ENTITLED, An Act to revise provisions regarding the South Dakota Life and Health Insurance
Guaranty Association Act.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
Section 1. That § 58-29C-46 be amended to read as follows:
58-29C-46. A. This chapter shall provide coverage for the policies and contracts specified in
subpart B:
(1) To persons who, regardless of where they reside (except for nonresident certificate
holders under group policies or contracts), are the beneficiaries, assignees, or payees of
the persons covered under subdivision (2);
(2) To persons who are owners of or certificate holders under the policies or contracts (other
than structured settlement annuities) and in each case who:
(a) Are residents; or
(b) Are not residents, but only under all of the following conditions:
(i) The insurer that issued the policies or contracts is domiciled in this state;
(ii) The states in which the persons reside have associations similar to the
association created by this chapter;
(iii) The persons are not eligible for coverage by an association in any other state
due to the fact that the insurer was not licensed in the state at the time
specified in the state's guaranty association law;
(3) For structured settlement annuities specified in subpart B, subdivisions (1) and (2) of this
subpart do not apply, and this chapter shall (except as provided in subdivisions (4) and
(5) of this subpart) provide coverage to a person who is a payee under a structured
settlement annuity (or beneficiary of a payee if the payee is deceased), if the payee:
(a) Is a resident, regardless of where the contract owner resides; or
(b) Is not a resident, but only under both of the following conditions:
(i)(I) The contract owner of the structured settlement annuity is a resident, or
(II) The contract owner of the structured settlement annuity is not a resident, but
the insurer that issued the structured settlement annuity is domiciled in this
state and the state in which the contract owner resides has an association
similar to the association created by this chapter; and
(ii) Neither the payee (or beneficiary) nor the contract owner is eligible for
coverage by the association of the state in which the payee or contract owner
resides;
(4) This chapter does not provide coverage to a person who is a payee (or beneficiary) of a
contract owner resident of this state, if the payee (or beneficiary) is afforded any coverage
by the association of another state;
(5) This chapter is intended to provide coverage to a person who is a resident of this state and,
in special circumstances, to a nonresident. In order to avoid duplicate coverage, if a
person who would otherwise receive coverage under this chapter is provided coverage
under the laws of any other state, the person may not be provided coverage under this
chapter. In determining the application of the provisions of this paragraph in situations
where a person could be covered by the association of more than one state, whether as an
owner, payee, beneficiary, or assignee, this chapter shall be construed in conjunction with
other state laws to result in coverage by only one association.
B. (1) This chapter shall provide coverage to the persons specified in subpart A for direct,
nongroup life, health, or annuity policies or contracts, and for certificates under direct group policies
and contracts, and for supplemental contracts to any of these, in each case except as limited by this
chapter. Annuity contracts and certificates under group annuity contracts include allocated funding
agreements, structured settlement annuities, and any immediate or deferred annuity contracts.
(2) This chapter may not provide coverage for:
(a) A portion of a policy or contract not guaranteed by the insurer, or under which the
risk is borne by the policy or contract owner;
(b) A policy or contract of reinsurance, unless assumption certificates have been issued
pursuant to the reinsurance policy or contract;
(c) A portion of a policy or contract to the extent that the rate of interest on which it
is based, or the interest rate, crediting rate, or similar factor determined by use of
an index or other external reference stated in the policy or contract employed in
calculating returns or changes in value:
(i) Averaged over the period of four years prior to the date on which the
member insurer becomes an impaired or insolvent insurer under this chapter,
whichever is earlier, exceeds the rate of interest determined by subtracting
two percentage points from Moody's Corporate Bond Yield Average
averaged for that same four-year period or for such lesser period if the policy
or contract was issued less than four years before the member insurer
becomes an impaired or insolvent insurer under this chapter, whichever is
earlier; and
(ii) On and after the date on which the member insurer becomes an impaired or
insolvent insurer under this chapter, whichever is earlier, exceeds the rate
of interest determined by subtracting three percentage points from Moody's
Corporate Bond Yield Average as most recently available;
(d) A portion of a policy or contract issued to a plan or program of an employer,
association, or other person to provide life, health, or annuity benefits to its
employees, members, or others, to the extent that the plan or program is self-funded or uninsured, including benefits payable by an employer, association, or
other person under:
(i) A multiple employer welfare arrangement as defined in section 3(40) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. § 1002(40));
(ii) A minimum premium group insurance plan;
(iii) A stop-loss group insurance plan; or
(iv) An administrative services only contract;
(e) A portion of a policy or contract to the extent that it provides for:
