applies to a lien by a legal or equitable proceeding.
4325 (4) The receiver may not avoid a transfer of property under this section for or because
4326 of:
4327 (a) new and contemporaneous consideration;
4328 (b) the payment, within 45 days after the day on which a debt is incurred, of a debt
4329 incurred:
4330 (i) in the ordinary course of the business of the insurer; and
4331 (ii) according to normal business terms;
4332 (c) a transfer of a security interest in property:
4333 (i) to enable the insurer to acquire the property; and
4334 (ii) which is perfected within ten days after the day on which the security interest
4335 attaches;
4336 (d) a transfer to or for the benefit of a creditor:
4337 (i) to the extent that after the transfer the creditor gives new value not secured by an
4338 unavoidable security interest; and
4339 (ii) on account of which the insurer did not make an unavoidable transfer to or for the
4340 benefit of the creditor; or
4341 (e) a transfer of a perfected security interest in inventory, a receivable, or the proceeds
4342 of either, except to the extent that the aggregate of all of those types of transfers to the
4343 transferee cause a reduction of the amount by which the debt secured by the security interest
4344 exceeds the value of the security interest four months before the date of liquidation or any time
4345 subsequent to the liquidation.
4346 (5) (a) The receiver may avoid a transfer of property of the insurer transferred to secure
4347 reimbursement of a surety that furnishes a bond or other obligation to dissolve a judicial lien
4348 that would have been avoidable by the receiver under Subsection (1)(a).
4349 (b) The liability of the surety under the bond or obligation described in Subsection
4350 (5)(a) shall be discharged to the extent of the value of the property recovered by the receiver or
4351 the amounts paid to the receiver.
4352 (6) (a) Subject to Subsection (6)(b), the property affected by a lien that is considered
4353 voidable under Subsections (1)(a) and (5):
4354 (i) is discharged from the lien; and
4355 (ii) passes to the rehabilitator or liquidator with any of the indemnifying property
4356 transferred to or for the benefit of a surety.
4357 (b) Notwithstanding Subsection (6)(a), the court may:
4358 (i) on due notice, order the lien to be preserved for the benefit of the estate; and
4359 (ii) direct that a conveyance be executed that is adequate to evidence the title of the
4360 rehabilitator or liquidator.
4361 (7) (a) The court has jurisdiction of any proceeding by the rehabilitator or liquidator, to
4362 hear and determine the rights of any parties under this section.
4363 (b) Reasonable notice of any hearing in a proceeding described in Subsection (7)(a)
4364 shall be given to all parties in interest, including the obligee of a releasing bond or other similar
4365 obligation.
4366 (c) If an order is entered for the recovery of indemnifying property in kind or for the
4367 avoidance of an indemnifying lien:
4368 (i) the court, upon application of any party in interest, shall in the same proceeding
4369 ascertain the value of the property or lien; and
4370 (ii) if the value of the property or lien is less than the amount for which the property is
4371 an indemnity or than the amount of the lien, the transferee or lienholder may elect to retain the
4372 property or lien upon payment of its value, as ascertained by the court:
4373 (A) to the rehabilitator or liquidator; and
4374 (B) within a reasonable time fixed by the court.
4375 (8) The liability of a surety under a releasing bond or other similar obligation is
4376 discharged to the extent of the value of:
4377 (a) the indemnifying property recovered;
4378 (b) the indemnifying lien nullified and avoided; or
4379 (c) if the property is retained under Subsection (7), the amount paid to the rehabilitator
4380 or liquidator.
4381 (9) If a creditor is preferred and afterward in good faith gives the insurer further credit,
4382 without security of any kind, for property that becomes a part of the insurer's estate, the amount
4383 of the new credit remaining unpaid at the time of the petition shall be set off against the
4384 preference which would otherwise be recoverable from the creditor.
4385 (10) (a) If an insurer, directly or indirectly, pays money or transfers property within
4386 four months before the day on which a successful petition for rehabilitation or liquidation is
4387 filed under this chapter or at any time in contemplation of a proceeding to rehabilitate or
4388 liquidate the insurer, to an attorney for services rendered or to be rendered, the transaction:
4389 (i) (A) may be examined by the court on its own motion; or
4390 (B) shall be examined by the court on petition of the rehabilitator or liquidator; and
4391 (ii) shall be held valid only to the extent that the transfer is a reasonable amount as
4392 determined by the court.
4393 (b) The amount in excess of the amount held valid under Subsection (10)(a), may be
4394 recovered by the rehabilitator or liquidator for the benefit of the estate.
4395 (c) If the attorney meets the description in Subsection (1)(a)(iv), Subsection (1)(a)(iv)
4396 applies in place of this Subsection (10).
4397 (11) (a) Every officer, manager, employee, shareholder, member, subscriber, attorney,
4398 or any other person acting on behalf of the insurer who knowingly participates in giving a
4399 preference when that person has reasonable cause to believe that the insurer is or is about to
4400 become insolvent at the time of the preference, is personally liable to the rehabilitator or
4401 liquidator for the amount of the preference.
4402 (b) It is permissible to infer that there is "reasonable cause to so believe" if the transfer
4403 is made within four months before the date on which a successful petition for rehabilitation or
4404 liquidation is filed.
4405 (c) A person receiving any property from the insurer or for the benefit of the insurer as
4406 a preference which is voidable under Subsection (1)(a) is:
4407 (i) personally liable for that transfer and property; and
4408 (ii) bound to account to the rehabilitator or liquidator.
4409 (d) This Subsection (11) does not prejudice any other claim by the rehabilitator or
4410 liquidator against any person.
4411 Section 81. Section 31A-27a-505 is enacted to read:
4412 31A-27a-505. Avoidance of property title transfers.
4413 (1) The rehabilitator or liquidator has the creditor's rights described in this Subsection
4414 (1), without regard to any knowledge of the rehabilitator or liquidator or any creditor.
4415 (a) (i) The rehabilitator or liquidator is considered to:
4416 (A) have extended credit to the insurer on the day on which the rehabilitation or
4417 liquidation petition is filed; and
4418 (B) have obtained on the day described in Subsection (1)(a)(i) a judicial lien on all the
4419 insurer's property on which a creditor under a contract could obtain a judicial lien.
4420 (ii) The rehabilitator or liquidator:
4421 (A) may avoid a transfer that would be avoidable by the type of creditor described in
4422 this Subsection (1)(a); and
4423 (B) has all the other rights and powers of the type of creditor described in this
4424 Subsection (1)(a).
4425 (b) (i) The rehabilitator or liquidator is considered to:
4426 (A) have extended credit to the insurer on the day on which the rehabilitation or
4427 liquidation petition filed; and
4428 (B) have obtained on the day described in Subsection (1)(b)(i), with respect to that
4429 credit extension, an execution against the insurer on that same date that is returned unsatisfied.
4430 (ii) The rehabilitator or liquidator:
4431 (A) may avoid a transfer that would be avoidable by the type of creditor described in
4432 this Subsection (1)(b); and
4433 (B) has all the other rights and powers of the type of creditor described in this
4434 Subsection (1)(b).
4435 (c) The rehabilitator or liquidator:
4436 (i) is considered to be a bona fide purchaser of the insurer's real property on the day on
4437 which the rehabilitation or liquidation petition is filed; and
4438 (ii) has the rights and powers of a bona fide purchaser to avoid other transfers of the
4439 insurer's realty.
4440 (2) (a) The rehabilitator or liquidator may avoid a transfer of an interest of the insurer
4441 in property or an obligation incurred by the insurer that is voidable under applicable law by a
4442 creditor holding an unsecured claim.
4443 (b) This Subsection (2) does not apply to secured claims.
4444 (3) (a) Except as provided in Subsections (3)(b) and (c), the rehabilitator or liquidator
4445 may avoid a transfer of property of the estate that:
4446 (i) occurs after the day on which the petition for rehabilitation or liquidation is filed;
4447 and
4448 (ii) is not authorized under this chapter or by the court.
4449 (b) (i) Subject to Subsection (3)(b)(ii), a transfer is valid against the rehabilitator or
4450 liquidator to the extent of any value, including services if it occurs:
4451 (A) after the day on which the petition is filed; and
4452 (B) before the day on which the order for rehabilitation or liquidation is entered.
4453 (ii) The value described in Subsection (3)(b)(i) does not include the satisfaction or
4454 securing of a debt:
4455 (A) that arises before the day on which the petition is filed;
4456 (B) which is given after the date described in this Subsection (3)(b) in exchange for the
4457 transfer; and
4458 (C) notwithstanding the transferee's knowledge or lack of knowledge of the petition.
4459 (c) (i) Subject to Subsection (3)(c)(ii), the rehabilitator or liquidator may not avoid a
4460 transfer of real property under Subsection (3)(a) to:
4461 (A) a good faith purchaser:
4462 (I) if the good faith purchaser is without knowledge of the petition for rehabilitation or
4463 liquidation; and
4464 (II) for present fair consideration; or
4465 (B) a purchaser at a judicial sale.
4466 (ii) Notwithstanding Subsection (3)(c)(i), the rehabilitator or liquidator may avoid a
4467 transfer of real property under Subsection (3)(a) if a copy of the petition is filed in the office of
4468 the county recorder before the transfer is so far perfected that a bona fide purchaser of the
4469 property against whom applicable law permits that type of transfer to be perfected cannot
4470 acquire an interest that is superior to the interest of the good faith purchaser or judicial sale
4471 purchaser.
4472 (iii) Unless a copy of the petition is filed before the transfer is perfected, a good faith
4473 purchaser of real property under a transfer which the rehabilitator or liquidator may avoid
4474 under this section has a lien on the property transferred:
4475 (A) if the good faith purchaser:
4476 (I) is without knowledge of the petition for rehabilitation or liquidation at the time of
4477 the transfer; and
4478 (II) pays less than present fair consideration; and
4479 (B) to the extent of the present consideration given.
4480 (4) An action or proceeding under Subsection (1) or (2) may not be commenced after
4481 the earlier of:
4482 (a) two years after the day on which a rehabilitator is appointed under Section
4483 31A-27a-301 or a liquidator is appointed under Section 31A-27a-401 ; or
4484 (b) the day on which the rehabilitation is terminated under Subsection 31A-27a-304 (3)
4485 or the liquidation is terminated under Section 31A-27a-802 .
4486 (5) An action or proceeding under Subsection (3) may not be commenced after the
4487 earlier of:
4488 (a) two years after the day on which the transfer sought to be avoided is made; or
4489 (b) the day on which the rehabilitation is terminated under Subsection 31A-27a-304 (3)
4490 or the liquidation is terminated under Section 31A-27a-802 .
4491 Section 82. Section 31A-27a-506 is enacted to read:
4492 31A-27a-506. Fraudulent transfers and obligations.
4493 (1) For purposes of this section:
4494 (a) A "transfer":
4495 (i) is made when the transfer is so perfected that a bona fide purchaser from the insurer
4496 against whom applicable law permits the transfer to be perfected cannot acquire an interest in
4497 the property transferred that is superior to the interest in the property of the transferee; or
4498 (ii) if the transfer is not perfected as provided in Subsection (1)(a) before the
4499 commencement of the delinquency proceeding, is considered made immediately before the day
4500 on which the initial filing of the petition commencing delinquency proceedings is filed.
4501 (b) "Value" means property or satisfaction or securing of a present or antecedent debt
4502 of the insurer.
4503 (2) (a) If the conditions of Subsection (2)(b) are met, the receiver may avoid the
4504 following:
4505 (i) a transfer of an interest of the insurer in property;
4506 (ii) a reinsurance transaction; or
4507 (iii) an obligation incurred by an insurer.
4508 (b) Subsection (2)(a) applies if:
4509 (i) the transfer or obligation is made or incurred on or within two years before the day
4510 on which the initial filing of a petition commencing delinquency proceedings is filed under this
4511 chapter; and
4512 (ii) the insurer voluntarily or involuntarily:
4513 (A) makes the transfer or incurs the obligation with actual intent to hinder, delay, or
4514 defraud a person to which the insurer is or becomes indebted on or after the day on which the
4515 transfer is made or the obligation is incurred; or
4516 (B) receives less than a reasonably equivalent value in exchange for the transfer or
4517 obligation.
4518 (3) Except to the extent that a transfer or obligation voidable under this section is
4519 voidable under other provisions of this chapter, a transferee or obligee of a transfer or
4520 obligation voidable under this section that takes for value and in good faith:
4521 (a) as the case may be:
4522 (i) has a lien on or may retain any interest transferred; or
4523 (ii) may enforce any obligation incurred; and
4524 (b) to the extent that the transferee or obligee gave value to the insurer in exchange for
4525 the transfer or obligation.
4526 (4) If a reinsurance transaction is avoided under this section:
4527 (a) the receiver shall tender to the reinsurer the value of any consideration transferred
4528 to the insurer in connection with the transaction less the amount of matured and liquidated
4529 liabilities owing by the reinsurer to the estate; and
4530 (b) the parties shall be returned to their relative positions before the implementation of
4531 the transaction avoided.
4532 Section 83. Section 31A-27a-507 is enacted to read:
4533 31A-27a-507. Receiver as lien creditor.
4534 (1) The receiver may avoid a transfer of or lien on the property of, or obligation
4535 incurred by, an insurer that the insurer or a policyholder, creditor, member, or stockholder of
4536 the insurer:
4537 (a) may have avoided without regard to any knowledge of:
4538 (i) the receiver;
4539 (ii) the commissioner;
4540 (iii) the insurer; or
4541 (iv) a policyholder, creditor, member, or stockholder of the insurer; and
4542 (b) whether or not a policyholder, creditor, member, or stockholder described in this
4543 Subsection (1) exists.
4544 (2) The receiver is considered a creditor without knowledge for purposes of pursuing
4545 claims under:
4546 (a) Title 25, Chapter 6, Uniform Fraudulent Transfer Act; or
4547 (b) similar provisions of state or federal law.
4548 Section 84. Section 31A-27a-508 is enacted to read:
4549 31A-27a-508. Liability of transferee.
4550 (1) Except as otherwise provided in this section, to the extent that the receiver obtains
4551 an order pursuant to Section 31A-27a-501 , or avoids a transfer under Section 31A-27a-502 ,
4552 31A-27a-503 , 31A-27a-504 , 31A-27a-506 , or 31A-27a-507 , the receiver may recover the
4553 property transferred, or the value of the property, from:
4554 (a) the initial transferee of the transfer or the entity for whose benefit the transfer is
4555 made; or
4556 (b) subject to Subsection (2), an immediate or mediate transferee of the initial
4557 transferee.
4558 (2) The receiver may not recover under Subsection (1)(b) from:
4559 (a) a transferee that takes for value, including satisfaction or securing of a present or
4560 antecedent debt:
4561 (i) in good faith; and
4562 (ii) without knowledge of the voidability of the transfer avoided; or
4563 (b) an immediate or mediate good faith transferee of the transferee.
4564 (3) A transfer avoided in accordance with this chapter is preserved for the benefit of
4565 the receivership estate, but only with respect to property of the insurer.
4566 (4) In addition to the remedies specifically provided in Sections 31A-27a-501 ,
4567 31A-27a-502 , 31A-27a-503 , 31A-27a-504 , 31A-27a-506 , and 31A-27a-507 and Subsection
4568 (1), if the receiver is successful in establishing a claim to the property or any part of the
4569 property, the receiver may recover judgment for the following:
4570 (a) rental for the use of tangible property from the later of:
4571 (i) the day on which the receivership order is entered; or
4572 (ii) the date of the transfer; and
4573 (b) in the case of funds or intangible property:
4574 (i) the greater of:
4575 (A) the actual interest;
4576 (B) income earned by the property; or
4577 (C) interest at the statutory rate for judgments; and
4578 (ii) from the later of:
4579 (A) the day on which the receivership order is entered; or
4580 (B) the date of the transfer.
4581 (5) In an action pursuant to this section, the receivership court may allow the receiver
4582 to seek recovery of the property involved or its value.
4583 (6) In an action pursuant to Sections 31A-27a-501 , 31A-27a-502 , 31A-27a-503 ,
4584 31A-27a-504 , 31A-27a-506 , 31A-27a-507 , and 31A-27a-510 :
4585 (a) the receiver has the burden of proving the avoidability of a transfer; and
4586 (b) the person against whom recovery or avoidance is sought has the burden of proving
4587 the nature and extent of any affirmative defense.
4588 Section 85. Section 31A-27a-509 is enacted to read:
4589 31A-27a-509. Claims of holders of void or voidable rights.
4590 (1) (a) The receiver may disallow a claim of a creditor who receives or acquires a
4591 preference, lien, conveyance, transfer, assignment, or encumbrance voidable under this chapter,
4592 unless the creditor surrenders the preference, lien, conveyance, transfer, assignment, or
4593 encumbrance.
4594 (b) If an avoidance is effected by a proceeding in which a final judgment is entered, a
4595 creditor's claim is not allowed unless the money is paid or the property is delivered to the
4596 receiver within 30 days from the day on which the final judgment is entered, except that the
4597 receivership court may allow further time if there is an appeal or other continuation of the
4598 proceeding.
4599 (2) A claim allowable under Subsection (1) by reason of an avoidance, whether
4600 voluntary or involuntary, or a preference, lien, conveyance, transfer, assignment, or
4601 encumbrance, may be filed as an excused late filing under Subsection 31A-27a-601 (2) if filed
4602 within:
4603 (a) 30 days from the date of the avoidance; or
4604 (b) the further time allowed by the receivership court under Subsection (1).
4605 Section 86. Section 31A-27a-510 is enacted to read:
4606 31A-27a-510. Setoffs.
4607 (1) (a) A mutual debt or mutual credit shall be set off and the balance only allowed or
4608 paid:
4609 (i) whether arising out of one or more contracts between the insurer and another person
4610 in connection with an action or proceeding under this chapter; and
4611 (ii) except as provided in Subsection (2) and Sections 31A-27a-513 and 31A-27a-514 .
4612 (b) An obligation arising out of the termination of a life, disability income, or
4613 long-term care reinsurance contract pursuant to Section 31A-27a-513 may be set off against
4614 other debts and credits arising out of a contract between the insurer and the reinsurer.
4615 (2) (a) A setoff is not allowed after the commencement of a delinquency proceeding
4616 under this chapter in favor of any person if:
4617 (i) the claim against the insurer is disallowed;
4618 (ii) the claim against the insurer is purchased by or transferred to the person:
4619 (A) on or after the day on which the receivership petition is filed; or
4620 (B) within 120 days preceding the day on which the receivership petition is filed;
4621 (iii) the obligation of the insurer is owed to an affiliate or entity other than the person,
4622 absent written assignment of the obligation made more than 120 days before the day on which
4623 the petition for receivership is filed;
4624 (iv) the obligation of the person is owed to an affiliate or entity other than the insurer,
4625 absent written assignment of the obligation made more than 120 days before the day on which
4626 the petition for receivership is filed;
4627 (v) the obligation of the person is:
4628 (A) to pay:
4629 (I) an assessment levied against a member or subscriber of the insurer; or
4630 (II) a balance upon a subscription to the capital stock of the insurer; or
4631 (B) in any other way in the nature of a capital contribution;
4632 (vi) an obligation between the person and the insurer arises out of a transaction by
4633 which either the person or the insurer:
4634 (A) assumes a risk or obligation from the other party; and
4635 (B) then cedes back to that party substantially the same risk or obligation;
4636 (vii) the obligation of the person arises out of an avoidance action taken by the
4637 receiver; or
4638 (viii) the obligation of the insured is for the payment of earned premiums or
4639 retrospectively rated earned premiums in accordance with Section 31A-27a-514 .
4640 (b) Notwithstanding Subsection (2)(a)(vi), the receiver may permit a setoff if, in the
4641 receiver's discretion, a setoff is appropriate because of specific circumstances relating to a
4642 transaction.
4643 (3) The receiver may avoid pursuant to Sections 31A-27a-504 , 31A-27a-506 , and
4644 31A-27a-507 and subject to defenses under those sections, a setoff that occurs before the
4645 commencement of the delinquency proceeding under this chapter if the setoff would otherwise
4646 be disallowed pursuant to Subsection (2).
4647 Section 87. Section 31A-27a-511 is enacted to read:
4648 31A-27a-511. Assessments.
4649 (1) As soon as practicable but not more than four years from the day on which an order
4650 of receivership of an insurer issuing assessable policies is entered, the receiver shall make a
4651 report to the receivership court setting forth:
4652 (a) the reasonable value of the assets of the insurer;
4653 (b) the insurer's probable total liabilities;
4654 (c) the probable aggregate amount of the assessment necessary to pay all claims of
4655 creditors and expenses in full, including expenses of administration and costs of collecting the
4656 assessment; and
4657 (d) a recommendation as to:
4658 (i) whether or not an assessment should be made; and
4659 (ii) what amount of assessment.
4660 (2) (a) Upon the basis of the report provided in Subsection (1), including any
4661 supplement or amendment to the report, the receivership court may approve, solely on
4662 application by the receiver, one or more assessments against all members of the insurer who are
4663 subject to assessment.
4664 (b) An order approving an assessment under this Subsection (2) shall provide
4665 instructions regarding:
4666 (i) notice of the assessment;
4667 (ii) deadlines for payment; and
4668 (iii) other instructions to the receiver for collection of the assessment.
4669 (3) Subject to any applicable legal limit on an ability to assess and with due regard
4670 given to assessments that cannot be collected economically, the aggregate assessment shall be
4671 for the amount by which the sum of the following exceeds the value of existing assets:
4672 (a) probable liabilities;
4673 (b) the expenses of administration; and
4674 (c) the estimated cost of collection of the assessment.
4675 (4) (a) After levy of assessment under Subsection (2), the receiver shall petition the
4676 receivership court for an order directing each member who has not paid the assessment
4677 pursuant to the levy to show cause why a judgment for the failure to pay the assessment should
4678 not be entered.
4679 (b) At least 20 days before the return day of the order to show cause described in
4680 Subsection (4)(a), the receiver shall give notice of the order to show cause by:
4681 (i) publication or by first-class mail to each member liable on the assessment mailed to
4682 the member's last-known address as it appears on the insurer's records; or
4683 (ii) such other method of notification as the receivership court may direct.
4684 (c) Failure of the member or subscriber to receive the notice of the assessment or of the
4685 order to show cause either within the time specified in the order or at all, is no defense in a
4686 proceeding to collect the assessment.
4687 (5) If a member does not appear and serve verified objections upon the receiver on or
4688 before the return day of the order to show cause under Subsection (4):
4689 (a) the receivership court shall make an order adjudging the member liable for the sum
4690 of:
4691 (i) the amount of the assessment against the member pursuant to Subsection (4); and
4692 (ii) the costs; and
4693 (b) the receiver has a judgment against the member for the amount described in
4694 Subsection (5)(a).
4695 (6) If on or before the return day in the order to show cause described in Subsection (4)
4696 the member appears and serves verified objections on the receiver, the receivership court may:
4697 (a) (i) hear and determine the matter; or
4698 (ii) appoint a referee to hear the matter; and
4699 (b) make such order as the facts warrant.
4700 (7) The receiver may enforce an order or collect a judgment under Subsection (5) by
4701 any lawful means.
4702 (8) An assessment of a subscriber or member of an insurer made by the receiver is
4703 prima facie correct if it is pursuant to the order of receivership court:
4704 (a) fixing the aggregate amount of the assessment against all members or subscribers;
4705 and
4706 (b) approving the classification and formula made by the receiver under this section.
4707 (9) A claim filed by an assessee who fails to pay an assessment, after the conclusion of
4708 a legal action by the assessee objecting to the assessment, is considered a late filed claim under
4709 Section 31A-27a-701 .
4710 Section 88. Section 31A-27a-512 is enacted to read:
4711 31A-27a-512. Reinsurer's liability.
4712 (1) (a) Except as otherwise provided in this chapter, the amount recoverable by the
4713 receiver from a reinsurer may not be reduced as a result of a delinquency proceeding with a
4714 finding of insolvency, regardless of any provision in the reinsurance contract or other
4715 agreement.
4716 (b) An agreement, written, oral, or otherwise, may not be enforced to the extent it is in
4717 conflict, or not in strict compliance with this section.
4718 (c) Except as expressly provided in this section, a person other than the receiver
4719 whether as a creditor, third party beneficiary, or otherwise does not have a direct right to
4720 reinsurance proceeds from any reinsurer of the insolvent insurer:
4721 (i) on the basis of any written or oral agreement; or
4722 (ii) pursuant to an action or cause of action seeking any equitable or legal remedy.
4723 (d) This section applies to all the insurer's reinsurance contracts including:
4724 (i) treaty reinsurance;
4725 (ii) quota share reinsurance;
4726 (iii) facultative reinsurance; or
4727 (iv) a fronting or captive reinsurance arrangement.
4728 (2) Except as otherwise provided in Subsection (9), the amount recoverable by the
4729 liquidator from a reinsurer is payable under one or more contracts reinsured by the reinsurer on
4730 the basis of:
4731 (a) proof of payment of the insured claim by an affected guaranty association, the
4732 insurer, or the receiver, to the extent of the payment; or
4733 (b) the allowance of the claim pursuant to:
4734 (i) Section 31A-27a-608 ;
4735 (ii) an order of the receivership court; or
4736 (iii) a plan of rehabilitation.
4737 (3) If the insurer takes credit for a reinsurance contract in a filing or submission made
4738 to the commissioner and the reinsurance contract does not contain the provisions required with
4739 respect to the obligations of reinsurers in the event of insolvency of the reinsured, the
4740 reinsurance contract is considered to contain the provisions required with respect to:
4741 (a) the obligations of reinsurers in the event of insolvency of the reinsured in order to
4742 obtain credit for reinsurance; or
4743 (b) other applicable statutes.
4744 (4) A reinsurance contract that under Subsection (3) is considered to contain certain
4745 provisions, is considered to contain a provision that:
4746 (a) in the event of insolvency and the appointment of a receiver, the reinsurance
4747 obligation is payable to the ceding insurer or to its receiver without diminution because of the
4748 insolvency or because the receiver fails to pay all or a portion of the claim;
4749 (b) payment shall be made upon either:
4750 (i) to the extent of the payment, proof of payment of the insured claim by an affected
4751 guaranty association, the insurer, or the receiver; or
4752 (ii) the allowance of the claim pursuant to:
4753 (A) Section 31A-27a-608 ;
4754 (B) an order of the receivership court; or
4755 (C) a plan of rehabilitation; and
4756 (c) if a reinsurer does not pay the amount billed by the receiver within 60 days after the
4757 mailing by the receiver, interest on the unpaid billed amount will begin to accrue at the
4758 statutory legal rate provided in Subsection 15-1-1 (2), except that all or a portion of the interest
4759 may be waived as part of an arbitration proceeding.
4760 (5) (a) The receiver shall notify in writing, in accordance with the terms of the contract,
4761 each reinsurer obligated in relation to the claim or the pendency of a claim against the reinsured
4762 company.
4763 (b) The receiver's failure to give notice of a pending claim pursuant to a provision in a
4764 reinsurance contract:
4765 (i) does not excuse the obligation of the reinsurer unless the reinsurer is prejudiced by
4766 the receiver's failure; and
4767 (ii) if the reinsurer is prejudiced, reduces the reinsurer's obligations only to the extent
4768 of the prejudice.
4769 (c) A reinsurer may interpose, at its own expense, in a proceeding in which a claim is
4770 to be adjudicated, any one or more defenses that the reinsurer considers available to the
4771 reinsured company or its receiver.
4772 (6) The entry of an order of rehabilitation or liquidation:
4773 (a) may not be considered a breach or an anticipatory breach of a reinsurance contract;
4774 and
4775 (b) is not grounds for retroactive revocation or retroactive cancellation of a reinsurance
4776 contract by the reinsurer.
4777 (7) (a) If a reinsurance payment to a receiver of a ceding insurer is later determined to
4778 be a payment in excess of the amounts actually due to the receiver, the excess shall be:
4779 (i) credited against future payments due to the receiver; or
4780 (ii) repaid to the reinsurer as an administrative expense of the estate pursuant to
4781 Subsection 31A-27a-701 (2)(g).
4782 (b) A repayment under this Subsection (7) may be limited on the basis of the property
4783 remaining in the estate.
4784 (8) (a) Subject to Subsection (1):
4785 (i) except as provided in Subsection (8)(a)(ii):
4786 (A) a payment made by the reinsurer directly to an insured or other creditor does not
4787 diminish the reinsurer's obligation to the insurer's estate; and
4788 (B) a payment made by the reinsurer shall be made directly to the ceding insurer or its
4789 receiver;
4790 (ii) Subsection (8)(a)(i) does not apply when:
4791 (A) the reinsurance contract or other written agreement to which the insured, ceding
4792 insurer, and reinsurer are all parties:
4793 (I) specifically provides another payee, other than an affiliate of the ceding insurer or
4794 reinsurer, of the reinsurance in the event of the insolvency or receivership of the ceding insurer;
4795 and
4796 (II) the provision described in this Subsection (8)(a)(ii)(A) is contained in:
4797 (Aa) the reinsurance contract as it is written on the day on which the reinsurance
4798 contract is initially executed; or
4799 (Bb) the other written agreement as it is written on the day on which the initial policy is
4800 issued;
4801 (B) the reinsurance contract, as it is written on the day on which the reinsurance
4802 contract is initially executed, contains a provision where the assuming insurer with the consent
4803 of the direct insured and the ceding insurer assumes all policy obligations of the ceding insurer:
4804 (I) as a direct obligation of the assuming insurer to the payees under the policies; and
4805 (II) in substitution for the entire obligations of the ceding insurer to the payees; or
4806 (C) a life and health insurance guaranty association makes the election to succeed to
4807 the rights and obligations of the insolvent insurer under a contract of reinsurance:
4808 (I) in accordance with:
4809 (Aa) Section 31A-27a-513 ; or
4810 (Bb) the life and health guaranty association laws of its domiciliary state; or
4811 (II) pursuant to other applicable law, rule, order, or assignment contract; and
4812 (iii) in the circumstances described in Subsection (8)(a)(ii)(C), a payment shall be
4813 made directly to or at the direction of the guaranty association.
4814 (b) Both the receiver and the reinsurer are entitled to recover from a person, other than
4815 the receiver or a guaranty association, who unsuccessfully makes a claim directly against the
4816 reinsurer the following incurred in preventing any collection by that person:
4817 (i) the person's attorney fees; and
4818 (ii) expenses.
4819 (9) This chapter may not be construed to authorize the liquidator or any other entity to
4820 compel payment from a nonlife reinsurer:
4821 (a) on the basis of estimated incurred but not reported losses, loss expenses, or case
4822 reserves for unpaid losses and loss expenses, except under Sections 31A-27a-515 and
4823 31A-27a-516 ; and
4824 (b) with respect to a claim allowed in accordance with Section 31A-27a-605 .
4825 Section 89. Section 31A-27a-513 is enacted to read:
4826 31A-27a-513. Reinsurance continuation and termination.
4827 (1) For purposes of this section:
4828 (a) "Coverage date" is the day on which an order of liquidation is entered.
4829 (b) "Election date" is the day on which an affected guaranty association elects to
4830 assume under this section the rights and obligations of a ceding insurer that relate to a policy or
4831 annuity covered, in whole or in part, by the affected guaranty association.
4832 (2) A contract reinsuring a life insurance policy, disability income insurance policy,
4833 long-term care insurance policy, or an annuity issued by a ceding insurer that is placed in
4834 rehabilitation proceedings pursuant to this chapter shall be continued or terminated pursuant to:
4835 (a) the terms or conditions of each contract; and
4836 (b) this section.
4837 (3) A contract reinsuring a life insurance policy, disability income insurance policy,
4838 long-term care insurance policy, or an annuity issued by a ceding insurer that is placed into
4839 liquidation pursuant to this chapter shall be continued, subject to this section, unless:
4840 (a) the contract is terminated pursuant to the contract's terms before the coverage date;
4841 or
4842 (b) the contract is terminated pursuant to the order of liquidation, in which case
4843 Subsection (10) applies.
4844 (4) (a) (i) At any time within 180 days of the coverage date, an affected guaranty
4845 association covering a life insurance policy, disability income insurance policy, long-term care
4846 insurance policy, or an annuity, in whole or in part, may elect to assume the rights and
4847 obligations of the ceding insurer that relate to the policy or annuity covered, in whole or in part,
4848 by the affected guaranty association, under one or more reinsurance contracts between the
4849 insolvent insurer and the insolvent insurer's reinsurers selected by the affected guaranty
4850 association.
4851 (ii) An assumption under this Subsection (4)(a) is effective as of the coverage date.
4852 (iii) The election described in this Subsection (4)(a) is made by the affected guaranty
4853 association or a nationally recognized association of guaranty associations that is designated by
4854 the affected guaranty association to act on the affected guaranty association's behalf for
4855 purposes of this Subsection (4)(a) by sending written notice, return receipt requested, to the
4856 affected reinsurers.
4857 (b) (i) To facilitate the earliest practicable decision about whether to assume a contract
4858 of reinsurance and to protect the financial position of the estate, the receiver and each reinsurer
4859 of the ceding insurer shall make available the information described in Subsection (4)(b)(ii):
4860 (A) upon request to an affected guaranty association; or
4861 (B) to a nationally recognized association of guaranty associations that is designated by
4862 the affected guaranty association to act on behalf of the affected guaranty associations for
4863 purposes of this Subsection (4) as soon as possible after commencement of formal delinquency
4864 proceedings.
4865 (ii) The information described in Subsection (4)(b)(i) is:
4866 (A) copies of all in-force contracts of reinsurance;
4867 (B) all records related to in-force contracts of reinsurance relevant to the determination
4868 of whether the in-force contracts of reinsurance should be assumed; and
4869 (C) notice of:
4870 (I) any default under the in-force contracts of reinsurance; or
4871 (II) any known event or condition that with the passage of time could become a default
4872 under the in-force contracts of reinsurance.
4873 (c) Subsections (4)(c)(i) through (vi) apply to a reinsurance contract assumed by an
4874 affected guaranty association under this Subsection (4).
4875 (i) The guaranty association is responsible for the following that relates to a life
4876 insurance policy, disability income insurance policy, long-term care insurance policy, or an
4877 annuity covered, in whole or in part, by the guaranty association:
4878 (A) all unpaid premiums due under a reinsurance contract, for the periods both before
4879 and after the coverage date; and
4880 (B) the performance of all other obligations to be performed after the coverage date.
4881 (ii) The affected guaranty association:
4882 (A) may charge a policy of insurance or annuity covered in part by the affected
4883 guaranty association, through reasonable allocation methods, the costs for reinsurance in excess
4884 of the obligations of the affected guaranty association; and
4885 (B) if it imposes a charge under this Subsection (4)(c)(ii), shall provide notice and an
4886 accounting of the charge to the liquidator.
4887 (iii) The affected guaranty association is entitled to any amount payable by the
4888 reinsurer under the reinsurance contract with respect to a loss or event:
4889 (A) that:
4890 (I) occurs in a period on or after the coverage date; and
4891 (II) relates to a life insurance policy, disability income insurance policy, long-term care
4892 insurance policy, or an annuity covered, in whole or in part, by the affected guaranty
4893 association; and
4894 (B) except that upon receipt of the amount, the affected guaranty association is obliged
4895 to pay to the beneficiary under the insurance policy or annuity on account of which the amount
4896 is paid a portion of the amount equal to the lesser of:
4897 (I) the amount received by the affected guaranty association; and
4898 (II) an amount calculated by:
4899 (Aa) determining the excess of the amount received by the affected guaranty
4900 association over the amount equal to the benefits paid by the affected guaranty association on
4901 account of the policy or annuity; and
4902 (Bb) subtracting the retention of the insurer applicable to the loss or event.
4903 (iv) (A) Within 30 days following the election date, the affected guaranty association
4904 and each reinsurer under a contract assumed by the affected guaranty association shall calculate
4905 the net balance due to or from the affected guaranty association under each reinsurance contract
4906 as of the election date with respect to a policy or annuity covered, in whole or in part, by the
4907 affected guaranty association.
4908 (B) The calculation required by Subsection (4)(c)(iv)(A) shall give full credit to all
4909 items paid by the insurer, the insurer's receiver, or the reinsurer before the election date.
4910 (C) The reinsurer shall pay the receiver an amount due for a loss or event before the
4911 coverage date, subject to any setoff for premiums unpaid for periods before the coverage date.
4912 (D) Within five days of the completion of the calculation required by Subsection
4913 (4)(c)(iv)(A), the affected guaranty association or reinsurer shall pay any balance due the other
4914 after completion of the calculation.
4915 (E) A dispute over an amount due to either the affected guaranty association or the
4916 reinsurer shall be resolved by arbitration:
4917 (I) pursuant to the terms of the affected reinsurance contract; or
4918 (II) if the affected reinsurance contract contains no arbitration clause, as provided in
4919 Subsection (10)(d).
4920 (v) If the receiver receives an amount due the affected guaranty association pursuant to
4921 Subsection (4)(c)(iii), the receiver shall remit that amount to the affected guaranty association
4922 as promptly as practicable.
4923 (vi) If the affected guaranty association or the receiver on the affected guaranty
4924 association's behalf, within 60 days of the election date, pays the unpaid premiums due for
4925 periods both before and after the election date that relate to a life insurance policy, disability
4926 income insurance policy, long-term care insurance policy, or an annuity covered, in whole or in
4927 part, by the affected guaranty association, the reinsurer may not:
4928 (A) terminate the reinsurance contract for failure to pay premiums, insofar as the
4929 reinsurance contract relates to a life insurance policy, disability income insurance policy,
4930 long-term care insurance policy, or an annuity covered, in whole or in part, by the affected
4931 guaranty association; and
4932 (B) set off any unpaid amounts due under other contracts, or unpaid amounts due from
4933 parties other than the affected guaranty association, against amounts due the affected guaranty
4934 association.
4935 (5) (a) If pursuant to court approval under Section 31A-27a-402 a receiver continues a
4936 life insurance policy, disability income insurance policy, long-term care insurance policy, or an
4937 annuity in force following an order of liquidation, and the policy of insurance is not covered in
4938 whole or in part by one or more affected guaranty associations, the receiver may elect to
4939 assume the rights and obligations of the ceding insurer under one or more of the reinsurance
4940 contracts that relate to the policy or annuity:
4941 (i) within 180 days of the coverage date; and
4942 (ii) if the contract is not terminated as set forth in Subsection (2).
4943 (b) The election described in this Subsection (5) shall be made by sending written
4944 notice, return receipt requested, to the affected reinsurers.
4945 (c) If the election described in this Subsection (5) is made:
4946 (i) payment of premiums on the reinsurance contract for the policy or annuity, for
4947 periods both before and after the coverage date, shall be chargeable against the estate as a Class
4948 1 administrative expense; and
4949 (ii) amounts paid by the reinsurer on account of losses on the policy or annuity shall be
4950 to the estate of the insolvent insurer.
4951 (6) During the period beginning on the coverage date and ending on the election date:
4952 (a) (i) neither the affected guaranty association nor the reinsurer has any rights or
4953 obligations under a reinsurance contract that the affected guaranty association has the right to
4954 assume under Subsection (4), whether for a period before or after the coverage date;
4955 (ii) (A) with respect to the period after the coverage date, neither the receiver nor the
4956 reinsurer has any rights or obligations under a reinsurance contract that the receiver has the
4957 right to assume under Subsection (5); and
4958 (B) with respect to the period before the coverage date, the rights and obligations of the
4959 affected guaranty association and the reinsurer remain unchanged; and
4960 (iii) the reinsurer, the receiver, and an affected guaranty association shall, to the extent
4961 practicable, provide each other data and records reasonably requested; and
4962 (b) once the affected guaranty association or the receiver, as the case may be, elects or
4963 declines to elect to assume a reinsurance contract, the parties' rights and obligations are
4964 governed by Subsection (4), (5), or (10), as applicable.
4965 (7) (a) If an affected guaranty association does not elect to assume a reinsurance
4966 contract by the election date pursuant to Subsection (4), the affected guaranty association has
4967 no rights or obligations, in each case for periods both before and after the coverage date, with
4968 respect to the reinsurance contract.
4969 (b) If a receiver does not elect to assume a reinsurance contract by the election date
4970 pursuant to Subsection (5), the receiver and the reinsurer:
4971 (i) retain their respective rights and obligations with respect to the reinsurance contract
4972 for the period before the coverage date; and
4973 (ii) have no rights or obligations to each other for the period after the coverage date,
4974 except as provided in Subsection (10).
4975 (c) (i) If an affected guaranty association or the receiver, as the case may be, does not
4976 elect to assume a reinsurance contract by the election date, the reinsurance contract terminates
4977 retroactively effective on the coverage date.
4978 (ii) A reinsurance contract covering a life insurance policy, disability income insurance
4979 policy, long-term care insurance policy, or an annuity that is terminated pursuant to Section
4980 31A-27a-402 terminates effective on the coverage date.
4981 (iii) Subsection (10) applies to a reinsurance contract described in Subsection (7)(c)(i)
4982 or (ii).
4983 (8) (a) Subject to Subsection (8)(b), when a life insurance policy, disability income
4984 insurance policy, long-term care insurance policy, an annuity, or guaranty association
4985 obligation with respect to that policy or annuity is transferred to an assuming insurer,
4986 reinsurance on the policy or annuity may also be transferred:
4987 (i) by the affected guaranty association, in the case of a contract assumed under
4988 Subsection (4); or
4989 (ii) by the receiver, in the case of a contract assumed under Subsection (5).
4990 (b) A transfer under Subsection (8)(a), is subject to the following:
4991 (i) unless the reinsurer and the assuming insurer agree otherwise, the reinsurance
4992 contract transferred may not cover a new policy of insurance or new annuity in addition to
4993 those transferred;
4994 (ii) the obligations described in Subsections (4) and (5) do not apply with respect to
4995 matters arising after the effective date of the transfer; and
4996 (iii) notice shall be given in writing, return receipt requested, by the transferring party
4997 to the affected reinsurer not less than 30 days before the effective date of the transfer.
4998 (9) (a) This section shall, to the extent provided in this chapter, supersede a law or an
4999 affected reinsurance contract that provides for or requires a payment of reinsurance proceeds on
5000 account of a loss or event:
5001 (i) that occurs in a period after the coverage date; and
5002 (ii) to the receiver of the insolvent insurer or to any other person.
5003 (b) The receiver shall remain entitled to any amounts payable by the reinsurer under the
5004 reinsurance contract with respect to a loss or event that occurs in a period before the coverage
5005 date, subject to this chapter including applicable setoff provisions.
5006 (10) If a contract reinsuring a life insurance policy, disability income insurance policy,
5007 long-term care insurance policy, or an annuity is terminated pursuant to this chapter, the
5008 procedures of this Subsection (10) apply.
5009 (a) The reinsurer and the receiver shall, upon written notice to the other party to the
5010 reinsurance contract no later than 30 days after the receipt by the reinsurer of notice of
5011 termination, commence a mandatory negotiation and arbitration procedure in accordance with
5012 this Subsection (10).
5013 (b) (i) Each party shall appoint an actuary to determine an estimated sum due as a
5014 result of the termination of the reinsurance contract calculated in a way expected to make the
5015 parties economically indifferent as to whether the reinsurance contract continues or terminates,
5016 giving due regard to the economic effects of the insolvency.
5017 (ii) The estimated sum described in this Subsection (10)(b) shall:
5018 (A) take into account the present value of future cash flows expected under the
5019 reinsurance contract; and
5020 (B) be based on a gross premium valuation of net liability using current assumptions:
5021 (I) that reflect postinsolvency experience expectations, with no additional margins;
5022 (II) that are net of any amounts payable and receivable; and
5023 (III) with a market value adjustment to reflect premature sale of assets to fund the
5024 settlement.
5025 (c) (i) Within 90 days of the day on which the written request pursuant to Subsection
5026 (10)(a) is made, each party shall provide the other party with:
5027 (A) its estimate of the sum due as a result of the termination of the reinsurance
5028 contract; and
5029 (B) all relevant documents and other information supporting the estimate.
5030 (ii) The parties shall make a good faith effort to reach agreement on the sum due.
5031 (d) (i) If the parties are unable to reach agreement within 90 days following the day on
5032 which the materials required in Subsection (10)(c) are submitted, either party may initiate
5033 arbitration proceedings:
5034 (A) as provided in the reinsurance contract; or
5035 (B) if the reinsurance contract does not contain an arbitration clause, pursuant to this
5036 Subsection (10)(d) by providing the other party with a written demand for arbitration.
5037 (ii) Arbitration under Subsection (10)(d)(i)(B) shall be conducted pursuant to the
5038 following procedures:
5039 (A) Venue for the arbitration shall be within the county of the court's jurisdiction or
5040 another location agreed to by the parties.
5041 (B) Within 30 days of the responding party's receipt of the arbitration demand, each
5042 party shall appoint an arbitrator who is:
5043 (I) a disinterested active or retired officer or executive of a life insurance or reinsurance
5044 company; or
5045 (II) other professional with no less than ten years experience in or relating to the field
5046 of life insurance or life reinsurance.
5047 (C) The two arbitrators appointed under Subsection (10)(d)(ii)(B) shall appoint an
5048 independent, impartial, disinterested umpire who is an:
5049 (I) active or retired officer or executive of a life insurance or reinsurance company; or
5050 (II) other professional with no less than ten years experience in the field of life
5051 insurance or life reinsurance.
5052 (D) If the arbitrators appointed under Subsection (10)(d)(ii)(B) are unable to agree on
5053 an umpire:
5054 (I) each arbitrator shall provide the other with the names of three qualified individuals;
5055 (II) each arbitrator shall strike two names from the other's list; and
5056 (III) the umpire shall be chosen by drawing lots from the remaining individuals.
5057 (E) Within 60 days following the day on which the umpire is appointed, each party
5058 shall, unless otherwise ordered by the arbitration panel, submit to the arbitration panel:
5059 (I) the party's estimates of the sum due as a result of the termination of the reinsurance
5060 contract; and
5061 (II) all relevant documents and other information supporting the estimate.
5062 (F) The time periods set forth in this Subsection (10)(d)(ii) may be extended upon
5063 mutual agreement of the parties.
5064 (G) The arbitration panel has all powers necessary to conduct the arbitration
5065 proceedings in a fair and appropriate manner, including the power to:
5066 (I) request additional information from the parties;
5067 (II) authorize discovery;
5068 (III) hold hearings; and
5069 (IV) hear testimony.
5070 (H) The arbitration panel may, if the arbitration panel considers it necessary, appoint
5071 one or more independent actuarial experts, the expense of which shall be shared equally
5072 between the parties.
5073 (I) An arbitration panel considering the matters set forth in this Subsection (10)(d)
5074 shall:
5075 (I) apply the standards set forth in Subsection (10)(b); and
5076 (II) issue a written award specifying a net settlement amount due from one party or the
5077 other as a result of the termination of the reinsurance contract.
5078 (e) The supervising court shall confirm an award issued under Subsection (10)(d)(ii)(I)
5079 absent proof of statutory grounds for vacating or modifying arbitration awards under the
5080 Federal Arbitration Act, 9 U.S.C. Sec. 1 et seq.
5081 (f) (i) If the net settlement amount agreed or awarded pursuant to this Subsection (10)
5082 is payable by the reinsurer, the reinsurer shall pay the amount due to the estate subject to any
5083 applicable setoff under Section 31A-27a-510 .