(i) Dividends or experience rating credits;
(ii) Voting rights; or
(iii) Payment of any fees or allowances to any person, including the policy or
contract owner, in connection with the service to or administration of the
policy or contract;
(f) A policy or contract issued in this state by a member insurer at a time when it was
not licensed or did not have a certificate of authority to issue the policy or contract
in this state;
(g) A portion of a policy or contract to the extent that the assessments required by 58-29C-52 with respect to the policy or contract are preempted by federal or state law;
(h) An obligation that does not arise under the express written terms of the policy or
contract issued by the insurer to the contract owner or policy owner, including
without limitation:
(i) Claims based on marketing materials;
(ii) Claims based on side letters, riders, or other documents that were issued by
the insurer without meeting applicable policy form filing or approval
requirements;
(iii) Misrepresentations of or regarding policy benefits;
(iv) Extra-contractual claims; or
(v) A claim for penalties or consequential or incidental damages;
(i) A contractual agreement that establishes the member insurer's obligations to
provide a book value accounting guaranty for defined contribution benefit plan
participants by reference to a portfolio of assets that is owned by the benefit plan
or its trustee, which in each case is not an affiliate of the member insurer;
(j) An unallocated annuity contract;
(k) A portion of a policy or contract to the extent it provides for interest or other
changes in value to be determined by the use of an index or other external reference
stated in the policy or contract, but which have not been credited to the policy or
contract, or as to which the policy or contract owner's rights are subject to
forfeiture, as of the date the member insurer becomes an impaired or insolvent
insurer under this chapter, whichever is earlier. If a policy's or contract's interest
or changes in value are credited less frequently than annually, then for purposes of
determining the values that have been credited and are not subject to forfeiture
under this subsection, the interest or change in value determined by using the
procedures defined in the policy or contract will be credited as if the contractual
date of crediting interest or changing values was the date of impairment or
insolvency, whichever is earlier, and will not be subject to forfeiture; and
(l) A policy or contract providing any hospital, medical, prescription drug, or other
health care benefits pursuant to Part C or Part D of Subchapter XVIII Chapter 7 of
Title 42 of the United States Code (commonly known as Medicare Part C & D) or
any regulations issued pursuant thereto.
C. The benefits that the association may become obligated to cover may in no event exceed the
lesser of:
(1) The contractual obligations for which the insurer is liable or would have been liable if it
were not an impaired or insolvent insurer; or
(2)(a) With respect to one life, regardless of the number of policies or contracts:
(i) Three hundred thousand dollars in life insurance death benefits, but not
more than one hundred thousand dollars in net cash surrender and net cash
withdrawal values for life insurance;
(ii) In health insurance benefits:
(I) One hundred thousand dollars for coverages not described in clauses
(II) and (III) below, including any net cash surrender and net cash
withdrawal values;
(II) Three hundred thousand dollars for disability income insurance as
defined in § 58-17-108, and three hundred thousand dollars for long-term care insurance as defined in subdivision 58-17B-2(6);
(III) Five hundred thousand dollars for basic hospital, medical and
surgical insurance, or major medical insurance as defined in the
National Association of Insurance Commissioners Health Insurance
Shoppers' Guide, as of January 1, 2003; or
(iii) Two hundred fifty thousand dollars in the present value of annuity benefits,
including net cash surrender and net cash withdrawal values; or
(b) With respect to each payee of a structured settlement annuity (or beneficiary or
beneficiaries of the payee if deceased), two hundred fifty thousand dollars in
present value annuity benefits, in the aggregate, including net cash surrender and
net cash withdrawal values, if any;
(c) However, in no event may the association be obligated to cover more than (i) an
aggregate of three hundred thousand dollars in benefits with respect to any one life
under subsections 2(a) and 2(b) of subpart C of this section except with respect to
benefits for basic hospital, medical and surgical insurance, and major medical
insurance under subsection 2(a)(ii) of this section, in which case the aggregate
liability of the association may not exceed five hundred thousand dollars with
respect to any one individual, or (ii) with respect to one owner of multiple
nongroup policies of life insurance, whether the policy owner is an individual,
firm, corporation, or other person, and whether the persons insured are officers,
managers, employees, or other persons, more than five million dollars in benefits,
regardless of the number of policies and contracts held by the owner;
(d) The limitations set forth in this section are limitations on the benefits for which the
association is obligated before taking into account either its subrogation and
assignment rights or the extent to which those benefits could be provided out of the
assets of the impaired or insolvent insurer attributable to covered policies. The
costs of the association's obligations under this chapter may be met by the use of
assets attributable to covered policies or reimbursed to the association pursuant to
its subrogation and assignment rights.