5084 (ii) If the net settlement amount agreed or awarded pursuant to this Subsection (10) is
5085 payable by the insurer, the reinsurer is considered to have a timely filed claim against the estate
5086 for that amount, which claim shall be paid pursuant to the priority established in Subsection
5087 31A-27a-701 (2)(f).
5088 (iii) A guaranty association:
5089 (A) is not entitled to receive the net settlement amount, except to the extent it is
5090 entitled to share in the estate assets as creditors of the estate; and
5091 (B) has no responsibility for the net settlement amount.
5092 (11) (a) Except as otherwise provided in this section, this section does not alter or
5093 modify the terms and conditions of a reinsurance contract.
5094 (b) This section does not abrogate or limit any rights of a reinsurer to claim that it is
5095 entitled to rescind a reinsurance contract.
5096 (c) This section does not give a policyholder or beneficiary an independent cause of
5097 action against a reinsurer that is not otherwise set forth in the reinsurance contract.
5098 (d) This section does not limit or affect any guaranty association's rights as a creditor of
5099 the estate against the assets of the estate.
5100 (e) This section does not apply to a reinsurance agreement covering property or
5101 casualty risks.
5102 Section 90. Section 31A-27a-514 is enacted to read:
5103 31A-27a-514. Recovery of premiums owed.
5104 (1) (a) An insured shall pay any unpaid earned premium or retrospectively rated
5105 premium due the insurer:
5106 (i) directly to the receiver; or
5107 (ii) to an agent that pays or is obligated to pay the receiver on behalf of the insured.
5108 (b) (i) Premium on surety business is considered earned at inception if no policy term
5109 can be determined.
5110 (ii) All premium other than that described in Subsection (1)(b)(i) is considered earned
5111 and is prorated equally over the determined policy term, regardless of any provision in the
5112 bond, guaranty, contract, or other agreement.
5113 (2) (a) A person, other than the insured, responsible for the remittance of a premium,
5114 shall turn over to the receiver any unpaid premium due and owing as shown on the records of
5115 the insurer for the full policy term due the insurer at the time of the entry of the receivership
5116 order:
5117 (i) including any amount representing commissions; and
5118 (ii) whether earned or unearned based on the termination of coverage under Sections
5119 31A-27a-402 and 31A-27a-403 .
5120 (b) The unpaid premium due the receiver from any person other than the insured
5121 excludes any premium not collected from the insured and not earned based on the termination
5122 of coverage under Sections 31A-27a-402 and 31A-27a-403 .
5123 (3) (a) A person, other than the insured, responsible for the remittance of a premium,
5124 shall turn over to the receiver any unearned commission of that person based on the termination
5125 of coverage under Sections 31A-27a-402 and 31A-27a-403 .
5126 (b) A credit, setoff, or both may not be allowed to an agent, broker, premium finance
5127 company, or any other person for an:
5128 (i) amount advanced to the insurer by the person on behalf of, but in the absence of a
5129 payment by, the insured; or
5130 (ii) other amount paid by the person to any other person after the day on which the
5131 order of receivership is entered.
5132 (4) Regardless of any provision to the contrary in an agency contract or other
5133 agreement, a person that collects premium or finances premium under a premium finance
5134 contract, that is due the insurer in receivership is considered to:
5135 (a) hold that premium in trust as a fiduciary for the benefit of the insurer; and
5136 (b) have availed itself of the laws of this state.
5137 (5) (a) A premium finance company is obligated to pay an amount due the insurer from
5138 a premium finance contract, whether the premium is earned or unearned.
5139 (b) The receiver may collect an unpaid financed premium directly from:
5140 (i) the premium finance company by taking an assignment of the underlying premium
5141 finance contract; or
5142 (ii) the insured that is a party to the premium finance contract.
5143 (6) Upon satisfactory evidence of a violation of this section by a person other than an
5144 insured, the commissioner may pursue one or more of the following courses of action:
5145 (a) suspend, revoke, or refuse to renew the license of an offending party;
5146 (b) impose a penalty of not more than $1,000 for each act in violation of this section by
5147 a party; and
5148 (c) impose any other sanction or penalty allowed for by law.
5149 (7) (a) Before the commissioner may take an action set forth in Subsection (6), written
5150 notice shall be given to the person accused of violating the law:
5151 (i) stating specifically the nature of the alleged violation; and
5152 (ii) fixing a time and place, at least ten days after the day on which the notice is sent,
5153 when a hearing on the matter is to be held.
5154 (b) After a hearing, or upon failure of the accused to appear at a hearing, the
5155 commissioner, if a violation is found, shall impose the penalties under Subsection (6) that the
5156 commissioner considers advisable.
5157 (c) If the commissioner takes action under this Subsection (7), the party aggrieved may
5158 appeal from that action as provided in Title 63, Chapter 46b, Administrative Procedures Act.
5159 Section 91. Section 31A-27a-515 is enacted to read:
5160 31A-27a-515. Commutation and release agreements.
5161 (1) For purposes of this section, "casualty claims" means the insurer's aggregate claims
5162 arising out of insurance contracts in the following lines:
5163 (a) farm owner multiperil;
5164 (b) homeowner multiperil;
5165 (c) commercial multiperil;
5166 (d) medical malpractice;
5167 (e) workers' compensation;
5168 (f) other liability;
5169 (g) products liability;
5170 (h) auto liability;
5171 (i) aircraft, all peril; and
5172 (j) international, for lines listed in Subsections (1)(a) through (i).
5173 (2) (a) Notwithstanding Section 31A-27a-512 , the liquidator and a reinsurer may
5174 negotiate a voluntary commutation and release of all obligations arising from a reinsurance
5175 agreement in which the insurer is the ceding party.
5176 (b) A commutation and release agreement voluntarily entered into by the parties shall
5177 be commercially reasonable, actuarially sound, and in the best interests of the creditors of the
5178 insurer.
5179 (c) (i) An agreement subject to this Subsection (2) that has a gross consideration in
5180 excess of $250,000 shall be submitted pursuant to Section 31A-27a-107 to the receivership
5181 court for approval.
5182 (ii) An agreement described in this Subsection (2)(c) shall be approved by the
5183 receivership court if it meets the standards described in this Subsection (2).
5184 (3) Without derogating from Section 31A-27a-512 , if the liquidator is unable to
5185 negotiate a voluntary commutation with a reinsurer with respect to a reinsurance agreement
5186 between the insurer and that reinsurer, the liquidator may, in addition to any other remedy
5187 available under applicable law, apply to the receivership court, with notice to the reinsurer, for
5188 an order requiring that the parties submit commutation proposals with respect to the
5189 reinsurance agreement to a panel of three arbitrators:
5190 (a) at any time after 75% of the actuarially estimated ultimate incurred liability for all
5191 of the casualty claims against the liquidation estate is reached by allowance of claims in the
5192 liquidation estate pursuant to Sections 31A-27a-603 and 31A-27a-605 , calculated:
5193 (i) as of the day on which the order of liquidation is entered by or at the instance of the
5194 liquidator; and
5195 (ii) for purposes of this Subsection (3), not performed during the five-year period
5196 subsequent to the day on which the order of liquidation is entered; or
5197 (b) at any time in regard to a reinsurer if that reinsurer has a total adjusted capital that
5198 is less than 250% of its authorized control level RBC as defined in Section 31A-17-601 .
5199 (4) Venue for the arbitration is within the district of the receivership court's jurisdiction
5200 or at another location agreed to by the parties.
5201 (5) (a) If the liquidator determines that commutation would be in the best interests of
5202 the creditors of the liquidation estate, the liquidator may petition the receivership court to order
5203 arbitration.
5204 (b) If the liquidator petitions the receivership court under Subsection (5)(a), the
5205 receivership court shall require that the liquidator and the reinsurer each appoint an arbitrator
5206 within 30 days after the day on which the order for arbitration is entered.
5207 (c) If either party fails to appoint an arbitrator within the 30-day period, the other party
5208 may appoint both arbitrators and the appointments are binding on the parties.
5209 (d) The two arbitrators shall be active or retired executive officers of insurance or
5210 reinsurance companies, not under the control of or affiliated with the insurer or the reinsurer.
5211 (e) (i) Within 30 days after the day on which both arbitrators have been appointed, the
5212 two arbitrators shall agree to the appointment of a third independent, impartial, disinterested
5213 arbitrator.
5214 (ii) If agreement to the disinterested arbitrator is not reached within the 30-day period,
5215 the third arbitrator shall be appointed by the receivership court.
5216 (f) The disinterested arbitrator shall be a person who:
5217 (i) is or, if retired, has been, an executive officer of a United States domiciled
5218 insurance or reinsurance company that is not under the control of or affiliated with either of the
5219 parties; and
5220 (ii) has at least 15 years experience in the reinsurance industry.
5221 (6) (a) The arbitration panel may choose to retain as an expert to assist the panel in its
5222 determinations, a retired, disinterested executive officer of a United States domiciled insurance
5223 or reinsurance company having at least 15 years loss reserving actuarial experience.
5224 (b) If the arbitration panel is unable to unanimously agree on the identity of the expert
5225 within 14 days of the day on which the disinterested arbitrator is appointed, the expert shall be:
5226 (i) designated by the commissioner:
5227 (A) by rule made in accordance with Title 63, Chapter 46a, Utah Administrative
5228 Rulemaking Act; and
5229 (B) on the basis of recommendations made by a nationally recognized society of
5230 actuaries; and
5231 (ii) a disinterested person that has knowledge, experience, and training applicable to
5232 the line of insurance that is the subject of the arbitration.
5233 (c) The expert:
5234 (i) may not vote in the proceeding; and
5235 (ii) shall issue a written report and recommendations to the arbitration panel within 60
5236 days after the day on which the arbitration panel receives the commutation proposals submitted
5237 by the parties pursuant to Subsection (7), which report shall:
5238 (A) be included as part of the arbitration record; and
5239 (B) accompany the award issued by the arbitration panel pursuant to Subsection (8).
5240 (d) The cost of the expert is to be paid equally by the parties.
5241 (7) Within 90 days after the day on which the disinterested arbitrator is appointed
5242 under Subsection (5), each party shall submit to the arbitration panel:
5243 (a) the party's commutation proposals; and
5244 (b) other documents and information relevant to the determination of the parties' rights
5245 and obligations under the reinsurance agreement to be commuted, including:
5246 (i) a written review of any disputed paid claim balances;
5247 (ii) any open claim files and related case reserves at net present value; and
5248 (iii) any actuarial estimates with the basis of computation of any other reserves and any
5249 incurred-but-not-reported losses at net present value.
5250 (8) (a) Within 90 days after the day on which the parties submit the information
5251 required by Subsection (7), the arbitration panel:
5252 (i) shall issue an award, determined by a majority of the arbitration panel, specifying
5253 the terms of a commercially reasonable and actuarially sound commutation agreement between
5254 the parties; or
5255 (ii) may issue an award declining commutation between the parties for a period not to
5256 exceed two years if a majority of the arbitration panel determines that it is unable to derive a
5257 commercially reasonable and actuarially sound commutation on the basis of:
5258 (A) the submissions of the parties; and
5259 (B) if applicable, the report and recommendation of the expert retained in accordance
5260 with Subsection (6).
5261 (b) Following the expiration of the two-year period described in Subsection (8)(a), the
5262 liquidator may again invoke arbitration in accordance with Subsection (2), in which event
5263 Subsections (2) through (9) apply to the renewed proceeding, except that the arbitration panel
5264 is obliged to issue an award under Subsection (8)(a).
5265 (9) Once an award is issued, the liquidator shall promptly submit the award to the
5266 receivership court for confirmation.
5267 (10) (a) Within 30 days of the day on which the receivership court confirms the award,
5268 the reinsurer shall give notice to the receiver that the reinsurer:
5269 (i) will commute the reinsurer's liabilities to the insurer for the amount of the award in
5270 return for a full and complete release of all liabilities between the parties, whether past, present,
5271 or future; or
5272 (ii) will not commute the reinsurer's liabilities to the insurer.
5273 (b) If the reinsurer's liabilities are not commuted under Subsection (10)(a), the
5274 reinsurer shall:
5275 (i) establish and maintain in accordance with Section 31A-27a-516 a reinsurance
5276 recoverable trust in the amount of 102% of the award; and
5277 (ii) pay the costs and fees associated with establishing and maintaining the trust
5278 established under this Subsection (10)(b).
5279 (11) (a) If the reinsurer notifies the liquidator that it will commute the reinsurer's
5280 liabilities pursuant to Subsection (10)(a)(i), the liquidator has 30 days from the day on which
5281 the reinsurer notifies the liquidator to:
5282 (i) tender to the reinsurer a proposed commutation and release agreement:
5283 (A) providing for a full and complete release of all liabilities between the parties,
5284 whether past, present, or future;
5285 (B) that requires that the reinsurer make payment of the commutation amount within
5286 14 days from the day on which the agreement is consummated; or
5287 (ii) reject the commutation in writing, subject to receivership court approval.
5288 (b) If the liquidator rejects the commutation subject to approval of the receivership
5289 court in accordance with Subsection (11)(a)(ii), the reinsurer shall establish and maintain a
5290 reinsurance recoverable trust in accordance with Section 31A-27a-516 .
5291 (c) The liquidator and the reinsurer shall share equally in the costs and fees associated
5292 with establishing and maintaining the trust established under Subsection (11)(b).
5293 (12) Except for the period provided in Subsection (8)(b), the time periods established
5294 in Subsections (6), (7), (8), (10), and (11) may be extended:
5295 (a) upon the consent of the parties; or
5296 (b) by order of the receivership court, for good cause shown.
5297 (13) Subject to Subsection (14), this section may not be construed to supersede or
5298 impair any provision in a reinsurance agreement that establishes a commercially reasonable and
5299 actuarially sound method for valuing and commuting the obligations of the parties to the
5300 reinsurance agreement by providing in the contract the specific methodology to be used for
5301 valuing and commuting the obligations between the parties.
5302 (14) (a) A commutation provision in a reinsurance agreement is not effective if it is
5303 demonstrated to the receivership court that the provision is entered into in contemplation of the
5304 insolvency of one or more of the parties.
5305 (b) A contractual commutation provision entered into within one year of the day on
5306 which the liquidation order of the insurer is entered is rebuttably presumed to have been
5307 entered into in contemplation of insolvency.
5308 Section 92. Section 31A-27a-516 is enacted to read:
5309 31A-27a-516. Reinsurance recoverable trust provisions.
5310 (1) As used in this section:
5311 (a) "Beneficiary" means the domiciliary insurance commissioner, as liquidator of the
5312 insurer for whose sole benefit a reinsurance recoverable trust is established.
5313 (b) "Grantor" means the reinsurer who has established a reinsurance recoverable trust
5314 for the sole benefit of the beneficiary.
5315 (c) "Qualified United States financial institution" means an institution that:
5316 (i) (A) is organized under the laws of the United States or any state of the United
5317 States; or
5318 (B) in the case of a United States branch or agency office of a foreign banking
5319 organization, licensed under the laws of the United States or any state of the United States;
5320 (ii) is granted authority to operate with fiduciary powers; and
5321 (iii) is regulated, supervised, and examined by federal or state authorities having
5322 regulatory authority over banks and trust companies.
5323 (d) "Reinsurance recoverable trust" means a trust established pursuant to Section
5324 31A-27a-515 .
5325 (2) (a) The trustee of a reinsurance recoverable trust shall be a qualified United States
5326 financial institution.
5327 (b) The trust agreement governing a reinsurance recoverable trust shall:
5328 (i) be entered into by the beneficiary, the grantor, and a trustee;
5329 (ii) create a trust account into which assets shall be deposited in accordance with
5330 Section 31A-27a-515 ;
5331 (iii) provide that the beneficiary may withdraw assets from the trust only:
5332 (A) on the basis of a filed claim allowed pursuant to Section 31A-27a-603 or
5333 31A-27a-605 ;
5334 (B) where the grantor is notified, in writing, of the allowance of the claim;
5335 (C) to the extent that the amount to be withdrawn exceeds any setoff permitted by
5336 Section 31A-27a-510 due to the grantor; and
5337 (D) when 60 days expires during which the grantor fails to:
5338 (I) pay the claim; or
5339 (II) subject to and without derogation from Section 31A-27a-512 , which at all times
5340 governs and remains binding on the reinsurer, file notice of a written dispute with respect to the
5341 claim under and in terms of the reinsurance agreement; or
5342 (E) if the beneficiary complies with any different or other terms and conditions
5343 mutually agreed to by the beneficiary and the grantor in the trust agreement;
5344 (iv) require the trustee to:
5345 (A) receive assets and hold all assets at the trustee's office in the United States in a safe
5346 place;
5347 (B) determine that all assets are in such form that the beneficiary, or the trustee upon
5348 direction by the beneficiary, may whenever necessary negotiate the assets, without consent or
5349 signature from the grantor or any other person;
5350 (C) furnish to the grantor and the beneficiary a statement of all assets in the trust
5351 account upon its inception and at intervals no less frequent than the end of each calendar
5352 quarter; and
5353 (D) notify the grantor and the beneficiary within ten days of a deposit to or withdrawal
5354 from the trust account;
5355 (v) be made subject to and governed by the laws of this state;
5356 (vi) prohibit the invasion of the trust corpus for the purpose of paying compensation to,
5357 or reimbursing the expenses of, the trustee;
5358 (vii) provide that the trustee is liable for the trustee's negligence, willful misconduct, or
5359 lack of good faith;
5360 (viii) subject to Subsection (2)(c), provide that the trustee may resign upon delivery of
5361 a written notice of resignation, effective not less than 90 days after the day on which the
5362 beneficiary and grantor receive the notice;
5363 (ix) subject to Subsection (2)(c), provide that the trustee may be removed by the
5364 grantor by delivery to the trustee and the beneficiary of a written notice of removal, effective
5365 not less than 90 days after the day on which the trustee and the beneficiary receive the notice;
5366 (x) provide that the grantor has the full and unqualified right to vote any shares of stock
5367 in the trust account except that, subject to other provisions of this section, an interest or
5368 dividend paid on shares of stock or other obligation in the trust account shall remain in the
5369 trust;
5370 (xi) specify categories of investments reasonably acceptable to the beneficiary;
5371 (xii) authorize the trustee to invest funds and to accept substitutions, by the grantor,
5372 that the trustee determines are at least equal in market value to the assets withdrawn provided
5373 that no investment or substitution shall be made without prior approval from the beneficiary,
5374 which may not be unreasonably or arbitrarily withheld;
5375 (xiii) subject to Subsection (2)(d), provide that the beneficiary may at any time
5376 designate a party to which all or part of the trust assets are to be transferred;
5377 (xiv) specify the types of assets that may be included in the trust account:
5378 (A) which shall consist only of:
5379 (I) cash in United States dollars;
5380 (II) certificates of deposit issued by a United States bank and payable in United States
5381 dollars;
5382 (III) investments permitted by this state's insurance law; or
5383 (IV) any combination of the types specified by this Subsection (2)(b)(xiv)(A);
5384 (B) except that if investments in or issued by an entity controlling, controlled by, or
5385 under common control with either the grantor or the beneficiary of the trust, may not exceed
5386 5% of total investments; and
5387 (C) subject to the assets deposited in the trust account being valued according to the
5388 asset's current fair market value;
5389 (xv) give the grantor the right to seek approval from the beneficiary, which may not be
5390 unreasonably or arbitrarily withheld, to withdraw from the trust account all or any part of the
5391 trust assets and transfer those assets to the grantor, if:
5392 (A) the grantor, at the time of withdrawal, replaces the withdrawn assets with other
5393 qualified assets so as to maintain at all times the deposit in the required amount; or
5394 (B) after withdrawal and transfer, the market value of the trust account is no less than
5395 102% of the award made pursuant to Subsection 31A-27a-515 (7)(a);
5396 (xvi) provide for the return of any amount withdrawn in excess of the actual amounts
5397 required for:
5398 (A) payment of reported allowed claims under Subsection (2)(b)(iii); and
5399 (B) interest payments at a rate not in excess of the prime rate of interest on the excess
5400 amounts withdrawn; and
5401 (xvii) provide for termination of the reinsurance recoverable trust in accordance with
5402 Subsection (6).
5403 (c) Notwithstanding Subsection (2)(b)(viii) or (ix), a resignation or removal may not be
5404 effective until:
5405 (i) a successor trustee is appointed and approved by the beneficiary and the grantor;
5406 and
5407 (ii) all assets in the trust are transferred to the new trustee.
5408 (d) Notwithstanding Subsection (2)(b)(xiii), a transfer may be conditioned upon the
5409 trustee receiving, before or simultaneously with, other specified assets.
5410 (e) Subsection (2)(b) may not be construed to alter the rights or obligations of the
5411 parties pursuant to contractual and statutory provisions providing for notice and the
5412 determination of a claim.
5413 (3) The grantor shall, before depositing assets with the trustee, execute assignments or
5414 endorsements in blank, or transfer legal title to the trustee of all shares, obligations, or any
5415 other assets requiring assignments, in order that the beneficiary, or the trustee upon the
5416 direction of the beneficiary, may whenever necessary negotiate these assets without consent or
5417 signature from the grantor or any other person.
5418 (4) (a) Without derogating Section 31A-27a-512 , the grantor or the beneficiary may
5419 request that the receivership court review the amount held if:
5420 (i) the grantor and beneficiary fail to reach agreement on the extent, if any, to which
5421 supplementation or reduction of a reinsurance recoverable trust should be occasioned;
5422 (ii) (A) the reinsurance recoverable trust is exhausted; or
5423 (B) the reinsurance recoverable trust is insufficient to respond to claims allowed
5424 pursuant to Section 31A-27a-603 or 31A-27a-605 ; and
5425 (iii) the grantor or the beneficiary believe that the amount held in the reinsurance
5426 recoverable trust is either deficient or overstated.
5427 (b) The review described in this Subsection (4) shall be conducted applying procedures
5428 and terms as the receivership court shall, in its sole discretion, direct.
5429 (5) A reinsurance recoverable trust shall terminate upon the earlier of:
5430 (a) receivership court approval of a voluntary commutation between the grantor and the
5431 beneficiary pursuant to Subsection 31A-27a-515 (1);
5432 (b) the mutual agreement of the grantor and the beneficiary; or
5433 (c) a finding by the receivership court that the grantor has discharged its liabilities to
5434 the beneficiary.
5435 (6) Upon termination of a reinsurance recoverable trust, all assets not previously
5436 withdrawn by the beneficiary, pursuant to Subsection (2)(b)(iii), shall, with written approval of
5437 the beneficiary, be delivered to the grantor.
5438 Section 93. Section 31A-27a-601 is enacted to read:
5439
5440 31A-27a-601. Filing of claims.
5441 (1) (a) Subject to the other provisions of this Subsection (1), proof of a claim shall be
5442 filed with the liquidator in the form required by Section 31A-27a-602 on or before the last day
5443 for filing specified in the notice required under Section 31A-27a-406 .
5444 (b) The last day for filing specified in the notice may not be later than 18 months after
5445 the day on which the order of liquidation is entered unless the receivership court, for good
5446 cause shown, extends the time.
5447 (c) Proof of a claim for the following does not need to be filed unless the liquidator
5448 expressly requires filing of proof:
5449 (i) cash surrender value in life insurance and annuities;
5450 (ii) investment value in life insurance and annuities other than cash surrender value;
5451 and
5452 (iii) any other policy insuring the life of a person.
5453 (d) Only upon application of the liquidator, the receivership court may allow
5454 alternative procedures and requirements for the filing of proof of a claim or for allowing or
5455 proving a claim.
5456 (e) Upon application, if the receivership court dispenses with the requirements of filing
5457 a proof of claim by a person, class, or group of persons, a proof of claim for that person, class,
5458 or group is considered as being filed for all purposes, except that the receivership court's
5459 waiver of proof of claim requirements may not impact guaranty association proof of claim
5460 filing requirements or coverage determinations to the extent that the guaranty association
5461 statute or filing requirements are inconsistent with the receivership court's waiver of proof.
5462 (2) The liquidator may permit a claimant that makes a late filing to share ratably in
5463 distributions, whether past or future, as if the claim were not filed late, to the extent that the
5464 payment will not prejudice the orderly administration of the liquidation, under the following
5465 circumstances:
5466 (a) the eligibility to file a proof of claim was not known to the claimant, and the
5467 claimant files a proof of claim within 90 days after the day on which the claimant first learns of
5468 the eligibility;
5469 (b) (i) a transfer to a creditor is:
5470 (A) avoided under Section 31A-27a-503 , 31A-27a-504 , 31A-27a-506 , or 31A-27a-507 ;
5471 or
5472 (B) voluntarily surrendered under Section 31A-27a-509 ; and
5473 (ii) the filing satisfies the conditions of Section 31A-27a-509 ; or
5474 (c) the valuation of security held by a secured creditor under Section 31A-27a-610
5475 shows a deficiency and the claim for the deficiency is filed within 30 days after the valuation.
5476 (3) If a reinsurer's reinsurance contract terminates pursuant to Section 31A-27a-513 :
5477 (a) a claim filed by the receiver which arises from the termination may not be
5478 considered late if the claim is filed within 90 days of the day on which the reinsurance contract
5479 terminates; and
5480 (b) the reinsurer shall receive a ratable share of distributions, whether past or future, as
5481 if the claim described in Subsection (3)(a) is not late.
5482 (4) Notwithstanding any other provision of this chapter, the liquidator may petition the
5483 receivership court, subject to Section 31A-27a-107 , to set a date certain after which no further
5484 claims may be filed.
5485 Section 94. Section 31A-27a-602 is enacted to read:
5486 31A-27a-602. Proof of claim.
5487 (1) Proof of claim shall consist of a statement signed by the claimant or on behalf of
5488 the claimant that includes all of the following that are applicable:
5489 (a) the particulars of the claim including the consideration given for the claim;
5490 (b) the identity and amount of the security on the claim;
5491 (c) the payments made on the debt, if any;
5492 (d) that the sum claimed is justly owing and there is no setoff, counterclaim, or defense
5493 to the claim;
5494 (e) any right of priority of payment or other specific right asserted by the claimant;
5495 (f) the name and address of the claimant and the attorney, if any, who represents the
5496 claimant; and
5497 (g) the claimant's Social Security number or federal employer identification number.
5498 (2) The liquidator may require that:
5499 (a) a prescribed form be used under this section; and
5500 (b) other information and documents be included.
5501 (3) At any time the liquidator may:
5502 (a) require the claimant to present information or evidence supplementary to that
5503 required under Subsection (1);
5504 (b) take testimony under oath;
5505 (c) require production of one or more affidavits or depositions; or
5506 (d) otherwise obtain additional information or evidence.
5507 (4) (a) An affected guaranty association may file a single omnibus proof of claim for
5508 all claims of the affected guaranty association in connection with payment of claims of the
5509 insurer.
5510 (b) The omnibus proof of claim may be periodically updated by the affected guaranty
5511 association without regard to the deadline specified in Subsection 31A-27a-601 (1).
5512 (c) An affected guaranty association may be required to submit a reasonable amount of
5513 documentation in support of the claim.
5514 Section 95. Section 31A-27a-603 is enacted to read:
5515 31A-27a-603. Allowance of claims.
5516 (1) (a) Except as provided in Subsections (11) and (12), the liquidator shall:
5517 (i) review all claims filed in the liquidation proceeding in accordance with this chapter;
5518 and
5519 (ii) further investigate a claim, as the liquidator considers necessary.
5520 (b) Consistent with this chapter, the liquidator may allow, disallow, or compromise a
5521 claim that will be recommended to the receivership court unless the liquidator is required by
5522 law to accept the claim as settled by a person, including an affected guaranty association,
5523 subject to a statutory or contractual right of the affected reinsurers to participate in the claims
5524 allowance process.
5525 (c) Notwithstanding any other provision of this chapter, a claim under a policy of
5526 insurance may not be allowed for an amount in excess of the applicable policy limits.
5527 (2) (a) Pursuant to the review required by Subsection (1), the liquidator shall provide
5528 notice of the claim determination to the claimant or the claimant's attorney.
5529 (b) The notice required by this Subsection (2) shall set forth:
5530 (i) the amount of the claim allowed by the liquidator, if any;
5531 (ii) the priority class of the claim as established in Section 31A-27a-701 ; and
5532 (iii) if the claim is denied, the reason for the denial.
5533 (c) In regard to a claim to be allowed pursuant to Section 31A-27a-605 , preliminary
5534 notice of the amount of the claim determination shall be provided to any reinsurer that is or
5535 may be liable in respect to the claim at least 45 days before the day on which notice is provided
5536 to the claimant pursuant to this Subsection (2).
5537 (d) In regard to a claim being allowed other than pursuant to Section 31A-27a-605 , the
5538 notice sent to the claimant may be provided to any reinsurer that is or may be liable in respect
5539 of the claim.
5540 (e) If no timely objection is submitted, the claim determination is binding on the
5541 reinsurer upon allowance.
5542 (3) (a) Within 45 days after the day on which the notice described in Subsection (2) is
5543 mailed, the claimant noticed may submit a written objection to the liquidator.
5544 (b) An objection provided for under this Subsection (3) shall clearly set out:
5545 (i) all facts and the legal basis, if any, for the objection; and
5546 (ii) the reasons why the claim should be allowed at a different amount or in a different
5547 priority class.
5548 (c) If no timely objection is submitted, the claimant may not further object, and the
5549 determination is final.
5550 (d) The liquidator may accelerate the allowance of a claim by obtaining a waiver of an
5551 objection.
5552 (4) (a) A claim that is not mature as of the coverage termination date established under
5553 Section 31A-27a-402 may be allowed as if it were mature, except the claim shall be discounted
5554 to present value.
5555 (b) A claim is not mature if payment on the claim is not yet due.
5556 (5) The following is not required to be considered as evidence of liability or of the
5557 amount of damages:
5558 (a) a judgment or order against an insured or the insurer entered:
5559 (i) after the day on which a successful petition for receivership is initially filed; or
5560 (ii) within 120 days before the day on which the petition is initially filed; or
5561 (b) a judgment or order against an insured or the insurer entered at any time by default
5562 or by collusion.
5563 (6) A claim under an employment contract by a director, officer, or person in fact
5564 performing similar functions or having similar powers is limited to payment for services
5565 rendered before an order of receivership, unless explicitly approved in writing:
5566 (a) by the commissioner before an order of receivership;
5567 (b) by the rehabilitator before the day on which the order of liquidation is entered; or
5568 (c) by the liquidator after the day on which the order of liquidation is entered.
5569 (7) The total liability of the liquidator to all claimants arising out of the same act or
5570 policy shall be no greater than the insurer's total liability would have been were the insurer not
5571 in liquidation.
5572 (8) (a) The liquidator shall disallow a claim that is for or determined to be for a de
5573 minimis amount.
5574 (b) A de minimis amount is an amount equal to or less than a maximum de minimis
5575 amount approved by the receivership court as being reasonable and necessary for
5576 administrative convenience.
5577 (9) A claim that does not contain all the applicable information required by Section
5578 31A-27a-602 :
5579 (a) does not need to be further reviewed or adjudicated; and
5580 (b) may be denied or disallowed by the liquidator subject to the notice and objection
5581 procedures in this section.
5582 (10) (a) The liquidator may reconsider a claim on the basis of additional information
5583 and amend the recommendation to the receivership court.
5584 (b) The claimant shall be afforded the same notice and opportunity to be heard on all
5585 changes in the recommendation as in the claim's initial determination.
5586 (c) The receivership court may amend the receivership court's allowance or
5587 disallowance as appropriate.
5588 (11) (a) The liquidator is not required to process claims for any class until it appears
5589 reasonably likely that property will be available for a distribution to that class.
5590 (b) If there are insufficient assets to justify processing all claims for a class listed in
5591 Section 31A-27a-701 , the liquidator shall:
5592 (i) report the facts to the receivership court; and
5593 (ii) make appropriate recommendations for handling the remainder of the claims.
5594 (12) A claim of a lessor for damages resulting from the termination of a lease of real
5595 property shall be disallowed to the extent that the claim exceeds the sum of:
5596 (a) the rent reserved by the lease, without acceleration, for the greater of one year, or
5597 15%, not to exceed three years, of the remaining term of the lease, following the earlier of:
5598 (i) the day on which the petition is filed; and
5599 (ii) the day on which the lessor repossessed, or the lessee surrendered, the leased
5600 property; and
5601 (b) any unpaid rent due under the lease, without acceleration, on the earlier of the dates
5602 specified in Subsection (12)(a).
5603 Section 96. Section 31A-27a-604 is enacted to read:
5604 31A-27a-604. Claims under an occurrence policy, surety bond, surety
5605 undertaking.
5606 (1) Subject to Section 31A-27a-603 , an insured may file a claim for the protection
5607 afforded under the insured's policy, irrespective of whether a claim is known at the time of
5608 filing, if the policy is an occurrence policy.
5609 (2) Subject to Section 31A-27a-603 , an obligee may file a claim for the protection
5610 afforded under a surety bond or a surety undertaking issued by the insurer as to which the
5611 obligee is the beneficiary, irrespective of whether a claim is known at the time of filing.
5612 (3) After a claim is filed under Subsection (1) or (2), when a specific claim is made by
5613 or against the insured or by the obligee:
5614 (a) the insured or the obligee shall supplement the claim; and
5615 (b) the receiver shall treat the claim as a contingent or unliquidated claim under
5616 Section 31A-27a-605 .
5617 Section 97. Section 31A-27a-605 is enacted to read:
5618 31A-27a-605. Allowance of contingent and unliquidated claims.
5619 (1) As used in this section, "claim" means a demand for payment pursuant to Section
5620 31A-27a-601 under the terms and conditions of a contract issued by the insurer as a result of a
5621 known accident, casualty, disaster, loss, event, or occurrence.
5622 (2) (a) A claim of an insured or third party may be allowed under Section
5623 31A-27a-603 , regardless of the fact that it is contingent or unliquidated if:
5624 (i) any contingency is removed in accordance with Subsection (3); and
5625 (ii) the value of the claim is determined in accordance with Subsection (4).
5626 (b) A claim is contingent if:
5627 (i) the accident, casualty, disaster, loss, event, or occurrence insured, reinsured, or
5628 bonded against occurs on or before the date fixed under Section 31A-27a-601 ; and
5629 (ii) the act or event triggering the insurer's obligation to pay has not occurred as of the
5630 date fixed under Section 31A-27a-401 .
5631 (c) A claim is unliquidated if the insurer's obligation to pay is established, but the
5632 amount of the claim has not been determined.
5633 (3) (a) Unless the receivership court directs otherwise, a contingent claim may be
5634 allowed if:
5635 (i) the claimant presents proof of the insurer's obligation to pay reasonably satisfactory
5636 to the liquidator; or
5637 (ii) subject to Subsection (3)(b), the claim is based on a cause of action against an
5638 insured of the insurer, and:
5639 (A) it may be reasonably inferred from proof presented upon the claim that the
5640 claimant would be able to obtain a judgment; and
5641 (B) the person furnishes suitable proof.
5642 (b) A contingent claim may not be allowed under Subsection (3)(a)(ii)(B) if the
5643 receivership court for good cause shown shall otherwise direct that no further valid claims can
5644 be made against the insurer arising out of the cause of action other than those already
5645 presented.
5646 (4) (a) An unliquidated claim may be allowed if its amount has been determined.
5647 (b) If the amount of an unliquidated claim filed pursuant to Section 31A-27a-601
5648 remains undetermined, the valuation of the unliquidated claim may be made by estimate
5649 whenever the liquidator determines that:
5650 (i) liquidation of the claim would unduly delay the administration of the liquidation
5651 proceeding; or
5652 (ii) the administrative expense of processing and adjudicating the claim or group of
5653 claims of a similar type would be unduly excessive when compared with the property that is
5654 estimated to be available for distribution with respect to the claim.
5655 (c) Any estimate shall be based on an accepted method of valuing a claim with
5656 reasonable certainty at the claim's net present value, such as an actuarial evaluation.
5657 (5) (a) Notwithstanding the other provisions of this section, a claim for the value or
5658 breach of a life insurance policy, disability income insurance policy, long-term care insurance
5659 policy, or annuity may not result in or serve as the basis of any liability of a reinsurer of the
5660 insurer.
5661 (b) A reinsurer's liability to the insurer shall be determined exclusively on the basis of
5662 its contracts of reinsurance and Section 31A-27a-513 .
5663 (6) (a) The liquidator may petition the receivership court to set a date certain before
5664 which all claims under this section shall be final.
5665 (b) In addition to the notice requirements of Section 31A-27a-107 , the liquidator shall
5666 give notice of the filing of the petition to all claimants with claims that remain contingent or
5667 unliquidated under this section.
5668 Section 98. Section 31A-27a-606 is enacted to read:
5669 31A-27a-606. Special provisions for third party claims.
5670 (1) Whenever a third party asserts a cause of action against an insured of an insurer in
5671 liquidation, the third party may file a claim with the liquidator on or before the last day for
5672 filing claims.
5673 (2) Whether or not the third party files a claim, the insured may file a claim on the
5674 insured's own behalf in the liquidation.
5675 (3) (a) The liquidator may make recommendations to the receivership court for the
5676 allowance of an insured's claim after consideration of:
5677 (i) the probable outcome of any pending action against the insured on which the claim
5678 is based;
5679 (ii) the probable damages recoverable in the action; and
5680 (iii) the probable costs and expenses of defense.
5681 (b) After allowance by the receivership court, the liquidator shall withhold any
5682 distribution payable on the claim, pending the outcome of litigation and negotiation between
5683 the insured and the third party.
5684 (c) The liquidator may reconsider the claim as provided in Subsection
5685 31A-27a-603 (10).
5686 (d) As a claim against the insured is settled or barred, the insured or third party, as
5687 appropriate, shall be paid, from the amount withheld, the same percentage distribution as is
5688 paid on other claims of like priority, on the basis of the lesser of:
5689 (i) the amount actually due from the insured by action or paid by agreement plus the
5690 reasonable costs and expense of defense; or
5691 (ii) the amount allowed on the claim by the receivership court.
5692 (e) After all claims are settled or barred, any sum remaining from the amount withheld
5693 shall revert to the undistributed property of the insurer.
5694 (4) (a) If several claims founded upon one policy are timely filed, whether by third
5695 parties or as claims by the insured under this section, and the aggregate amount of the timely
5696 filed allowed claims exceeds the aggregate policy limits, the liquidator may:
5697 (i) apportion the policy limits ratably among the timely filed allowed claims; or
5698 (ii) give notice to the insured, known third parties, and affected guaranty associations
5699 that the aggregate policy limits have been exceeded.
5700 (b) Thirty days after the day on which the liquidator's notice is given under this
5701 Subsection (4):
5702 (i) no further amounts shall be allowed;
5703 (ii) the policy limits shall be apportioned ratably among the timely filed allowed
5704 claims; and
5705 (iii) any additional claims shall be rejected.
5706 (c) A claim by the insured shall be evaluated as in Subsection (3). If an insured's claim
5707 is subsequently reduced under Subsection (3), the amount freed shall be apportioned ratably
5708 among the claims that have been reduced under this Subsection (4).
5709 (5) A claim may not be allowed under this section to the extent the claim is covered by
5710 a guaranty association.
5711 (6) A claimant may withdraw a proof of claim with the liquidator's approval. The
5712 liquidator may approve the withdrawal:
5713 (a) after giving notice of the withdrawal to the insured; and
5714 (b) only upon a showing of good cause.
5715 (7) The filing of a proof of claim in connection with a claim against an insured shall
5716 have the following effect on the rights of the claimant and the insured:
5717 (a) By filing a proof of claim, a claimant:
5718 (i) waives any right to pursue the personal assets of the insured with respect to the
5719 claim, to the extent of the coverage or policy limits provided by the insurer; and
5720 (ii) except as provided in this section, agrees that, to the extent of the coverage or
5721 policy limits provided by the insurer, the claimant shall seek satisfaction of the claim against
5722 the insured solely from:
5723 (A) distributions paid by the liquidator on the claim; and
5724 (B) any payments that an affected guaranty association may pay on account of the
5725 claim.
5726 (b) The waiver provided under this section;
5727 (i) is conditioned upon the cooperation of the insured with:
5728 (A) the liquidator in the defense of the claim; and
5729 (B) any applicable guaranty association in defense of the claim; and
5730 (ii) does not operate to:
5731 (A) discharge the guaranty association from any of its responsibilities and duties;
5732 (B) release the insured with respect to any claim in excess of the coverage or policy
5733 limits provided by the insurer or any other responsible party; or
5734 (C) release the insured to the extent of the guaranty association's claim for
5735 reimbursement from the insured under a guaranty association statutory provision instituting a
5736 right to recover from high net worth insureds.
5737 (c) The waiver provided under this section is void if:
5738 (i) a claimant withdraws the claimant's proof of claim under Subsection (6); or
5739 (ii) the liquidator avoids insurance coverage in connection with a proof of the claim.
5740 (d) The liquidator shall provide, where applicable, notice of the election of remedies
5741 provision in this section on any proof of claim form it distributes that shall:
5742 (i) be inserted above the claimant's signature line in typeface:
5743 (A) no smaller than the typeface of the rest of the notice; and
5744 (B) in no event smaller than font size 14; and
5745 (ii) include a statement substantially similar to the following: "I understand by filing
5746 this claim in the estate of the insurer I am waiving any right to pursue the personal assets of the
5747 insured to the extent that there are policy limits or coverage provided by the now insolvent
5748 insurer."
5749 Section 99. Section 31A-27a-607 is enacted to read:
5750 31A-27a-607. Disputed claims.
5751 (1) (a) When a claim is disallowed in whole or in part by the liquidator, written notice
5752 of the determination and of the right to object shall be given promptly to the claimant or the
5753 claimant's attorney of record, if any, by first-class mail at the addresses shown in the proof of
5754 claim.
5755 (b) (i) Within 45 days from the day on which the notice required by Subsection (1)(a) is
5756 mailed, the claimant may file an objection with the liquidator.
5757 (ii) If an objection is not filed within the period provided in Subsection (1)(b)(i), the
5758 claimant may not further object to the determination.
5759 (2) (a) If an objection is filed in accordance with Subsection 31A-27a-603 (3)(a) and the
5760 liquidator does not alter the liquidator's ruling, the liquidator shall ask the court for a hearing as
5761 soon as practicable.
5762 (b) If the liquidator asks for a hearing under Subsection (2)(a), the court shall issue an
5763 order setting a date as early as possible.
5764 (c) At the request of the liquidator, the court may establish procedures for the
5765 objections hearing.
5766 (d) The liquidator shall give notice of a hearing under this Subsection (2) by first-class
5767 mail to:
5768 (i) the claimant or the claimant's attorney; and
5769 (ii) any other persons directly affected.
5770 (e) A hearing under this Subsection (2):
5771 (i) shall be heard without a jury; and
5772 (ii) may be heard by:
5773 (A) the court; or
5774 (B) a court appointed referee.
5775 (f) A hearing under this Subsection (2) shall be limited to the evidence upon which the
5776 liquidator made the determination of the claim.
5777 (g) If a referee is appointed under this Subsection (2), the referee shall submit to the
5778 court:
5779 (i) findings of fact;
5780 (ii) recommendations; and
5781 (iii) a transcript of the hearing.
5782 (h) The court shall review the referee's findings of fact and recommendations for
5783 correctness by reviewing the record, including the hearing transcript.
5784 (i) Consistent with Section 31A-27a-608 , the court may approve, disapprove, or
5785 modify:
5786 (i) the liquidator's determination of a claim; or
5787 (ii) a referee's recommendations on a claim.
5788 (3) A court order issued after a hearing and pursuant to this section may be appealed as
5789 a final order for purposes of Rule 54, Utah Rules of Civil Procedure.
5790 (4) This section is not applicable to a dispute with respect to a coverage determination
5791 by an affected guaranty association as part of the affected guaranty association's statutory
5792 obligations.
5793 Section 100. Section 31A-27a-608 is enacted to read:
5794 31A-27a-608. Liquidator's recommendations to the receivership court.
5795 (1) The liquidator shall, from time to time as determined by the liquidator, present to
5796 the receivership court for approval, reports of claims settled or determined by the liquidator
5797 under Section 31A-27a-603 .
5798 (2) A report required by this section shall include information:
5799 (a) identifying the claim;
5800 (b) the amount of the claim; and
5801 (c) the priority class of the claim.
5802 Section 101. Section 31A-27a-609 is enacted to read:
5803 31A-27a-609. Claims of codebtor.
5804 If a creditor does not timely file a proof of the creditor's claim, the following may file a
5805 proof of the claim:
5806 (1) a person who is liable to the creditor together with the insurer; or
5807 (2) a person who has secured the creditor.
5808 Section 102. Section 31A-27a-610 is enacted to read:
5809 31A-27a-610. Secured creditor's claims.
5810 (1) The value of a security held by a secured creditor shall be determined in one of the
5811 following ways:
5812 (a) by converting the security into money according to the terms of the agreement
5813 pursuant to which the security is delivered to the creditor; or
5814 (b) by agreement or litigation between the creditor and the liquidator.
5815 (2) (a) The receiver has the first priority to use collateral to reimburse a prepetition loss
5816 or expense if:
5817 (i) a surety pays a loss or loss adjustment expense under its own surety instrument
5818 before any petition for a delinquency proceeding;
5819 (ii) the principal posts collateral that remains available to reimburse the loss, the loss
5820 adjustment expense, or both; and
5821 (iii) at the time of the petition, the collateral posted under this Subsection (2)(a) has not
5822 been credited against the payments made.
5823 (b) If the principal under a surety bond or a surety undertaking pledges collateral,
5824 including a guaranty or a letter of credit, to secure the principal's reimbursement obligation to
5825 the insurer, the claim of an obligee or, subject to the discretion of the receiver, completion
5826 contractor under the surety bond or surety undertaking shall be satisfied first out of the
5827 collateral or the collateral's proceeds.
5828 (c) In making a distribution to an obligee or completion contractor, the receiver shall
5829 retain a sufficient reserve for any other potential claim against the collateral under Subsection
5830 (2)(b).
5831 (d) If the collateral is insufficient to satisfy in full all potential claims against it under
5832 Subsections (2)(b) and (f):
5833 (i) the claims shall be paid on a pro rata basis; and
5834 (ii) the obligees or completion contractor shall have claims, subject to allowance
5835 pursuant to Section 31A-27a-603 , for any deficiency.
5836 (e) If the time to assert a claim against a surety bond or a surety undertaking expires
5837 and all claims have been satisfied in full, any remaining collateral for the surety bond or surety
5838 undertaking shall be returned to the principal.
5839 (f) (i) To the extent that a guaranty association has made a payment relating to a claim
5840 against a surety bond, the guaranty association shall first be reimbursed for the payment and
5841 related expenses out of the available collateral or proceeds related to the surety bond.
5842 (ii) To the extent the collateral is sufficient, the guaranty association will be reimbursed
5843 for 100% of the guaranty association's payment.
5844 (iii) If the collateral is insufficient to satisfy in full all potential claims against it under
5845 this Subsection (2)(f) and Subsection (2)(b), the one or more guaranty associations that pay
5846 claims on a surety bond:
5847 (A) are entitled to a pro rata share of the available collateral in accordance with
5848 Subsection (2)(d); and
5849 (B) have claims against the general assets of the estate in accordance with Section
5850 31A-27a-603 for any deficiency.