D. In performing its obligations to provide coverage under § 58-29C-51, the association may not
be required to guarantee, assume, reinsure, or perform, or cause to be guaranteed, assumed,
reinsured, or performed, the contractual obligations of the insolvent or impaired insurer under a
covered policy or contract that do not materially affect the economic values or economic benefits of
the covered policy or contract.
Section 2. That § 58-29C-48 be amended to read as follows:
58-29C-48. Terms used in this chapter mean:
(1) "Account," either of the two accounts created under § 58-29C-49;
(2) "Association," the South Dakota Life and Health Insurance Guaranty Association
described in § 58-29C-49;
(3) "Authorized assessment" or the term "authorized" when used in the context of
assessments, means a resolution by the board of directors has been passed whereby an
assessment will be called immediately or in the future from member insurers for a
specified amount. An assessment is authorized when the resolution is passed;
(4) "Benefit plan," a specific employee, union, or association of natural persons benefit plan;
(5) "Called assessment" or the term "called" when used in the context of assessments, means
that a notice has been issued by the association to member insurers requiring that an
authorized assessment be paid within the time frame set forth within the notice. An
authorized assessment becomes a called assessment when notice is mailed by the
association to member insurers;
(6) "Contractual obligation," an obligation under a policy or contract or certificate under a
group policy or contract, or portion thereof for which coverage is provided under § 58-29C-46;
(7) "Covered policy," a policy or contract or portion of a policy or contract for which
coverage is provided under § 58-29C-46;
(8) "Director," the director of the Division of Insurance of this state;
(9) "Extra-contractual claims," include, for example, claims relating to bad faith in the
payment of claims, punitive or exemplary damages, or attorneys' fees and costs;
(10) "Impaired insurer," a member insurer which, after July 1, 2003, is not an insolvent insurer,
and is placed under an order of rehabilitation or conservation by a court of competent
jurisdiction;
(11) "Insolvent insurer," a member insurer which after July 1, 2003, is placed under an order
of liquidation by a court of competent jurisdiction with a finding of insolvency;
(12) "Member insurer," an insurer licensed or that holds a certificate of authority to transact
in this state any kind of insurance for which coverage is provided under § 58-29C-46, and
includes an insurer whose license or certificate of authority in this state may have been
suspended, revoked, not renewed, or voluntarily withdrawn, but does not include:
(a) A hospital or medical service organization, whether for profit or nonprofit;
(b) A health maintenance organization;
(c) A fraternal benefit society;
(d) A mandatory state pooling plan;
(e) A mutual assessment company or other person that operates on an assessment
basis;
(f) An insurance exchange;
(g) An organization engaged in the issuance of charitable gift annuities, which is
described in § 58-1-16; or
(h) An entity similar to any of the above;
(13) "Moody's Corporate Bond Yield Average," the Monthly Average Corporates as published
by Moody's Investors Service, Inc., or any successor thereto;
(14) "Owner" of a policy or contract and "policy owner" and "contract owner," the person who
is identified as the legal owner under the terms of the policy or contract or who is
otherwise vested with legal title to the policy or contract through a valid assignment
completed in accordance with the terms of the policy or contract and properly recorded
as the owner on the books of the insurer. The terms owner, contract owner, and policy
owner do not include persons with a mere beneficial interest in a policy or contract;
(15) "Person," an individual, corporation, limited liability company, partnership, association,
governmental body or entity, or voluntary organization;
(16) "Premiums," amounts or considerations (by whatever name called) received on covered
policies or contracts less returned premiums, considerations, and deposits and less
dividends and experience credits. The term, premiums, does not include amounts or
considerations received for policies or contracts or for the portions of policies or contracts
for which coverage is not provided under subpart B of § 58-29C-46 except that assessable
premium may not be reduced on account of subsection 58-29C-46B(2)(c) relating to
interest limitations and subdivision 58-29C-46C(2) relating to limitations with respect to
one individual, one participant, and one contract owner. Premiums do not include:
(a) Premiums on an unallocated annuity contract; or
(b) With respect to multiple nongroup policies of life insurance owned by one owner,
whether the policy owner is an individual, firm, corporation, or other person, and
whether the persons insured are officers, managers, employees, or other persons,
premiums in excess of five million dollars with respect to these policies or
contracts, regardless of the number of policies or contracts held by the owner;
(17) "Principal place of business" of a plan sponsor or a person other than a natural person, the
single state in which the natural persons who establish policy for the direction, control,
and coordination of the operations of the entity as a whole primarily exercise that
function, determined by the association in its reasonable judgment by considering the
following factors:
(a) The state in which the primary executive and administrative headquarters of the
entity is located;
(b) The state in which the principal office of the chief executive officer of the entity
is located;
(c) The state in which the board of directors (or similar governing person or persons)
of the entity conducts the majority of its meetings;
(d) The state in which the executive or management committee of the board of
directors (or similar governing person or persons) of the entity conducts the
majority of its meetings;
(e) The state from which the management of the overall operations of the entity is
directed; and
(f) In the case of a benefit plan sponsored by affiliated companies comprising a
consolidated corporation, the state in which the holding company or controlling
affiliate has its principal place of business as determined using the above factors.