5851 (iv) A payment made to a guaranty association from the collateral may not be
5852 considered early access or otherwise considered a distribution out of the general assets or
5853 property of the estate.
5854 (v) A guaranty association shall subtract any payment from the collateral from the
5855 guaranty association's final claims against the estate.
5856 (3) (a) The amount determined pursuant to Subsection (1) shall be credited upon the
5857 secured claim, and the claimant may file a proof of claim, subject to the other provisions of this
5858 chapter, for any deficiency, which shall be treated as an unsecured claim.
5859 (b) If the claimant surrenders the claimant's security to the liquidator, the entire claim
5860 shall be treated as if unsecured.
5861 (4) The liquidator may recover from property securing an allowed secured claim the
5862 reasonable, necessary costs and expenses of preserving, or disposing of, the property to the
5863 extent of any benefit to the holder of the allowed secured claim.
5864 Section 103. Section 31A-27a-611 is enacted to read:
5865 31A-27a-611. Qualified financial contracts.
5866 (1) As used in this section:
5867 (a) (i) "Actual direct compensatory damages" does not include:
5868 (A) punitive or exemplary damages;
5869 (B) damages for lost profit or lost opportunity; or
5870 (C) damages for pain and suffering.
5871 (ii) "Actual direct compensatory damages" includes:
5872 (A) normal and reasonable costs of cover; or
5873 (B) other reasonable measures of damages used in the derivatives, securities, or other
5874 market for the contract or agreement claim.
5875 (b) "Business day" means a day other than:
5876 (i) a Saturday;
5877 (ii) a Sunday; or
5878 (iii) day on which either the New York Stock Exchange or the Federal Reserve Bank of
5879 New York is closed.
5880 (c) "Contractual right" includes:
5881 (i) a right set forth:
5882 (A) in a rule or bylaw of:
5883 (I) a derivatives clearing organization, as defined in the Commodity Exchange Act, 7
5884 U.S.C. Sec.1 et seq.;
5885 (II) a multilateral clearing organization, as defined in the Federal Deposit Insurance
5886 Corporation Improvement Act of 1991, 12 U.S.C. Sec. 4421;
5887 (III) a national securities exchange;
5888 (IV) a national securities association;
5889 (V) a securities clearing agency;
5890 (VI) a contract market designated under the Commodity Exchange Act, 7 U.S.C. Sec. 1
5891 et seq.;
5892 (VII) a derivatives transaction execution facility registered under the Commodity
5893 Exchange Act, 7 U.S.C. Sec. 1 et seq.; or
5894 (VIII) a board of trade, as defined in the Commodity Exchange Act, 7 U.S.C. Sec. 1 et
5895 seq.; or
5896 (B) in a resolution of the governing board of an entity described in Subsection
5897 (1)(c)(i)(A); and
5898 (ii) a right, whether or not evidenced in writing, arising:
5899 (A) under statutory or common law;
5900 (B) under law merchant; or
5901 (C) by reason of normal business practice.
5902 (d) For purposes of Subsection (3), "walkaway clause" means a provision in a qualified
5903 financial contract that suspends, conditions, or extinguishes a payment obligation of a party, in
5904 whole or in part, or does not create a payment obligation of a party that would otherwise exist:
5905 (i) solely because of:
5906 (A) the party's status as a nondefaulting party in connection with the insolvency of an
5907 insurer that is subject to this chapter and a party to the contract; or
5908 (B) the appointment of or the exercise of rights or powers by a receiver of an insurer
5909 that is subject to this chapter and a party to the contract; and
5910 (ii) not as a result of a party's exercise of any right to offset, setoff, or net obligations
5911 that exist under:
5912 (A) the contract;
5913 (B) any other contract between those parties; or
5914 (C) applicable law.
5915 (2) Notwithstanding any other provision of this chapter, including any provision of this
5916 chapter permitting the modification of a contract, or other law of a state:
5917 (a) a person may not be stayed or prohibited from exercising:
5918 (i) a contractual right to cause the termination, liquidation, acceleration, or close out of
5919 an obligation under or in connection with a netting agreement or qualified financial contract
5920 with an insurer because of:
5921 (A) the insolvency, financial condition, or default of the insurer at any time, if the right
5922 is enforceable under applicable law other than this chapter; or
5923 (B) the commencement of a formal delinquency proceeding under this chapter;
5924 (ii) a right under any of the following relating to one or more netting agreements or
5925 qualified financial contracts:
5926 (A) a pledge agreement or arrangement;
5927 (B) a security agreement or arrangement;
5928 (C) a collateral agreement or arrangement;
5929 (D) a reimbursement agreement or arrangement;
5930 (E) a guarantee agreement or arrangement;
5931 (F) any other similar security agreement or arrangement; or
5932 (G) other credit enhancement; or
5933 (iii) subject to Subsection 31A-27a-510 (2), a right to set off or net out any termination
5934 value, payment amount, or other transfer obligation arising under or in connection with one or
5935 more qualified financial contracts where the counterparty or its guarantor is organized under
5936 the laws of:
5937 (A) the United States;
5938 (B) a state; or
5939 (C) a foreign jurisdiction approved by the Securities Valuation Office of the National
5940 Association of Insurance Commission as eligible for netting; or
5941 (b) if a counterparty to a master netting agreement or a qualified financial contract with
5942 an insurer subject to a proceeding under this chapter terminates, liquidates, closes out, or
5943 accelerates the master netting agreement or qualified financial contract:
5944 (i) damages shall be measured as of the date or dates of termination, liquidation, close
5945 out, or acceleration; and
5946 (ii) the amount of a claim for damages shall be actual direct compensatory damages
5947 calculated in accordance with Subsection (7).
5948 (3) (a) Upon termination of a netting agreement or qualified financial contract, the net
5949 or settlement amount, if any, owed by a nondefaulting party to an insurer against which an
5950 application or petition is filed under this chapter shall be transferred to or on the order of the
5951 receiver for the insurer:
5952 (i) even if the insurer is the defaulting party; and
5953 (ii) notwithstanding any walkaway clause in the netting agreement or qualified
5954 financial contract.
5955 (b) (i) A limited two-way payment or first method provision in a netting agreement or
5956 qualified financial contract with an insurer that defaults is considered to be a full two-way
5957 payment or second method provision as against the defaulting insurer.
5958 (ii) Property or an amount described in this Subsection (3)(b) shall, except to the extent
5959 it is subject to one or more secondary liens or encumbrances or rights of netting or setoff, be a
5960 general asset of the insurer.
5961 (4) In making a transfer of a netting agreement or qualified financial contract of an
5962 insurer subject to a proceeding under this chapter, the receiver shall either:
5963 (a) transfer to one party, other than an insurer subject to a proceeding under this
5964 chapter, all netting agreements and qualified financial contracts between a counterparty or an
5965 affiliate of the counterparty and the insurer that is the subject of the proceeding, including:
5966 (i) all rights and obligations of each party under each netting agreement and qualified
5967 financial contract; and
5968 (ii) all property, including any guarantees or other credit enhancement, securing any
5969 claims of each party under each netting agreement and qualified financial contract; or
5970 (b) transfer none of the netting agreements, qualified financial contracts, rights,
5971 obligations, or property referred to in Subsection (4)(a) with respect to the counterparty and an
5972 affiliate of the counterparty.
5973 (5) If a receiver for an insurer makes a transfer of one or more netting agreements or
5974 qualified financial contracts, the receiver shall use its best efforts to notify any person who is
5975 party to the netting agreements or qualified financial contracts of the transfer by 12 noon, the
5976 receiver's local time, on the business day following the transfer.
5977 (6) (a) Notwithstanding any other provision of this chapter and except for Subsection
5978 (6)(b), a receiver may not avoid a transfer of money or other property arising under or in
5979 connection with any of the following that is made before the commencement of a formal
5980 delinquency proceeding under this chapter:
5981 (i) a netting agreement;
5982 (ii) a qualified financial contract; or
5983 (iii) one of the following relating to a netting agreement or qualified financial contract:
5984 (A) a pledge agreement;
5985 (B) a security agreement;
5986 (C) a collateral agreement;
5987 (D) a guarantee agreement;
5988 (E) any other similar security arrangement; or
5989 (F) a credit support document.
5990 (b) A transfer may be avoided under Subsection 31A-27a-507 (1) if the transfer is made
5991 with actual intent to hinder, delay, or defraud:
5992 (i) the insurer;
5993 (ii) a receiver appointed for the insurer; or
5994 (iii) an existing or future creditor.
5995 (7) (a) In exercising the rights of disaffirmance or repudiation of a receiver with respect
5996 to a netting agreement or qualified financial contract to which an insurer is a party, the receiver
5997 for the insurer shall either:
5998 (i) disaffirm or repudiate all netting agreements and qualified financial contracts
5999 between a counterparty or an affiliate of the counterparty and the insurer that is the subject of
6000 the proceeding; or
6001 (ii) disaffirm or repudiate none of the netting agreements and qualified financial
6002 contracts referred to in Subsection (7)(a)(i) with respect to the person or an affiliate of the
6003 person.
6004 (b) Notwithstanding any other provision of this chapter, a claim of a counterparty
6005 against the estate arising from the receiver's disaffirmance or repudiation of a netting
6006 agreement or qualified financial contract that has not been previously affirmed in the
6007 liquidation or immediately preceding rehabilitation case shall be determined and shall be
6008 allowed or disallowed:
6009 (i) as if the claim arose before the day on which the petition for liquidation is filed; or
6010 (ii) if a rehabilitation proceeding is converted to a liquidation proceeding, as if the
6011 claim had arisen before the day on which the petition for rehabilitation is filed.
6012 (c) The amount of a claim shall be the actual direct compensatory damages determined
6013 as of the date of the disaffirmance or repudiation of the netting agreement or qualified financial
6014 contract.
6015 (8) This section does not apply to a person who is an affiliate of the insurer that is the
6016 subject of the proceeding.
6017 (9) All rights of a counterparty under this chapter apply to a netting agreement or
6018 qualified financial contract entered into on behalf of the general account or separate accounts if
6019 the assets of each separate account are available only to counterparties to netting agreements
6020 and qualified financial contracts entered into on behalf of that separate account.
6021 (10) (a) The definition of "qualified financial contract" in Section 31A-27a-102 shall
6022 be interpreted to be consistent with the definitions applicable under federal law in instances of
6023 insolvency of other types of financial institutions.
6024 (b) The definition of "qualified financial contract" and this section do not:
6025 (i) affect the scope of permissible investments of insurers or the valuation of those
6026 investments; or
6027 (ii) modify any other regulatory framework applicable to investments or investment
6028 practices of insurers.
6029 Section 104. Section 31A-27a-612 is enacted to read:
6030 31A-27a-612. Administration of deductible policies and insured collateral.
6031 (1) As used in this section:
6032 (a) "Collateral" means any of the following that secures an insured's obligation to pay
6033 or to reimburse the insurer for deductible claim payments and to reimburse or pay to the insurer
6034 other secured obligations:
6035 (i) cash;
6036 (ii) a letter of credit of the insured;
6037 (iii) a surety bond posted by the insured; or
6038 (iv) any other form of security posted by the insured.
6039 (b) "Deductible claim" means a claim, including a loss or allocated loss adjustment
6040 expense, under a deductible policy within the insured's obligation to pay a portion of a claim or
6041 claim expense that the insurer is obligated to pay to a person other than the insured by the
6042 deductible policy or by operation of law.
6043 (c) (i) "Deductible limit" means a limit on an amount to be paid or reimbursed by the
6044 insured under a deductible policy that is equal to or greater than $5,000.
6045 (ii) A deductible limit may be any amount of the risk exposure before the insurer
6046 agrees to become liable for the insurance risk without a right of recoupment from the insured
6047 for the insurer's payment of claims or expenses related to a claim under the deductible policy.
6048 (d) (i) "Deductible policy" means any combination of one or more policies,
6049 endorsements, contracts, or security agreements in which the insured agrees with the insurer to:
6050 (A) pay directly:
6051 (I) the initial portion of a claim under the policy, endorsement, contract, or agreement
6052 up to a specified dollar amount; or
6053 (II) the expenses related to a claim; or
6054 (B) reimburse the insurer for the insurer's payment of:
6055 (I) a claim under the policy, endorsement, contract, or agreement up to a specified
6056 dollar amount; or
6057 (II) the expenses related to a claim.
6058 (ii) "Deductible policy" includes a policy, endorsement, contract, or agreement that
6059 contains an aggregate limit on the insured's liability for all deductible claims in addition to a
6060 deductible limit for each claim.
6061 (iii) "Deductible policy" does not include:
6062 (A) a policy, endorsement, contract, or agreement that provides that the initial portion
6063 of a covered claim shall be self-insured and the insurer has no payment obligation within the
6064 self-insured retention;
6065 (B) a policy, endorsement, contract, or agreement that provides for retrospectively
6066 rated premium payments by the insured; or
6067 (C) a reinsurance arrangement or agreement.
6068 (d) "Other secured obligation" means an obligation, such as a reinsurance or
6069 retrospective premium obligation, that is:
6070 (i) payable by the insured to the insurer; and
6071 (ii) secured by collateral that also secures a deductible obligation.
6072 (e) "Uncovered claim" means a deductible claim that is secured by collateral but that:
6073 (i) is not defined as a covered claim under any relevant guaranty association statute;
6074 (ii) the insured fails to fund or pay; and
6075 (iii) is filed with the receiver pursuant to the receivership proof of claim process.
6076 (2) (a) If an insurer agrees to allow an insured to fund or pay deductible claims directly
6077 or through a third party administrator, except as prohibited by applicable workers'
6078 compensation insurance law:
6079 (i) the insured shall fulfill the insured's obligations notwithstanding a delinquency
6080 proceeding; and
6081 (ii) the receiver shall allow the funding or payment agreements to continue
6082 notwithstanding a delinquency proceeding.
6083 (b) To the extent the insured funds or pays a deductible claim, the insured's funding or
6084 payment of a deductible claim:
6085 (i) bars any deductible claim in a delinquency proceeding including a claim by the
6086 insured or third party claimant; and
6087 (ii) extinguishes the obligation, if any, of the receiver or an affected guaranty
6088 association to pay the deductible claim.
6089 (c) The insured is responsible for providing timely notice to the receiver and to all
6090 affected guaranty associations for any claim that may exceed the deductible limit.
6091 (d) A charge of any kind may not be made against a receiver or an affected guaranty
6092 association on the basis of an insured's funding or payment of a deductible claim.
6093 (e) The failure of an insured to fulfill the insured's obligation pursuant to a funding
6094 agreement entitles the following to the full benefit of all collateral and other rights of recovery
6095 and reimbursement under the other provisions of this section:
6096 (i) the receiver that pays a deductible claim; or
6097 (ii) pursuant to Subsection (6)(b), an affected guaranty association that pays a
6098 deductible claim.
6099 (3) Any reimbursement owed to an insurer under a deductible policy issued by an
6100 insurer subject to a delinquency proceeding shall be administered as follows:
6101 (a) (i) A reimbursement from an insured for the payment of a deductible claim is a
6102 general asset of the estate to the extent that:
6103 (A) the insolvent insurer is owed reimbursement for deductible payments made before
6104 the entry of a final order of liquidation; or
6105 (B) the receiver is owed reimbursement for a deductible payment.
6106 (ii) The receiver shall determine if a reimbursement is a general asset of the estate in
6107 accordance with this section.
6108 (b) The receiver shall bill an insured for reimbursement of a deductible claim:
6109 (i) paid by the insurer before the commencement of delinquency proceedings;
6110 (ii) paid by an affected guaranty association upon receipt of notice of a reimbursable
6111 payment; or
6112 (iii) paid or allowed by the receiver.
6113 (c) The receiver may take all commercially reasonable actions necessary to collect a
6114 reimbursement owed if the insured does not make payment within:
6115 (i) the time specified in the deductible policy; or
6116 (ii) within 60 days after the day of billing if no time is specified in the deductible
6117 policy.
6118 (d) The following is not a defense to the insured's reimbursement obligation under a
6119 deductible policy:
6120 (i) the insolvency of the insurer;
6121 (ii) the insurer's inability to perform any of the insurer's obligations under a deductible
6122 policy; or
6123 (iii) an allegation of improper handling or payment of a deductible claim by:
6124 (A) the insurer;
6125 (B) the receiver;
6126 (C) an affected guaranty association; or
6127 (D) any combination of Subsections (3)(d)(iii)(A) through (C).
6128 (4) The receiver shall adjust and pay uncovered claims as provided in Subsection (5).
6129 The receiver's obligation under this Subsection (4) terminates once all available collateral is
6130 exhausted. Once all available collateral is exhausted, any unpaid uncovered claims shall
6131 continue to be handled as a proof of claim in the receivership estate.
6132 (5) (a) (i) Except where a deductible policy or other agreement conflicts with this
6133 section, any collateral held by an insurer subject to a delinquency proceeding under this chapter
6134 held under a deductible policy issued by the insurer, held for other secured obligations, or held
6135 under both shall be maintained and administered in accordance with:
6136 (A) the deductible policy;
6137 (B) any applicable security agreement;
6138 (C) any agreement regarding other secured obligations; or
6139 (D) any applicable combination of the deductible policy and other agreement.
6140 (ii) This Subsection (5) applies to collateral regardless of whether the collateral is held
6141 by, for the benefit of, or assigned to the insurer under a deductible policy, agreement, or other
6142 secured obligation.
6143 (b) (i) Subject to this Subsection (5), collateral shall be used to secure the insured's
6144 obligation to fund or reimburse deductible claims or other secured obligations or other payment
6145 obligations under Subsection (8).
6146 (ii) Collateral shall be considered as property of the receivership estate solely for the
6147 purpose of the receiver administering and handling the collateral.
6148 (iii) Collateral may not be considered as a general asset of the estate, except as
6149 provided in Subsections (6)(b) and (8).
6150 (c) (i) Subject to Subsection (5)(c)(ii), collateral held to secure the insured's
6151 performance of obligations is a general asset of the estate to the extent that:
6152 (A) the insurer pays or has paid a deductible claim before the day on which a final
6153 order of liquidation is entered and the deductible is not reimbursed by the insured;
6154 (B) the receiver pays or has paid a deductible claim; or
6155 (C) the insured fails to pay or reimburse to the insurer other secured obligations to the
6156 extent the payment or reimbursement is due or payable before the day on which a final order of
6157 liquidation is entered and remains unpaid.
6158 (ii) The receiver shall determine the extent that collateral described in this Subsection
6159 (5)(c) is a general asset.
6160 (d) The receiver shall draw down collateral to the extent necessary if the insured fails
6161 to:
6162 (i) perform the insured's funding or payment obligations under any deductible policy;
6163 (ii) pay deductible reimbursements within:
6164 (A) the time specified in the deductible policy; or
6165 (B) 60 days after the date of the billing if no time is specified in the deductible policy;
6166 (iii) timely fund any other secured obligation; or
6167 (iv) timely pay expenses defined in Subsection (8).
6168 (e) (i) The receiver shall first apply or reserve collateral to the insured's obligations
6169 referenced in Subsection (6)(b).
6170 (ii) The receiver shall use any collateral remaining after the application of Subsection
6171 (5)(e)(i) to:
6172 (A) reimburse deductible claims submitted by an affected guaranty association;
6173 (B) adjust and pay uncovered claims allowed by the liquidator;
6174 (C) pay other secured obligations of the insured that become due and payable after the
6175 date of liquidation; or
6176 (D) pay expenses as defined in Subsection (8).
6177 (iii) The receiver shall:
6178 (A) use collateral under Subsection (5)(e)(ii) in the order that the deductible claims or
6179 charges against the collateral listed in Subsection (5)(e)(ii) are received and accepted by the
6180 receiver; and
6181 (B) continue until all valid deductible claims or charges are fully reimbursed or paid or
6182 the collateral is exhausted.
6183 (iv) If there are amounts payable or reimbursable under this Subsection (5)(e) and the
6184 receiver for any reason has been precluded from drawing the collateral, the receiver may
6185 establish a reserve against the collateral for those amounts. Only the collateral exceeding the
6186 reserve shall be considered remaining collateral under this Subsection (5)(e).
6187 (f) Once all claims, other secured obligations, or expenses under Subsection (8)
6188 covered by collateral have been paid and the receiver is satisfied that no new claims, other
6189 secured obligations, or expenses under Subsection (5)(e) may be presented, the receiver shall
6190 release any remaining collateral to the insured in accordance with the deductible policy or
6191 agreement relating to other secured obligations.
6192 (6) To the extent an affected guaranty association pays a deductible claim for which the
6193 insurer would have been entitled to reimbursement from the insured, the following provisions
6194 apply:
6195 (a) (i) When an affected guaranty association pays a deductible claim, the affected
6196 guaranty association shall report the claim to the receiver.
6197 (ii) The receiver shall collect from the insured all deductible amounts due as
6198 reimbursement. Subject to Subsection (8), when the insured reimbursements are collected, the
6199 receiver shall reimburse the affected guaranty association for deductible claims.
6200 (iii) A reimbursement paid to the affected guaranty association pursuant to this
6201 Subsection (6)(a) may not be treated as a distribution under Section 31A-27a-703 or as an early
6202 access payment under Section 31A-27a-704 .
6203 (iv) If an affected guaranty association pays a deductible claim that is also subject to
6204 reimbursement under statutory net worth provisions, the affected guaranty association shall:
6205 (A) bill the insured directly;
6206 (B) notify the insurer of the payment; and
6207 (C) notify the receiver of any receipt of a reimbursement under net worth provisions,
6208 which shall be credited against the insured's deductible reimbursement obligations to the extent
6209 that the reimbursement applies to deductible claims.
6210 (b) (i) This Subsection (6)(b) applies if:
6211 (A) the receiver declines to seek reimbursement from the insured or from any available
6212 collateral;
6213 (B) the receiver is unsuccessful in obtaining reimbursement from the insured or from
6214 any available collateral; or
6215 (C) the receiver fails to take available commercially reasonable actions to collect a
6216 reimbursement owed.
6217 (ii) The receiver shall notify an affected guaranty association if the receiver declines to
6218 seek or is unsuccessful in obtaining reimbursement from the insured or from any available
6219 collateral.
6220 (iii) If a condition described in Subsection (6)(b)(i) exists, notwithstanding whether the
6221 affected guaranty association receives the notice required by Subsection (6)(b)(ii), an affected
6222 guaranty association:
6223 (A) may, after notice to the receiver, collect a reimbursement due from the insured for
6224 the deductible claims the affected guaranty association has paid:
6225 (I) on the same basis as the receiver; and
6226 (II) with the same rights and remedies; and
6227 (B) shall report any amounts collected under Subsection (6)(b)(iii)(A) from each
6228 insured to the receiver.
6229 (iv) The receiver shall provide an affected guaranty association with available
6230 information needed to collect a reimbursement due from the insured.
6231 (v) When an affected guaranty association undertakes to collect reimbursements from
6232 the insured, the affected guaranty association shall notify all other guaranty associations who
6233 have paid deductible claims on behalf of the same insured that this action is being taken.
6234 (vi) An amount collected by the affected guaranty association pursuant to this
6235 Subsection (6)(b) may not be treated as a distribution under Section 31A-27a-703 or as an early
6236 access payment under Section 31A-27a-704 .
6237 (vii) An affected guaranty association may net an expense incurred in collecting a
6238 reimbursement against that reimbursement.
6239 (c) The receiver shall provide any affected guaranty associations with periodic reports
6240 concerning the receiver's activities in discharging responsibilities under this section, which
6241 shall include an accounting for the receiver's deductible billing and collection activities.
6242 (d) To the extent that an affected guaranty association pays a deductible claim that is
6243 not reimbursed either from collateral or by insured payments, the affected guaranty association
6244 has a claim for those amounts in the delinquency proceeding. Any claim by an affected
6245 guaranty association shall be reduced by reimbursed or unreimbursed expenses described in
6246 Subsection (8) incurred by the receiver.
6247 (e) (i) If any collateral is held under a deductible policy at the time the receiver files an
6248 application to terminate the delinquency proceeding, and it appears that an additional
6249 deductible claim may be payable by an affected guaranty association under the deductible
6250 policy, the receiver shall:
6251 (A) transfer to an affected guaranty association the portion of the collateral that is
6252 reasonably estimated to be necessary to pay the deductible claim; and
6253 (B) release any remaining portion of the collateral to the insured.
6254 (ii) An affected guaranty association shall handle any collateral transferred from the
6255 receiver as provided in this section.
6256 (f) Nothing in this Subsection (6) limits any rights of the receiver or an affected
6257 guaranty association under applicable statutory law to obtain reimbursement from an insured
6258 for a claims payment made by the affected guaranty association under a policy of the insurer or
6259 for the affected guaranty association's related expenses.
6260 (7) (a) The receiver shall periodically adjust the collateral being held using accepted
6261 actuarial principles and practices.
6262 (b) The receiver may impose a discretionary safety margin for collateral maintained.
6263 (c) The receiver may not be required to review collateral more than once a year.
6264 (d) The receiver shall inform any affected guaranty association and the insured of any
6265 collateral reviews, including the basis for any proposed adjustment.
6266 (8) The receiver may do the following in relation to reasonable expenses incurred in
6267 fulfilling the receiver's responsibilities under this section:
6268 (a) deduct the expense from reimbursements;
6269 (b) deduct the expense from the collateral; or
6270 (c) recover the expense through billings to the insured.
6271 (9) (a) A receiver shall meet the receiver's obligations under this section in a timely
6272 manner.
6273 (b) If an affected guaranty association believes that a receiver is not meeting an
6274 obligation under this section in a timely manner, upon motion by an affected guaranty
6275 association, a receivership court may grant relief to the affected guaranty association if the
6276 receivership court finds that the receiver is not meeting an obligation under this section in a
6277 timely manner.
6278 Section 105. Section 31A-27a-701 is enacted to read:
6279
6280 31A-27a-701. Priority of distribution.
6281 (1) (a) The priority of payment of distributions on unsecured claims shall be in
6282 accordance with the order in which each class of claim is set forth in this section except as
6283 provided in Section 31A-27a-702 .
6284 (b) All claims in each class shall be paid in full or adequate funds retained for the
6285 claim's payment before a member of the next class receives payment.
6286 (c) All claims within a class shall be paid substantially the same percentage.
6287 (d) Except as provided in Subsections (2)(a)(i)(E), (2)(k), and (2)(m), subclasses may
6288 not be established within a class.
6289 (e) A claim by a shareholder, policyholder, or other creditor may not be permitted to
6290 circumvent the priority classes through the use of equitable remedies.
6291 (2) The order of distribution of claims shall be as follows:
6292 (a) a Class 1 claim, which:
6293 (i) is a cost or expense of administration expressly approved or ratified by the
6294 liquidator, including the following:
6295 (A) the actual and necessary costs of preserving or recovering the property of the
6296 insurer;
6297 (B) reasonable compensation for all services rendered on behalf of the administrative
6298 supervisor or receiver;
6299 (C) a necessary filing fee;
6300 (D) the fees and mileage payable to a witness;
6301 (E) an unsecured loan obtained by the receiver, which:
6302 (I) unless its terms otherwise provide, has priority over all other costs of
6303 administration; and
6304 (II) absent agreement to the contrary, shares pro rata with all other claims described in
6305 this Subsection (2)(a)(i)(E); and
6306 (F) an expense approved by the rehabilitator of the insurer, if any, incurred in the
6307 course of the rehabilitation that is unpaid at the time of the entry of the order of liquidation; and
6308 (ii) except as expressly approved by the receiver, excludes any expense arising from a
6309 duty to indemnify a director, officer, or employee of the insurer which expense, if allowed, is a
6310 Class 7 claim;
6311 (b) a Class 2 claim, which:
6312 (i) is a reasonable expense of a guaranty association, including overhead, salaries, or
6313 other general administrative expenses allocable to the receivership such as:
6314 (A) an administrative or claims handling expense;
6315 (B) an expense in connection with arrangements for ongoing coverage; and
6316 (C) in the case of a property and casualty guaranty association, a loss adjustment
6317 expense, including:
6318 (I) an adjusting or other expense; and
6319 (II) a defense or cost containment expense; and
6320 (ii) excludes an expense incurred in the performance of duties under Section
6321 31A-28-112 or similar duties under the statute governing a similar organization in another
6322 state;
6323 (c) a Class 3 claim, which:
6324 (i) is:
6325 (A) a claim under a policy of insurance including a third party claim;
6326 (B) a claim under an annuity contract or funding agreement;
6327 (C) a claim under a nonassessable policy for unearned premium;
6328 (D) a claim of an obligee and, subject to the discretion of the receiver, a completion
6329 contractor under a surety bond or surety undertaking, except for:
6330 (I) a bail bond;
6331 (II) a mortgage guaranty;
6332 (III) a financial guaranty; or
6333 (IV) other form of insurance offering protection against investment risk or warranties;
6334 (E) a claim by a principal under a surety bond or surety undertaking for wrongful
6335 dissipation of collateral by the insurer or its agents;
6336 (F) an indemnity payment on:
6337 (I) a covered claim;
6338 (II) unearned premium; or
6339 (III) a payment for the continuation of coverage made by an entity responsible for the
6340 payment of a claim or continuation of coverage of an insolvent health maintenance
6341 organization;
6342 (G) a claim incurred during the extension of coverage provided for in Sections
6343 31A-27a-402 and 31A-27a-403 ; or
6344 (H) all other claims incurred in fulfilling the statutory obligations of a guaranty
6345 association not included in Class 2, including:
6346 (I) an indemnity payment on covered claims; and
6347 (II) in the case of a life and health guaranty association, a claim:
6348 (Aa) as a creditor of the impaired or insolvent insurer for a payment of and liabilities
6349 incurred on behalf of a covered claim or covered obligation of the insurer; and
6350 (Bb) for the funds needed to reinsure the obligations described under this Subsection
6351 (2)(c)(i)(H)(II) with a solvent insurer; and
6352 (ii) notwithstanding any other provision of this chapter, excludes the following which
6353 shall be paid under Class 7, except as provided in this section:
6354 (A) an obligation of the insolvent insurer arising out of a reinsurance contract;
6355 (B) an obligation that is incurred pursuant to an occurrence policy or reported pursuant
6356 to a claims made policy after:
6357 (I) the expiration date of the policy;
6358 (II) the policy is replaced by the insured;
6359 (III) the policy is canceled at the insured's request; or
6360 (IV) the policy is canceled as provided in this chapter;
6361 (C) an obligation to an insurer, insurance pool, or underwriting association and the
6362 insurer's, insurance pool's, or underwriting association's claim for contribution, indemnity, or
6363 subrogation, equitable or otherwise, except for direct claims under a policy where the insurer is
6364 the named insured;
6365 (D) an amount accrued as punitive or exemplary damages unless expressly covered
6366 under the terms of the policy, which shall be paid as a claim in Class 9;
6367 (E) a tort claim of any kind against the insurer;
6368 (F) a claim against the insurer for bad faith or wrongful settlement practices; and
6369 (G) a claim of a guaranty association for assessments not paid by the insurer, which
6370 claims shall be paid as claims in Class 7; and
6371 (iii) notwithstanding Subsection (2)(c)(ii)(B), does not exclude an unearned premium
6372 claim on a policy, other than a reinsurance agreement;
6373 (d) a Class 4 claim, which is a claim under a policy for mortgage guaranty, financial
6374 guaranty, or other forms of insurance offering protection against investment risk or warranties;
6375 (e) a Class 5 claim, which is a claim of the federal government not included in Class 3
6376 or 4;
6377 (f) a Class 6 claim, which is a debt due an employee for services or benefits:
6378 (i) to the extent that the expense:
6379 (A) does not exceed the lesser of:
6380 (I) $5,000; or
6381 (II) two months' salary; and
6382 (B) represents payment for services performed within one year before the day on which
6383 the initial order of receivership is issued; and
6384 (ii) which priority is in lieu of any other similar priority that may be authorized by law
6385 as to wages or compensation of employees;
6386 (g) a Class 7 claim, which is a claim of an unsecured creditor not included in Classes 1
6387 through 6, including:
6388 (i) a claim under a reinsurance contract;
6389 (ii) a claim of a guaranty association for an assessment not paid by the insurer; and
6390 (iii) other claims excluded from Class 3 or 4, unless otherwise assigned to Classes 8
6391 through 13;
6392 (h) subject to Subsection (3), a Class 8 claim, which is:
6393 (i) a claim of a state or local government, except a claim specifically classified
6394 elsewhere in this section; or
6395 (ii) a claim for services rendered and expenses incurred in opposing a formal
6396 delinquency proceeding;
6397 (i) a Class 9 claim, which is a claim for penalties, punitive damages, or forfeitures,
6398 unless expressly covered under the terms of a policy of insurance;
6399 (j) a Class 10 claim, which is, except as provided in Subsections 31A-27a-601 (2) and
6400 31A-27a-601 (3), a late filed claim that would otherwise be classified in Classes 3 through 9;
6401 (k) subject to Subsection (4), a Class 11 claim, which is:
6402 (i) a surplus note;
6403 (ii) a capital note;
6404 (iii) a contribution note;
6405 (iv) a similar obligation;
6406 (v) a premium refund on an assessable policy; or
6407 (vi) any other claim specifically assigned to this class;
6408 (l) a Class 12 claim, which is a claim for interest on an allowed claim of Classes 1
6409 through 11, according to the terms of a plan to pay interest on allowed claims proposed by the
6410 liquidator and approved by the receivership court; and
6411 (m) subject to Subsection (4), a Class 13 claim, which is a claim of a shareholder or
6412 other owner arising out of:
6413 (i) the shareholder's or owner's capacity as shareholder or owner or any other capacity;
6414 and
6415 (ii) except as the claim may be qualified in Class 3, 4, 7, or 12.
6416 (3) To prove a claim described in Class 8, the claimant must show that:
6417 (a) the insurer that is the subject of the delinquency proceeding incurred the fee or
6418 expense on the basis of the insurer's best knowledge, information, and belief:
6419 (i) formed after reasonable inquiry indicating opposition is in the best interests of the
6420 insurer;
6421 (ii) that is well grounded in fact; and
6422 (iii) is warranted by existing law or a good faith argument for the extension,
6423 modification, or reversal of existing law; and
6424 (b) opposition is not pursued for any improper purpose, such as to harass, to cause
6425 unnecessary delay, or to cause needless increase in the cost of the litigation.
6426 (4) (a) A claim in Class 11 is subject to a subordination agreement related to other
6427 claims in Class 11 that exist before the entry of a liquidation order.
6428 (b) A claim in Class 13 is subject to a subordination agreement, related to other claims
6429 in Class 13 that exist before the entry of a liquidation order.
6430 Section 106. Section 31A-27a-702 is enacted to read:
6431 31A-27a-702. Health maintenance organization claims.
6432 (1) In the liquidation of a health maintenance organization, a claim for uncovered
6433 expenditures has priority over a Class 3 claim as provided for in Section 31A-27a-701 .
6434 (2) A claim other than one described in Subsection (1) shall follow the priority of
6435 distribution outlined in Section 31A-27a-701 .
6436 Section 107. Section 31A-27a-703 is enacted to read:
6437 31A-27a-703. Partial and final distributions of assets.
6438 (1) (a) With the approval of the receivership court, a liquidator may declare and pay:
6439 (i) one or more partial distributions on claims as those claims are allowed; and
6440 (ii) a final distribution.
6441 (b) All claims allowed within a priority class shall be paid at substantially the same
6442 percentage.
6443 (c) A distribution under this section to a guaranty association is not an advance under
6444 Section 31A-27a-704 .
6445 (2) In determining the percentage of distributions to be paid on a claim, the liquidator
6446 may consider:
6447 (a) the estimated value of the insurer's property, including estimated reinsurance
6448 recoverables in connection with the insurer's estimated liabilities for:
6449 (i) unpaid losses and loss expenses; and
6450 (ii) incurred but not reported losses and loss expenses; and
6451 (b) the estimated value of the insurer's liabilities, including estimated liabilities for:
6452 (i) unpaid losses and loss expenses; and
6453 (ii) incurred but not reported losses and loss expenses.
6454 (3) Distribution of property in kind may be made at valuations set by agreement:
6455 (a) between the liquidator and the creditor; and
6456 (b) as approved by the receivership court.
6457 (4) (a) Notwithstanding Subsection (1) and Part 6, Claims, the liquidator may pay
6458 benefits under a workers' compensation policy after the day on which the liquidation order is
6459 entered if:
6460 (i) there is an acceptance of liability by the insurer, and no bona fide dispute exists;
6461 (ii) payment is commenced before the entry of the liquidation order; and
6462 (iii) future or past indemnity or medical payments are due.
6463 (b) A claim payment under this Subsection (4) may continue until the applicable
6464 guaranty association:
6465 (i) assumes responsibility for the claim payments; or
6466 (ii) determines the claim is not a covered claim under its guaranty association law.
6467 (c) A claim payment or related expense made under this Subsection (4) may be treated
6468 as early access distribution under Section 31A-27a-704 in accordance with an agreement with
6469 the guaranty association responsible for the payment.
6470 Section 108. Section 31A-27a-704 is enacted to read:
6471 31A-27a-704. Early access disbursements.
6472 (1) As used in this section, "distributable assets" means general assets of the
6473 liquidation estate less:
6474 (a) amounts reserved, to the extent necessary and appropriate, for the entire Subsection
6475 31A-27a-701 (2)(a) expenses of the liquidation through and after the liquidation's closure; and
6476 (b) to the extent necessary and appropriate, reserves for distributions on claims other
6477 than those of an affected guaranty association falling within the priority classes of claims
6478 established in Subsection 31A-27a-701 (2)(c).
6479 (2) (a) An early access payment to an affected guaranty association shall be made:
6480 (i) as soon as possible after the day on which a liquidation order is entered;
6481 (ii) as frequently as possible after the first early access payment, but at least annually if
6482 there are distributable assets available to be distributed to the affected guaranty association; and
6483 (iii) in an amount consistent with this section.
6484 (b) An amount advanced to an affected guaranty association pursuant to this section
6485 shall be accounted for as an advance against distributions to be made under Section
6486 31A-27a-703 .
6487 (c) (i) Subject to Subsection (2)(c)(ii), if sufficient distributable assets are available,
6488 amounts advanced need not be limited to the claims and expenses paid to date by the affected
6489 guaranty association.
6490 (ii) Notwithstanding Subsection (2)(c)(i), the liquidator may not distribute distributable
6491 assets to an affected guaranty association in excess of the anticipated entire claims of the
6492 affected guaranty association falling within the priority classes of claims established in
6493 Subsections 31A-27a-701 (2)(b) and 31A-27a-701 (2)(c).
6494 (3) (a) Within 180 days after the day on which an order of liquidation is entered by the
6495 receivership court, and at least annually after that date, the liquidator shall:
6496 (i) apply to the receivership court for approval to make early access payments out of
6497 the general assets of the insurer to an affected guaranty association having an obligation arising
6498 in connection with the liquidation; or
6499 (ii) report that the liquidator has determined that there are no distributable assets at that
6500 time based on financial reporting as required in Section 31A-27a-117 .
6501 (b) The liquidator may apply to the receivership court for approval to make early
6502 access payments more frequently than annually based on additional information or the recovery
6503 of material assets.
6504 (4) Within 60 days after the day on which the receivership court approves an
6505 application under Subsection (3), the liquidator shall make an early access payment to an
6506 affected guaranty association as indicated in the approved application.
6507 (5) (a) Notice of each application for early access payments, or of a report required
6508 pursuant to this section, shall be given in accordance with Section 31A-27a-107 to the affected
6509 guaranty associations.
6510 (b) Notwithstanding Section 31A-27a-107 , the liquidator shall provide the affected
6511 guaranty associations described in Subsection (5)(a) with at least 30 days actual notice of the
6512 filing of the application with a complete copy of the application before any action by the
6513 receivership court.
6514 (c) An affected guaranty association may:
6515 (i) request additional information from the liquidator, who may not unreasonably deny
6516 the request; and
6517 (ii) object as provided in Section 31A-27a-107 to:
6518 (A) any part of each application; or
6519 (B) any report filed by the liquidator pursuant to this section.
6520 (6) In each application regarding early access payments, the liquidator shall, based on
6521 the best information available to the liquidator at the time of the application, provide at a
6522 minimum:
6523 (a) to the extent necessary and appropriate, the amount reserved for:
6524 (i) the entire expenses of the liquidation through and after the liquidation's closure; and
6525 (ii) distributions on claims falling within the priority classes of claims established in
6526 Subsections 31A-27a-701 (2)(b) and (2)(c);
6527 (b) the calculation of distributable assets;
6528 (c) the amount and method of equitable allocation of early access payments to each
6529 affected guaranty association; and
6530 (d) the most recent financial information filed with the receivership court by the
6531 liquidator.
6532 (7) (a) Each affected guaranty association that receives a payment pursuant to this
6533 section agrees, upon depositing the payment in any account to its benefit, to return to the
6534 liquidator any amount of these payments that may be required to pay:
6535 (i) a claim of a secured creditor; or
6536 (ii) a claim falling within the priority classes of claims established in Subsection
6537 31A-27a-701 (2)(a), (2)(b), or (2)(c).
6538 (b) A bond may not be required of an affected guaranty association.
6539 (8) Without the consent of an affected guaranty association or an order of the
6540 receivership court, the liquidator may not offset the amount to be disbursed to the affected
6541 guaranty association by the amount of any special deposit, any other statutory deposit, or any
6542 asset of the insolvent insurer held in that state unless the affected guaranty association actually
6543 receives the deposit or asset.
6544 Section 109. Section 31A-27a-705 is enacted to read:
6545 31A-27a-705. Unclaimed and withheld funds.
6546 (1) (a) If any funds of the receivership estate remain unclaimed after the final
6547 distribution under Section 31A-27a-703 , the funds shall be placed in a segregated unclaimed
6548 funds account held by the commissioner.
6549 (b) If the owner of any of the funds described in Subsection (1)(a) presents proof of
6550 ownership satisfactory to the commissioner within two years after the day on which the
6551 delinquency proceeding terminates, the commissioner shall remit the funds to the owner.
6552 (c) The interest earned on funds held in the unclaimed funds account may be used to
6553 pay any administrative costs related to the handling or return of unclaimed funds.
6554 (2) (a) If any amounts held in the unclaimed funds account remain unclaimed for two
6555 years after the day on which the delinquency proceeding terminates, the commissioner may file
6556 a motion for an order directing the disposition of the funds in the court in which the
6557 delinquency proceeding was pending.
6558 (b) Any costs incurred in connection with the motion made under this Subsection (2)
6559 may be paid from the unclaimed funds account.
6560 (c) A motion under this Subsection (2) shall identify:
6561 (i) the name of the insurer;
6562 (ii) the names and last-known addresses of the one or more persons entitled to the
6563 unclaimed funds, if known; and
6564 (iii) the amount of the funds.
6565 (d) Notice of the motion shall be given as directed by the court.
6566 (e) Upon a finding by the court that the funds have not been claimed within two years
6567 after the day on which the delinquency proceeding terminates:
6568 (i) the court shall order that a claim for unclaimed funds, and any interest earned on the
6569 claim that has not been expended under Subsection (1), is abandoned; and
6570 (ii) the funds shall be disbursed under one of the following methods, the amounts may
6571 be:
6572 (A) deposited in the general receivership expense account under Subsection (3);
6573 (B) transferred to the state treasurer and deposited into the General Fund; or
6574 (C) (I) used to reopen the receivership in accordance with Section 31A-27a-803 ; and
6575 (II) distributed to the known claimants with approved claims.
6576 (3) The commissioner may establish an account for the following purposes:
6577 (a) to pay general expenses related to the administration of receiverships; or
6578 (b) to advance funds to a receivership that does not have sufficient cash to pay its
6579 operating expenses.
6580 (4) Any advance to a receivership estate under Subsection (3)(b) may be treated:
6581 (a) as a claim under Section 31A-27a-701 as may be agreed at the time the advance is
6582 made; or
6583 (b) in the absence of an agreement described in Subsection (4)(a), in a priority
6584 determined to be appropriate by the receivership court.
6585 (5) If the commissioner determines at any time that the funds in the account created in
6586 Subsection (3) exceed the amount required, the commissioner may transfer the funds or any
6587 part of the funds to the state treasurer, and the transferred funds shall be deposited into the
6588 General Fund.
6589 Section 110. Section 31A-27a-801 is enacted to read:
6590
6591 31A-27a-801. Condition on release from delinquency proceedings.
6592 (1) Unless otherwise provided in a plan approved by the guaranty associations, an
6593 insurer that is subject to a rehabilitation proceeding may not take an action listed in Subsection
6594 (2) until all payments by all guaranty associations of or on account of the insurer's contractual
6595 obligations are repaid to the guaranty associations with:
6596 (a) all expenses related to the payments by all guaranty associations of or on account of
6597 the insurer's contractual obligations; and
6598 (b) interest on all the payments.
6599 (2) Until an insurer that is subject to a rehabilitation proceeding complies with
6600 Subsection (1), the insurer may not:
6601 (a) be permitted to:
6602 (i) solicit or accept new business; or
6603 (ii) request or accept the restoration of any suspended or revoked license or certificate
6604 of authority;
6605 (b) be returned to the control of its shareholders or private management; or
6606 (c) have any of its assets returned to the control of its shareholders or private
6607 management.
6608 Section 111. Section 31A-27a-802 is enacted to read:
6609 31A-27a-802. Discharge of liquidator and termination of liquidation proceedings.
6610 (1) When all property justifying the expense of collection and distribution is collected
6611 and distributed under this chapter, the liquidator shall apply to the receivership court for an
6612 order discharging the liquidator and terminating the proceeding.
6613 (2) The receivership court may grant the application and make any other orders,
6614 including orders to:
6615 (a) transfer any remaining funds that are uneconomic to distribute; or
6616 (b) pursuant to Subsection 31A-27a-703 (3), assign an asset that remains unliquidated,
6617 including a claim or cause of action, as may be considered appropriate.
6618 Section 112. Section 31A-27a-803 is enacted to read:
6619 31A-27a-803. Reopening liquidation.
6620 (1) After a liquidation proceeding is terminated and the liquidator discharged, the
6621 commissioner may at any time petition the court that was the receivership court to reopen the
6622 proceedings for good cause, including the discovery of additional property.
6623 (2) If the court is satisfied that there is justification for reopening the proceedings, the
6624 court shall order the proceedings reopened.
6625 Section 113. Section 31A-27a-804 is enacted to read:
6626 31A-27a-804. Disposition of records during and after termination of liquidation.
6627 (1) Whenever it appears to the receiver that records of the insurer in receivership are no
6628 longer useful, the receiver may recommend to the receivership court, and the receivership court
6629 shall direct what records shall be destroyed.
6630 (2) (a) If the receiver determines that records should be maintained after the closing of
6631 the delinquency proceeding, the receiver may reserve property from the receivership estate for
6632 the maintenance of the records.
6633 (b) Any amounts retained under this Subsection (2) are an administrative expense of
6634 the estate under Subsection 31A-27a-701 (2)(a).
6635 (c) Any records retained pursuant to this Subsection (2) shall be transferred to the
6636 custody of the commissioner, and the commissioner may retain or dispose of the records as
6637 appropriate, at the commissioner's discretion.
6638 (d) Records of a delinquent insurer that are transferred to the commissioner:
6639 (i) may not be considered a record of the department for any purpose; and
6640 (ii) are not subject to Title 63, Chapter 2, Government Records Access and
6641 Management Act.
6642 Section 114. Section 31A-27a-805 is enacted to read:
6643 31A-27a-805. External audit of the receiver's books.
6644 (1) As used in this section, "books" means:
6645 (a) the business operations of the receiver;
6646 (b) the accounting systems and procedures of the receiver; and
6647 (c) the financial records of the receiver.
6648 (2) (a) The receivership court may, as it considers desirable, order an audit to be made
6649 of the books of the receiver relating to any receivership established under this chapter.
6650 (b) A report of each audit under this Subsection (1) shall be filed with:
6651 (i) the commissioner; and
6652 (ii) the receivership court.
6653 (3) The books of the receivership shall be made available to the auditor at any time
6654 without notice.
6655 (4) The expense of each audit shall be considered a cost of administration of the
6656 receivership.
6657 Section 115. Section 31A-27a-901 is enacted to read:
6658
6659 31A-27a-901. Ancillary conservation of foreign insurers.
6660 (1) The commissioner may initiate an action against a foreign insurer pursuant to
6661 Section 31A-27a-201 on any of the grounds stated in that section or on the basis that:
6662 (a) any of the foreign insurer's property is sequestered, garnished, or seized by official
6663 action in its domiciliary state or in any other state;
6664 (b) (i) the foreign insurer's certificate of authority to do business in this state is revoked
6665 or a certificate of authority is never issued; and
6666 (ii) there is a resident of this state with an unpaid claim or in-force policy; or
6667 (c) it is necessary to enforce a stay under Chapter 28, Guaranty Associations.
6668 (2) If a domiciliary receiver is appointed, the commissioner may initiate an action
6669 against a foreign insurer under this section only with the consent of the domiciliary receiver.
6670 (3) (a) An order entered pursuant to this section shall appoint the commissioner as
6671 conservator.
6672 (b) The conservator's title to assets shall be limited to the insurer's property and records
6673 located in this state.
6674 (4) (a) Notwithstanding Subsection 31A-27a-201 (3), the conservator shall hold and
6675 conserve the assets located in this state until:
6676 (i) the commissioner in the insurer's domiciliary state appoints its receiver; or
6677 (ii) an order terminating conservation is entered under Subsection (7).
6678 (b) Once a domiciliary receiver is appointed, the conservator shall turn over to the
6679 domiciliary receiver all property subject to an order under this section.
6680 (5) The conservator may liquidate the property of the insurer that may be necessary to
6681 cover the costs incurred in the initiation or administration of a proceeding under this section.
6682 (6) (a) The court in which an action under this section is pending may issue a finding
6683 of insolvency or an ancillary liquidation order.
6684 (b) An ancillary liquidation order shall be entered for the limited purposes of:
6685 (i) liquidating assets in this state to pay costs under Subsection (5); or
6686 (ii) activating applicable guaranty associations in this state to pay valid claims that are
6687 not being paid by the insurer.
6688 (7) The conservator may at any time petition the receivership court for an order
6689 terminating an order entered under this section.
6690 Section 116. Section 31A-27a-902 is enacted to read:
6691 31A-27a-902. Domiciliary receivers appointed in other states.
6692 (1) (a) A domiciliary receiver appointed in another state is vested by operation of law
6693 with title to, and may summarily take possession of, all property and records of the insurer in
6694 this state.
6695 (b) Notwithstanding any other provision of law regarding special deposits, a special
6696 deposit held in this state for a guaranty association in this state as the only beneficiary shall be,
6697 upon the entry of an order of liquidation with a finding of insolvency, distributed to the
6698 guaranty association in this state as early access distributions, subject to Section 31A-27a-704 ,
6699 in relation to the lines of business for which the special deposit is made.
6700 (c) The holder of a special deposit shall account to the domiciliary receiver for all
6701 distributions from the special deposit at the time of the distribution.
6702 (d) The following shall be given full faith and credit in this state:
6703 (i) a statutory provision of another state;
6704 (ii) an order entered by a court of competent jurisdiction in relation to the appointment
6705 of a domiciliary receiver of an insurer; and
6706 (iii) a related proceeding in another state.
6707 (e) For purposes of this chapter, another state means any state other than this state.
6708 (f) This state shall treat all foreign states as reciprocal states.
6709 (2) The commissioner shall immediately transfer title to and possession of all property
6710 of the insurer under the commissioner's control to a domiciliary receiver:
6711 (a) upon appointment of the domiciliary receiver in another state;
6712 (b) unless otherwise agreed by the domiciliary receiver; and
6713 (c) including all statutory general or special deposits other than special deposits where
6714 that state's guaranty association is the only beneficiary.
6715 (3) (a) Except as provided in Subsection (1), the domiciliary receiver shall handle a
6716 special deposit or special deposit claim in accordance with the statutes pursuant to which the
6717 special deposit is required and applicable federal law.
6718 (b) All amounts in excess of the estimated amount necessary to administer the special
6719 deposit and pay the unpaid special deposit claims shall be considered general assets of the
6720 estate.
6721 (c) (i) Subject to Subsection (3)(c)(ii), if there is a deficiency in a special deposit so
6722 that a claim secured by the special deposit is not fully discharged from the special deposit, the
6723 claimant may share in the general assets of the insurer to the extent of the deficiency at the
6724 same priority as other claimants in the claimant's class of priority under Section 31A-27a-701 .
6725 (ii) The sharing described in Subsection (3)(c)(i) shall be deferred until the other
6726 claimants of the class are paid percentages of their claims equal to the percentage paid from the
6727 special deposit.
6728 (iii) The intent of Subsection (3)(c)(ii) is to equalize to the extent provided in this
6729 Subsection (3) the advantage gained by the security provided by the special deposit.
6730 Section 117. Section 31A-28-108 is amended to read:
6731 31A-28-108. Powers and duties of the association.
6732 (1) (a) If a member insurer is an impaired insurer, subject to any conditions imposed by
6733 the association that do not impair the contractual obligations of the impaired insurer, the
6734 association may elect to provide the protections provided by this part to the policyholders of
6735 the impaired insurer.
6736 (b) If the association makes the election described in Subsection (1)(a), the association
6737 may proceed under one or more of the options described in Subsection (3).
6738 (2) If a member insurer is an insolvent insurer, the association shall provide the
6739 protections provided by this part to the policyholders of the insolvent insurer by electing in its
6740 discretion to proceed under one or more of the options in Subsection (3).
6741 (3) With respect to the covered portions of covered policies of an impaired or insolvent
6742 insurer, the association may:
6743 (a) (i) (A) guaranty, assume, or reinsure, or cause to be guaranteed, assumed, or
6744 reinsured, the policies or contracts of the insurer; or
6745 (B) assure payment of the contractual obligations of the insolvent insurer; and
6746 (ii) provide such monies, pledges, guarantees, or other means as are reasonably
6747 necessary to discharge such duties; or
6748 (b) provide benefits and coverages in accordance with Subsection (4).
6749 (4) (a) In accordance with Subsection (3)(b), the association may:
6750 (i) assure payment of benefits for premiums identical to the premiums and benefits,
6751 except for terms of conversion and renewability, that would have been payable under the
6752 policies or contracts of the insurer, for claims incurred:
6753 (A) with respect to group policies:
6754 (I) not later than the earlier of the next renewal date under the policies or contracts or
6755 45 days after the coverage date; and
6756 (II) in no event less than 30 days after the coverage date; or
6757 (B) with respect to nongroup policies or contracts:
6758 (I) not later than the earlier of the next renewal date, if any, under the policies or
6759 contracts or one year from the coverage date; and
6760 (II) in no event less than 30 days from the coverage date;
6761 (ii) make diligent efforts to provide 30 days' notice of any termination of the benefits
6762 provided to:
6763 (A) all known insureds or annuitants for nongroup policies and contracts; or
6764 (B) group policy owners for group policies and contracts; and
6765 (iii) with respect to nongroup life and accident and health insurance policies and
6766 annuities, make available substitute coverage on an individual basis, in accordance with
6767 Subsection (4) (b), to each known insured, annuitant, or owner and to each individual formerly
6768 insured or formerly an annuitant under a group policy who is not eligible for replacement group
6769 coverage on an individual basis in accordance with Subsection (4)(b), if the insured or
6770 annuitant had a right under law or the terminated policy or annuity contract to:
6771 (A) convert coverage to individual coverage; or
6772 (B) continue an individual policy in force until a specified age or for a specified time
6773 during which the insurer had:
6774 (I) no right unilaterally to make changes in any provision of the policy; or
6775 (II) a right only to make changes in premium by class.
6776 (b) (i) In providing the substitute coverage required under Subsection (4)(a)(iii), the
6777 association may offer to:
6778 (A) reissue the terminated coverage; or
6779 (B) issue an alternative policy.
6780 (ii) An alternative or reissued policy under Subsection (4)(b)(i):
6781 (A) shall be offered without requiring evidence of insurability; and
6782 (B) may not provide for any waiting period or exclusion that would not have applied
6783 under the terminated policy.
6784 (iii) The association may reinsure any alternative or reissued policy.
6785 (c) (i) An alternative policy adopted by the association shall be subject to the approval
6786 of the commissioner.
6787 (ii) The association may adopt alternative policies of various types for future issuance
6788 without regard to any particular impairment or insolvency.
6789 (iii) An alternative policy:
6790 (A) shall contain at least the minimum statutory provisions required in this state; and
6791 (B) provide benefits that are not unreasonable in relation to the premium charged.
6792 (iv) The association shall set the premium for an alternative policy in accordance with
6793 a table of rates that the association adopts. The premium shall reflect:
6794 (A) the amount of insurance to be provided; and
6795 (B) the age and class of risk of each insured.
6796 (v) For an alternative policy issued under an individual policy of the impaired or
6797 insolvent insurer:
6798 (A) age shall be determined in accordance with the original policy provisions; and
6799 (B) class of risk shall be the class of risk under the original policy.
6800 (vi) For an alternative policy issued to individuals insured under a group policy:
6801 (A) age and class of risk shall be determined by the association in accordance with the
6802 alternative policy provisions and risk classification standards approved by the commissioner;
6803 and
6804 (B) the premium may not reflect any changes in the health of the insured after the
6805 original policy was last underwritten.
6806 (vii) Any alternative policy issued by the association shall provide coverage of a type
6807 similar to that of the policy issued by the impaired or insolvent insurer, as determined by the
6808 association.
6809 (d) If the association elects to reissue terminated coverage at a premium rate different
6810 from that charged under the terminated policy, the premium shall be set by the association in
6811 accordance with the amount of insurance provided and the age and class of risk, subject to the
6812 approval of the commissioner or by a court of competent jurisdiction.
6813 (e) The association's obligations with respect to coverage under any policy of the
6814 impaired or insolvent insurer or under any reissued or alternative policy shall cease on the date
6815 the coverage or policy is replaced by another similar policy by:
6816 (i) the policyholder;
6817 (ii) the insured; or
6818 (iii) the association.
6819 (f) (i) With respect to a claim unpaid as of the coverage date and a claim incurred
6820 during the period defined in Subsection (4)(a)(i), a provider of health care services, by
6821 accepting a payment from the association upon a claim of the provider against an insured
6822 whose health care insurer is an insolvent member insurer, agrees to forgive the insured of 20%
6823 of the debt which otherwise would be paid by the insurer had it not been insolvent, subject to a
6824 maximum of $8,000 being required to be forgiven by any one provider as to each claimant.
6825 (ii) The obligations of a solvent insurer to pay all or part of the covered claim are not
6826 diminished by the forgiveness provided for in this section.
6827 (5) When proceeding under Subsection (3)(b) with respect to any policy or contract
6828 carrying guaranteed minimum interest rates, the association shall assure the payment or
6829 crediting of a rate of interest consistent with Subsection 31A-28-103 (2)(b)(iii).
6830 (6) Nonpayment of premiums within 31 days after the date required under the terms of
6831 any guaranteed, assumed, alternative, or reissued policy or contract or substitute coverage shall
6832 terminate the association's obligations under the policy or coverage under this part with respect
6833 to the policy or coverage, except with respect to any claims incurred or any net cash surrender
6834 value that may be due in accordance with this part.
6835 (7) (a) Premiums due after the coverage date with respect to the covered portion of a
6836 policy or contract of an impaired or insolvent insurer shall belong to and be payable at the
6837 direction of the association.
6838 (b) The association is liable to the policy or contract owners for unearned premiums
6839 due to policy or contract owners arising after the coverage date with respect to the covered
6840 portion of the policy or contract.
6841 (8) The protection provided by this part does not apply if any guaranty protection is
6842 provided to residents of this state by laws of the domiciliary state or jurisdiction of the
6843 impaired or insolvent insurer other than this state.
6844 (9) In carrying out its duties under Subsections (1) and (2), and subject to approval by a
6845 court in this state, the association may:
6846 (a) impose permanent policy or contract liens in connection with a guarantee,
6847 assumption, or reinsurance agreement, if the association finds that:
6848 (i) the amounts that can be assessed under this part are less than the amounts needed to
6849 assure full and prompt performance of the association's duties under this part; or
6850 (ii) the economic or financial conditions as they affect member insurers are sufficiently
6851 adverse to render the imposition of the permanent policy or contract liens to be in the public
6852 interest;
6853 (b) impose temporary moratoriums or liens on payments of cash values and policy
6854 loans, or any other right to withdraw funds held in conjunction with policies or contracts, in
6855 addition to any contractual provisions for deferral of cash or policy loan value; and
6856 (c) if the receivership court imposes a temporary moratorium or moratorium charge on
6857 payment of cash values or policy loans, or on any other right to withdraw funds held in
6858 conjunction with policies or contracts, out of the assets of the impaired or insolvent insurer,
6859 defer the payment of cash values, policy loans, or other rights by the association for the period
6860 of the moratorium or moratorium charge imposed by the receivership court, except for claims
6861 covered by the association to be paid in accordance with a hardship procedure:
6862 (i) established by the liquidator or rehabilitator; and
6863 (ii) approved by the receivership court.
6864 (10) (a) A deposit in this state held pursuant to law or required by the commissioner for
6865 the benefit of creditors, including policy owners, that is not turned over to the domiciliary
6866 liquidator upon the entry of a final order of liquidation or order approving a rehabilitation plan
6867 of an insurer domiciled in [
6868
6869 (b) Any amount paid under Subsection (10)(a) to the association less the amount
6870 retained by the association shall be treated as a distribution of estate assets pursuant to
6871 [
6872 (11) If the association fails to act within a reasonable period of time as provided in this
6873 section, the commissioner shall have the powers and duties of the association under this part
6874 with respect to an impaired or insolvent insurer.
6875 (12) The association may render assistance and advice to the commissioner, upon the
6876 commissioner's request, concerning:
6877 (a) rehabilitation;
6878 (b) payment of claims;
6879 (c) continuance of coverage; or
6880 (d) the performance of other contractual obligations of any impaired or insolvent
6881 insurer.
6882 (13) (a) The association has standing to appear or intervene before a court or agency in
6883 this state with jurisdiction over:
6884 (i) an impaired or insolvent insurer concerning which the association is or may become
6885 obligated under this part; or
6886 (ii) any person or property against which the association may have rights through
6887 subrogation or otherwise.
6888 (b) The standing referred to in Subsection (13)(a) extends to all matters germane to the
6889 powers and duties of the association, including:
6890 (i) proposals for reinsuring, modifying, or guaranteeing the policies or contracts of the
6891 impaired or insolvent insurer; and
6892 (ii) the determination of the policies or contracts and contractual obligations.
6893 (c) The association has the right to appear or intervene before a court in another state
6894 with jurisdiction over:
6895 (i) an impaired or insolvent insurer for which the association is or may become
6896 obligated; or
6897 (ii) any person or property against which the association may have rights through
6898 subrogation of the insurer's policyholders.
6899 (14) (a) Any person receiving benefits under this part shall be considered to have
6900 assigned the rights under, and any causes of action against any person for losses arising under,
6901 resulting from, or otherwise relating to the covered policy or contract to the association to the
6902 extent of the benefits received because of this part, whether the benefits are payments of, or on
6903 account of:
6904 (i) contractual obligations;
6905 (ii) continuation of coverage; or
6906 (iii) provision of substitute or alternative coverages.
6907 (b) As a condition precedent to the receipt of any right or benefits conferred by this part
6908 upon that person, the association may require an assignment to it of the rights and causes of
6909 action described in Subsection (14)(a) by any:
6910 (i) payee;
6911 (ii) policy or contract owner;
6912 (iii) beneficiary;
6913 (iv) insured; or
6914 (v) annuitant.
6915 (c) The subrogation rights obtained by the association under this Subsection (14) shall
6916 have the same priority against the assets of the impaired or insolvent insurer as that possessed
6917 by the person entitled to receive benefits under this part.
6918 (d) In addition to Subsections (14)(a) through (c), the association has all common law
6919 rights of subrogation and any other equitable or legal remedy that would have been available to
6920 the impaired or insolvent insurer or owner, beneficiary, or payee of a policy or contract with
6921 respect to the policy or contract, including in the case of a structured settlement annuity any
6922 rights of the owner, beneficiary, or payee of the annuity to the extent of benefits received
6923 pursuant to this part against a person originally or by succession responsible for the losses
6924 arising from the personal injury relating to the annuity or payment of the annuity.
6925 (e) If a provision of this Subsection (14) is invalid or ineffective with respect to any
6926 person or claim for any reason, the amount payable by the association with respect to the
6927 related covered obligations shall be reduced by the amount realized by any other person with
6928 respect to the person or claim that is attributable to the policies, or portion of the policies,
6929 covered by the association.
6930 (f) If the association has provided benefits with respect to a covered policy and a
6931 person recovers amounts as to which the association has rights as described in this Subsection
6932 (14), the person shall pay to the association the portion of the recovery attributable to the
6933 covered policies.
6934 (15) (a) In addition to the rights and powers elsewhere in this part, the association may:
6935 (i) enter into contracts that are necessary or proper to carry out the provisions and
6936 purposes of this part;
6937 (ii) sue or be sued, including taking any legal actions necessary or proper to:
6938 (A) recover any unpaid assessments under Section 31A-28-109 ; and
6939 (B) settle claims or potential claims against the association;
6940 (iii) borrow money to effect the purposes of this part;
6941 (iv) employ or retain the persons necessary or the appropriate staff members to:
6942 (A) handle the financial transactions of the association; and
6943 (B) perform other functions as become necessary or proper under this part;
6944 (v) take necessary or appropriate legal action to avoid or recover payment of improper
6945 claims;
6946 (vi) exercise, for the purposes of this part and to the extent approved by the
6947 commissioner, the powers of a domestic life or health insurer, but in no case may the
6948 association issue insurance policies or annuity contracts other than those issued to perform its
6949 obligation under this part;
6950 (vii) request information from a person seeking coverage from the association to aid
6951 the association in determining the association's obligations under this part with respect to the
6952 person;
6953 (viii) take other necessary or appropriate action to discharge the association's duties
6954 and obligations under this part or to exercise the association's powers under this part; and
6955 (ix) act as a special deputy liquidator if appointed by the commissioner.
6956 (b) Any note or other evidence of indebtedness of the association under Subsection
6957 (15)(a)(iii) that is not in default:
6958 (i) is a legal investment for a domestic insurer; and
6959 (ii) may be carried as admitted assets.
6960 (c) A person seeking coverage from the association shall promptly comply with a
6961 request for information by the association under Subsection (15)(a)(vii).
6962 (16) The association may join an organization of one or more other state associations
6963 of similar purposes to further the purposes and administer the powers and duties of the
6964 association.
6965 (17) (a) Except as provided in Subsection (17)(b), at any time within one year after the
6966 coverage date, the association may elect to succeed to the rights and obligations of the member
6967 insurer that:
6968 (i) accrue on or after the coverage date; and
6969 (ii) relate to covered policies under any one or more indemnity reinsurance agreements
6970 entered into by the member insurer as a ceding insurer and selected by the association.
6971 (b) Notwithstanding Subsection (17)(a), the association may not exercise an election
6972 with respect to a reinsurance agreement if the receiver, rehabilitator, or liquidator of the
6973 member insurer has previously and expressly disaffirmed the reinsurance agreement.
6974 (c) The election described in Subsection (17)(a) shall be effected by a notice to:
6975 (i) (A) the receiver;
6976 (B) rehabilitator; or
6977 (C) liquidator; and
6978 (ii) the affected reinsurers.
6979 (d) If the association makes an election under Subsection (17)(a), the association shall
6980 comply with Subsections (17)(d)(i) through (vi) with respect to the agreements selected by the
6981 association.
6982 (i) For contracts covered, in whole or in part, by the association, the association shall
6983 be responsible for:
6984 (A) all unpaid premiums due under the agreements for periods both before and after the
6985 coverage date; and
6986 (B) the performance of all other obligations to be performed after the coverage date.
6987 (ii) The association may charge contracts covered in part by the association the costs
6988 for reinsurance in excess of the obligations of the association, through reasonable allocation
6989 methods.
6990 (iii) The association is entitled to any amounts payable by the reinsurer under the
6991 agreements with respect to losses or events that:
6992 (A) occur in periods after the coverage date; and
6993 (B) relate to contracts covered by the association, in whole or in part.
6994 (iv) On receipt of any amounts under Subsection (17)(d)(iii), the association shall pay
6995 to the beneficiary under the policy or contract on account of which the amounts were paid an
6996 amount equal to the excess of the amount received by the association over the benefits paid or
6997 payable by the association on account of the policy or contract.
6998 (v) (A) Within 30 days following the association's election, the association and each
6999 indemnity reinsurer shall calculate the net balance due to or from the association under each
7000 reinsurance agreement as of the date of the association's election, giving full credit to all items
7001 paid by either the member insurer, or its receiver, rehabilitator, or liquidator, or the indemnity
7002 reinsurer during the period between the coverage date and the date of the association's election.
7003 (B) Either the association or indemnity reinsurer shall pay the net balance due the other
7004 within five days of the completion of the calculation under Subsection (17)(d)(v)(A).
7005 (C) If the receiver, rehabilitator, or liquidator has received any amounts due the
7006 association pursuant to Subsection (17)(d)(iii), the receiver, rehabilitator, or liquidator shall
7007 remit the same to the association as promptly as practicable.
7008 (vi) If the association, within 60 days of the election, pays the premiums due for
7009 periods both before and after the coverage date that relate to contracts covered by the
7010 association, in whole or in part, the reinsurer may not:
7011 (A) terminate the reinsurance agreements, to the extent the agreements relate to
7012 contracts covered by the association, in whole or in part; and
7013 (B) set off any unpaid premium due for periods prior to the coverage date against
7014 amounts due the association.
7015 (e) An insurer other than the association shall succeed to the rights and obligations of
7016 the association under Subsections (17)(a) through (d) effective as of the date agreed upon by
7017 the association and the other insurer and regardless of whether the association has made the
7018 election referred to in Subsections (17)(a) through (d) provided that:
7019 (i) the association transfers its obligations to the other insurer;
7020 (ii) the association and the other insurer agree to the transfer;
7021 (iii) the indemnity reinsurance agreements automatically terminate for new reinsurance
7022 unless the indemnity reinsurer and the other insurer agree to the contrary;
7023 (iv) the obligations described in Subsection (17)(d)(iv) may not apply on and after the
7024 date the indemnity reinsurance agreement is transferred to the third party insurer; and
7025 (v) this Subsection (17)(e) may not apply if the association has previously expressly
7026 determined in writing that the association will not exercise the election referred to in
7027 Subsections (17)(a) through (d).
7028 (f) (i) This Subsection (17) supersedes the provisions of any law of this state or of any
7029 affected reinsurance agreement that provides for or requires any payment of reinsurance
7030 proceeds on account of losses or events that occur in periods after the coverage date, to the
7031 receiver, liquidator, or rehabilitator of an insolvent member insurer.
7032 (ii) The receiver, rehabilitator, or liquidator shall remain entitled to any amounts
7033 payable by the reinsurer under the reinsurance agreement with respect to losses or events that
7034 occur in periods prior to the coverage date, subject to applicable setoff provisions.
7035 (g) Except as otherwise expressly provided in Subsections (17)(a) through (f), this
7036 Subsection (17) does not:
7037 (i) alter or modify the terms and conditions of the indemnity reinsurance agreements of
7038 the insolvent member insurer;
7039 (ii) abrogate or limit any rights of any reinsurer to claim that it is entitled to rescind a
7040 reinsurance agreement; or
7041 (iii) give a policy owner or beneficiary an independent cause of action against an
7042 indemnity reinsurer that is not otherwise set forth in the indemnity reinsurance agreement.
7043 (18) The board of directors of the association shall have discretion and may exercise
7044 reasonable business judgment to determine the means by which the association is to provide
7045 the benefits of this part in an economical and efficient manner.
7046 (19) If the association has arranged or offered to provide the benefits of this part to a
7047 covered person under a plan or arrangement that fulfills the association's obligations under this
7048 part, the person is not entitled to benefits from the association in addition to or other than those
7049 provided under the plan or arrangement.
7050 (20) (a) Venue in a suit against the association arising under this part shall be in Salt
7051 Lake County.
7052 (b) The association may not be required to give an appeal bond in an appeal that relates
7053 to a cause of action arising under this part.
7054 Section 118. Section 31A-28-114 is amended to read:
7055 31A-28-114. Miscellaneous provisions.
7056 (1) Nothing in this part shall be construed to reduce the liability for unpaid assessments
7057 of the insureds of an impaired or insolvent insurer operating under a plan with assessment
7058 liability.
7059 (2) (a) Records shall be kept of all meetings of the board of directors to discuss the
7060 activities of the association in carrying out it powers and duties under Section 31A-28-108 .
7061 (b) Records of the association with respect to an impaired or insolvent insurer may not
7062 be disclosed before the earlier of:
7063 (i) the termination of a liquidation, rehabilitation, or conservation proceeding involving
7064 the impaired or insolvent insurer;
7065 (ii) the termination of the impairment or insolvency of the insurer; or
7066 (iii) upon the order of a court of competent jurisdiction.
7067 (c) Nothing in this Subsection (2) shall limit the duty of the association to render a
7068 report of its activities under Section 31A-28-115 .
7069 (3) (a) For the purpose of carrying out its obligations under this part, the association
7070 shall be considered to be a creditor of an impaired or insolvent insurer to the extent of assets
7071 attributable to covered policies reduced by any amounts to which the association is entitled as
7072 subrogee pursuant to Subsection 31A-28-108 (14).
7073 (b) Assets of the impaired or insolvent insurer attributable to covered policies shall be
7074 used to continue all covered policies and pay all contractual obligations of the impaired or
7075 insolvent insurer as required by this part.
7076 (c) As used in this Subsection (3), assets attributable to covered policies are that
7077 proportion of the assets which the reserves that should have been established for covered
7078 policies bear to the reserves that should have been established for all policies of insurance
7079 written by the impaired or insolvent insurer.
7080 (4) (a) As a creditor of the impaired or insolvent insurer under Subsection (3) and
7081 consistent with Section [
7082 association are entitled to receive a disbursement of assets out of the marshaled assets, from
7083 time to time as the assets become available to reimburse the association and any other similar
7084 association.
7085 (b) If, within 120 days of a final determination of insolvency of an insurer by the
7086 receivership court, the liquidator has not made an application to the court for the approval of a
7087 proposal to disburse assets out of marshaled assets to all guaranty associations having
7088 obligations because of the insolvency, the association is entitled to make application to the
7089 receivership court for approval of the association's proposal for disbursement of these assets.
7090 (5) (a) Prior to the termination of any liquidation, rehabilitation, or conservation
7091 proceeding, the court may take into consideration the contributions of the respective parties,
7092 including:
7093 (i) the association;
7094 (ii) the shareholders;
7095 (iii) policyowners of the insolvent insurer; and
7096 (iv) any other party with a bona fide interest in making an equitable distribution of the
7097 ownership rights of the insolvent insurer.
7098 (b) In making a determination under Subsection (5)(a), the court shall consider the
7099 welfare of the policyholders of the continuing or successor insurer.
7100 (c) A distribution to any stockholder of an impaired or insolvent insurer may not be
7101 made until and unless the total amount of valid claims of the association with interest has been
7102 fully recovered by the association for funds expended in carrying out its powers and duties
7103 under Section 31A-28-108 with respect to the insurer.
7104 (6) (a) If an order for liquidation or rehabilitation of an insurer domiciled in this state
7105 has been entered, the receiver appointed under the order shall have a right to recover on behalf
7106 of the insurer, from any affiliate that controlled the insurer, the amount of distributions, other
7107 than stock dividends paid by the insurer on its capital stock, made at any time during the five
7108 years preceding the petition for liquidation or rehabilitation subject to the limitations of
7109 Subsections (6)(b) through (d).
7110 (b) A distribution described in Subsection (6)(a) may not be recovered if the insurer
7111 shows that:
7112 (i) when paid the distribution was lawful and reasonable; and
7113 (ii) the insurer did not know and could not reasonably have known that the distribution
7114 might adversely affect the ability of the insurer to fulfill its contractual obligations.
7115 (c) (i) A person that was an affiliate that controlled the insurer at the time the
7116 distributions were paid shall be liable up to the amount of distributions received.
7117 (ii) A person that was an affiliate that controlled the insurer at the time the distributions
7118 were declared shall be liable up to the amount of distributions that would have been received if
7119 they had been paid immediately.
7120 (iii) If two or more persons are liable with respect to the same distributions, they shall
7121 be jointly and severally liable.
7122 (d) The maximum amount recoverable under this Subsection (6) shall be the amount
7123 needed in excess of all other available assets of the insolvent insurer to pay the contractual
7124 obligations of the insolvent insurer.
7125 (e) If any person liable under Subsection (6)(c) is insolvent, all of its affiliates that
7126 controlled it at the time the distribution was paid shall be jointly and severally liable for any
7127 resulting deficiency in the amount recovered from the insolvent affiliate.
7128 Section 119. Section 31A-28-207 is amended to read:
7129 31A-28-207. Powers and duties of the association.
7130 (1) (a) The association is obligated on the amount of the covered claims:
7131 (i) existing prior to the order of liquidation; and
7132 (ii) arising:
7133 (A) within 30 days after the order of liquidation; or
7134 (B) (I) before the policy expiration date if it is less than 30 days after the order of
7135 liquidation; or
7136 (II) before the insured replaces the policy or causes its cancellation, if the insured does
7137 so within 30 days of the order of liquidation.
7138 (b) The obligation under Subsection (1)(a) includes only that amount of each covered
7139 claim that is less than $300,000.
7140 (c) A claim under a personal lines policy for unearned premiums shall include only
7141 those claims that exceed $100 in amount, subject to a maximum of $10,000 per policy.
7142 (d) The association shall pay the full amount of any covered claim arising out of a
7143 workers' compensation policy. The association is not obligated to a policyholder or claimant in
7144 an amount in excess of the obligation of the insolvent insurer under the policy from which the
7145 claim arises.
7146 (e) Any obligation of the association to defend an insured on a covered claim shall
7147 cease:
7148 (i) upon payment by the association, as part of a settlement releasing the insured; or
7149 (ii) on a judgment, of the lesser of:
7150 (A) the association's covered claim obligation limit; or
7151 (B) the applicable policy limit.
7152 (f) The association:
7153 (i) is considered as the insurer only to the extent of its obligation on the covered
7154 claims, subject to the limitations provided in this part;
7155 (ii) has all the rights, duties, and obligations of the insolvent insurer as if the insurer
7156 had not yet become insolvent, including the right to pursue and retain salvage and subrogation
7157 recoverable on paid covered claim obligations; and
7158 (iii) may not be considered the insolvent insurer for any purpose relating to whether the
7159 association is subject to personal jurisdiction in the courts of any state.
7160 (g) (i) Notwithstanding any other provisions of this part, except in the case of a claim
7161 for benefits under workers' compensation coverage, any obligation of the association to or on
7162 behalf of a particular insured and its affiliates on covered claims shall cease when:
7163 (A) a total amount of $10,000,000 has been paid to or on behalf of the insured and its
7164 affiliates on covered claims by the association or a similar association; and
7165 (B) all payments on covered claims arise under one or more policies of a single
7166 insolvent insurer.
7167 (ii) The association may establish a plan to allocate the amounts payable by the
7168 association in a manner the association considers equitable if the association determines that:
7169 (A) there is more than one claimant asserting a covered claim against:
7170 (I) the association;
7171 (II) a similar association; or
7172 (III) a property or casualty insurance security fund in another state; and
7173 (B) all claims arise under the policy or policies of a single insolvent insurer.
7174 (h) The association shall assess member insurers amounts necessary to pay:
7175 (i) the obligations of the association under Subsection (1)(a), as limited by Subsections
7176 (1)(e) through (g), subsequent to the liquidation of an insolvent insurer;
7177 (ii) the expenses of handling covered claims subsequent to the liquidation of an
7178 insolvent insurer;
7179 (iii) the cost of examinations under Section 31A-28-214 ; and
7180 (iv) other expenses authorized by this part.
7181 (i) (i) The association shall:
7182 (A) investigate claims brought against the association; and
7183 (B) adjust, compromise, settle, and pay covered claims to the extent of the association's
7184 obligation and deny all other claims.
7185 (ii) The association is not bound by a settlement, release, compromise, waiver, or
7186 judgment executed or entered into by the insolvent insurer:
7187 (A) less than 12 months before the entry of an order of liquidation; or
7188 (B) more than 12 months before the entry of an order of liquidation if the settlement,
7189 release, compromise, waiver, or judgment is:
7190 (I) based on a claim that is not a covered claim; or
7191 (II) the result of fraud, collusion, default, or failure to defend.
7192 (iii) The association may assert all defenses available including defenses applicable to
7193 determining and enforcing the association's statutory rights and obligations to a claim.
7194 (iv) The association may appoint and direct legal counsel retained under a liability
7195 insurance policy for the defense of a covered claim.
7196 (j) (i) The association shall handle claims through:
7197 (A) its employees;
7198 (B) one or more insurers; or
7199 (C) other persons designated as servicing facilities.
7200 (ii) Designation of a servicing facility is subject to the approval of the commissioner,
7201 but this designation may be declined by a member insurer.
7202 (k) The association shall:
7203 (i) reimburse each servicing facility for:
7204 (A) obligations of the association paid by the facility; and
7205 (B) expenses incurred by the facility while handling claims on behalf of the
7206 association; and
7207 (ii) pay the other expenses of the association as authorized by this title.
7208 (2) The association may:
7209 (a) employ or retain the persons, including private legal counsel, necessary to handle
7210 claims and perform other duties of the association;
7211 (b) borrow funds necessary to implement the purposes of this part in accord with the
7212 plan of operation;
7213 (c) sue or be sued;
7214 (d) negotiate and become a party to the contracts necessary to carry out the purpose of
7215 this part;
7216 (e) perform any other acts necessary or proper to accomplish the purposes of this
7217 chapter; or
7218 (f) refund to the member insurers, in proportion to the contribution of each member
7219 insurer to the association account, the amount that the assets of the account exceed the
7220 liabilities, if, at the end of any calendar year, the board of directors finds that:
7221 (i) the assets of the association in the association account exceed the liabilities as
7222 estimated by the board of directors for the coming year; and
7223 (ii) the excess assets are not needed for other purposes of this part.
7224 (3) For a refund due to a member insurer for an assessment that has been offset against
7225 premium taxes, the association may pay the amount of the refund directly to the State Tax
7226 Commission.
7227 (4) The courts of the state shall have exclusive jurisdiction over all actions brought
7228 against the association that relate to or arise out of this part.
7229 (5) (a) Any person recovering under this part is considered to have assigned that
7230 person's rights under the policy to the association to the extent of that person's recovery from
7231 the association.
7232 (b) Every insured or claimant seeking the protection of this chapter shall cooperate
7233 with the association to the same extent the person would have been required to cooperate with
7234 the insolvent insurer.
7235 (c) Except as provided in Subsection (5)(e), the association has no cause of action
7236 against the insured of the insolvent insurer for any sums the association has paid out except
7237 those causes of action the insolvent insurer would have had if the sums had been paid by the
7238 insolvent insurer.
7239 (d) When an insolvent insurer operates on a plan with assessment liability, payments of
7240 claims of the association do not reduce the liability for unpaid assessments of the insurer to:
7241 (i) the receiver;
7242 (ii) liquidator; or
7243 (iii) statutory successor.
7244 (e) The association may recover from the following persons the amount of any
7245 "covered claim" paid on behalf of that person pursuant to this part:
7246 (i) any insured whose:
7247 (A) net worth on December 31 of the year next preceding the date the insurer becomes
7248 insolvent, exceeds $25,000,000; and
7249 (B) liability obligations to other persons are satisfied in whole or in part by payments
7250 made under this part; and
7251 (ii) any person:
7252 (A) who is an affiliate of the insolvent insurer; and
7253 (B) whose liability obligations to other persons are satisfied in whole or in part by
7254 payments made under this part.
7255 (f) (i) The receiver, liquidator, or statutory successor of an insolvent insurer is bound
7256 by:
7257 (A) a determination of a covered claim eligibility under this part; and
7258 (B) a settlement of a covered claim by the association or a similar organization in
7259 another state.
7260 (ii) The court having jurisdiction shall grant settled claims a priority equal to that
7261 which the claimant would have been entitled to in the absence of this part, against the assets of
7262 the insolvent insurer.
7263 (g) The association or any similar organization in another state shall:
7264 (i) be recognized as a claimant in the liquidation of an insolvent insurer for any
7265 amounts paid on a covered claim obligation as determined under this part or a similar law in
7266 another state; and
7267 (ii) receive dividends or distributions at the priority set forth in Section [
7268 31A-27a-701 .
7269 (h) (i) The association shall periodically file with the receiver or liquidator of the
7270 insolvent insurer:
7271 (A) statements of the covered claims paid by the association; and
7272 (B) estimates of anticipated claims on the association.
7273 (ii) The filing under this Subsection (5)(h) preserves the rights of the association for
7274 claims against the assets of the insolvent insurer.
7275 (i) The association need not pay any claim filed after the final date under Sections
7276 [
7277 for filing the same type of claim with the liquidator of the insolvent insurer.
7278 Section 120. Section 31A-28-213 is amended to read:
7279 31A-28-213. Miscellaneous provisions.
7280 (1) (a) Any person who has a claim against an insurer, whether or not the insurer is a
7281 member insurer, under any provision in an insurance policy, other than a policy of an insolvent
7282 insurer that is also a covered claim, is required to first exhaust that person's right under that
7283 person's policy.
7284 (b) Any amount payable on a covered claim under this part under an insurance policy is
7285 reduced by the amount of any recovery under the insurance policy described in Subsection
7286 (1)(a).
7287 (c) (i) Except as provided in Subsection (1)(c)(ii) a person having a claim that may be
7288 recovered under more than one insurance guaranty association or its equivalent shall first seek
7289 recovery from the association of the place of residence of the insured.
7290 (ii) If the person's claim is:
7291 (A) a first-party claim for damage to property with a permanent location, the person
7292 shall seek recovery first from the association of the location of the property; and
7293 (B) a workers' compensation claim, the person shall seek recovery first from the
7294 association of the residence of the claimant.
7295 (iii) Any recovery under this part shall be reduced by the amount of recovery from any
7296 other insurance guaranty association or its equivalent.
7297 (2) This part may not be construed to reduce the liability for unpaid assessments of the
7298 insureds of an impaired or insolvent insurer operating under a plan with assessment liability.
7299 (3) (a) Records shall be kept of all negotiations and meetings in which the association
7300 or its representatives are involved to discuss the activities of the association in carrying out the
7301 association's powers and duties under Section 31A-28-207 . Records of these negotiations or
7302 meetings shall be made public only:
7303 (i) upon the termination of a liquidation, rehabilitation, or conservation proceeding
7304 involving the insolvent insurer;
7305 (ii) the termination of the insolvency of the insurer; or
7306 (iii) the order of a court of competent jurisdiction.
7307 (b) This Subsection (3) does not limit the duty of the association to render a report of
7308 its activities under Section 31A-28-214 .
7309 (4) For the purpose of carrying out its obligations under this part, the association is
7310 considered to be a creditor of the insolvent insurer, except to the extent of any amounts the
7311 association is entitled as subrogee under Section 31A-28-207 .
7312 (5) (a) Before the termination of any liquidation, rehabilitation, or conservation
7313 proceeding, the court may take into consideration the contributions of the respective parties,
7314 including:
7315 (i) the association;
7316 (ii) the shareholders;
7317 (iii) the policyowners of the insolvent insurer; and
7318 (iv) any other party with a bona fide interest, in making an equitable distribution of the
7319 ownership rights of the insolvent insurer.
7320 (b) In making the determination described in Subsection (5)(a), the court shall consider
7321 the welfare of the policyholders of the continuing or successor insurer.
7322 (c) A distribution to stockholders, if any, of an insolvent insurer may not be made until
7323 the total amount of valid claims of the association with interest on those claims for funds
7324 expended in carrying out its powers and duties under Section 31A-28-207 regarding this
7325 insurer have been fully recovered by the association.
7326 (6) A rehabilitator, liquidator, or conservator appointed under any section of this part
7327 may recover on behalf of the insurer for excessive distributions paid to affiliates, pursuant to
7328 Section [
7329 Section 121. Section 31A-35-103 is amended to read:
7330 31A-35-103. Exemption from other sections of this title.
7331 Bail bond surety companies are exempted from:
7332 (1) [
7333 31A-3-103 ;
7334 (2) [
7335 31A-4-103 , 31A-4-104 , and 31A-4-107 ;
7336 (3) [
7337 Section 31A-5-103 , and
7338 (4) [
7339 26, 27, 27a, 28, 29, 30, 31, 32, 33, and 34.
7340 Section 122. Section 31A-37-504 is amended to read:
7341 31A-37-504. Business written by a captive insurance company -- Examinations --
7342 Application of code provisions.
7343 (1) This section applies to all business written by a captive insurance company.
7344 (2) Notwithstanding this section, the examination for a branch captive insurance
7345 company shall be of branch business and branch operations only, if the branch captive
7346 insurance company:
7347 (a) provides annually to the commissioner a certificate of compliance, or an equivalent,
7348 issued by or filed with the licensing authority of the jurisdiction in which the branch captive
7349 insurance company is formed; and
7350 (b) demonstrates to the commissioner's satisfaction that the branch captive insurance
7351 company is operating in sound financial condition in accordance with all applicable laws and
7352 regulations of the jurisdiction in which the branch captive insurance company is formed.
7353 (3) As a condition of obtaining a certificate of authority, an alien captive insurance
7354 company shall grant authority to the commissioner to examine the affairs of the alien captive
7355 insurance company in the jurisdiction in which the alien captive insurance company is formed.
7356 (4) To the extent that the provisions of Chapters 2, 4, 5, 14, 16, 17, 18, 19a, [
7357 and 27a do not contradict this section, these chapters apply to captive insurance companies that
7358 have received a certificate of authority under this chapter.
7359 Section 123. Repealer.
7360 This bill repeals:
7361 Section 31A-27-102, Definitions.
7362 Section 31A-27-103, Jurisdiction and venue.
7363 Section 31A-27-104, Injunctions and orders.
7364 Section 31A-27-105, Cooperation of officers and employees.
7365 Section 31A-27-106, Bonds.
7366 Section 31A-27-108, Continuation of delinquency proceedings.
7367 Section 31A-27-109, Standing of guaranty associations.
7368 Section 31A-27-110, Immunity and indemnification of the receiver.
7369 Section 31A-27-202, Court's seizure order.
7370 Section 31A-27-301, Grounds for rehabilitation.
7371 Section 31A-27-302, Answering the petition -- Hearing -- Appeal.
7372 Section 31A-27-303, Rehabilitation orders.
7373 Section 31A-27-304, Powers and duties of the rehabilitator.
7374 Section 31A-27-305, Actions by and against a rehabilitator.
7375 Section 31A-27-306, Termination of rehabilitation.
7376 Section 31A-27-307, Grounds for liquidation.
7377 Section 31A-27-308, Answering the petition.
7378 Section 31A-27-309, Pending the liquidation order.
7379 Section 31A-27-310, Liquidation orders.
7380 Section 31A-27-311, Continuance of coverage.
7381 Section 31A-27-311.5, Continuance of coverage -- Health maintenance
7382 organizations.
7383 Section 31A-27-312, Dissolution of insurer.
7384 Section 31A-27-313, Legislative intent concerning retention of jurisdiction.
7385 Section 31A-27-314, Powers and duties of the liquidator.
7386 Section 31A-27-315, Notice to creditors and others.
7387 Section 31A-27-316, Duties of producers.
7388 Section 31A-27-317, Actions by and against a liquidator.
7389 Section 31A-27-318, Collection and list of assets.
7390 Section 31A-27-319, Avoidance of property title transfers.
7391 Section 31A-27-320, Fraudulent transfers prior to petition.
7392 Section 31A-27-321, Voidable preferences and liens.
7393 Section 31A-27-322, Recoupment from affiliates.
7394 Section 31A-27-323, Setoffs.
7395 Section 31A-27-324, Recovery of premiums owed.
7396 Section 31A-27-325, Assessments.
7397 Section 31A-27-326, Reinsurer's liability -- Paid claims.
7398 Section 31A-27-327, Applicability of claims settlement provisions to loss claims.
7399 Section 31A-27-328, Filing of claims.
7400 Section 31A-27-329, Proof of claim.
7401 Section 31A-27-330, Special claims.
7402 Section 31A-27-330.5, Claim estimation.
7403 Section 31A-27-330.6, Reinsurance commutations.
7404 Section 31A-27-331, Special provisions for third party claims.
7405 Section 31A-27-332, Disputed claims.
7406 Section 31A-27-333, Surety's claims against insurer.
7407 Section 31A-27-334, Secured claims.
7408 Section 31A-27-335, Priority of distribution.
7409 Section 31A-27-335.5, Health maintenance organization claims.
7410 Section 31A-27-336, Liquidator's recommendations to the court.
7411 Section 31A-27-337, Distribution of assets.
7412 Section 31A-27-338, Unclaimed funds.
7413 Section 31A-27-339, Termination of proceedings.
7414 Section 31A-27-340, Reopening liquidation.
7415 Section 31A-27-341, Disposition of records.
7416 Section 31A-27-342, External audit of receiver's books.
7417 Section 31A-27-401, Conservation of property of foreign or alien insurers found in
7418 this state.
7419 Section 31A-27-402, Liquidation of property of foreign or alien insurers found in
7420 this state.
7421 Section 31A-27-403, Foreign domiciliary receivers.
7422 Section 31A-27-404, Ancillary formal proceedings.
7423 Section 31A-27-405, Ancillary summary proceedings.
7424 Section 31A-27-406, Claims of nonresidents against insurers domiciled in Utah.
7425 Section 31A-27-407, Claims of residents against insurers domiciled in reciprocal
7426 states.
7427 Section 31A-27-408, Attachment, garnishment, and levy of execution.
7428 Section 31A-27-409, Interstate priorities.
7429 Section 31A-27-410, Subordination of claims for noncooperation.
7430 Section 31A-27-411, Severability clause.
Legislative Review Note
as of 1-23-07 4:11 PM