However, in the case of a plan sponsor, if more than fifty percent of the participants
in the benefit plan are employed in a single state, that state shall be deemed to be
the principal place of business of the plan sponsor.
The principal place of business of a plan sponsor of a benefit plan shall be deemed
to be the principal place of business of the association, committee, joint board of
trustees, or other similar group of representatives of the parties who establish or
maintain the benefit plan that, in lieu of a specific or clear designation of a
principal place of business, shall be deemed to be the principal place of business
of the employer or employee organization that has the largest investment in the
benefit plan in question;
(18) "Receivership court," the court in the insolvent or impaired insurer's state having
jurisdiction over the conservation, rehabilitation, or liquidation of the insurer;
(19) "Resident," a person to whom a contractual obligation is owed and who resides in this
state on the date of entry of a court order that determines a member insurer to be an
impaired insurer or a court order that determines a member insurer to be an insolvent
insurer. A person may be a resident of only one state, which in the case of a person other
than a natural person shall be its principal place of business. Citizens of the United States
that are either (i) residents of foreign countries, or (ii) residents of United States
possessions, territories, or protectorates that do not have an association similar to the
association created by this chapter, shall be deemed residents of the state of domicile of
the insurer that issued the policies or contracts;
(20) "Structured settlement annuity," an annuity purchased in order to fund periodic payments
for a plaintiff or other claimant in payment for or with respect to personal injury suffered
by the plaintiff or other claimant;
(21) "State," a state, the District of Columbia, Puerto Rico, and a United States possession,
territory, or protectorate;
(22) "Supplemental contact," a written agreement entered into for the distribution of proceeds
under a life, health, or annuity policy or contract;
(23) "Unallocated annuity contract," an annuity contract or group annuity certificate which is
not issued to and owned by an individual, except to the extent of any annuity benefits
guaranteed to an individual by an insurer under the contract or certificate.
Section 3. That § 58-29C-49 be amended to read as follows:
58-29C-49. A. There is hereby continued the nonprofit legal entity known as the South Dakota
Life and Health Insurance Guaranty Association as created by former § 58-29C-1. All member
insurers shall be and remain members of the association as a condition of their authority to transact
insurance in this state. The association shall perform its functions under the plan of operation
established and approved under § 58-29C-53 and shall exercise its powers through a board of
directors established under § 58-29C-50. For purposes of administration and assessment, the
association shall maintain two accounts:
(1) The life insurance and annuity account which includes the following subaccounts:
(a) Life insurance account; and
(b) Annuity account; and
(2) The health insurance account.
B. The association shall come under the immediate supervision of the director and shall be
subject to the applicable provisions of the insurance laws of this state. Meetings or records of the
association may be opened to the public upon majority vote of the board of directors of the
association.
Section 4. That § 58-29C-51 be amended to read as follows:
58-29C-51. A. If a member insurer is an impaired insurer, the association may, in its discretion,
and subject to any conditions imposed by the association that do not impair the contractual
obligations of the impaired insurer and that are approved by the director:
(1) Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, any or
all of the policies or contracts of the impaired insurer; and
(2) Provide such moneys, pledges, loans, notes, guarantees, or other means as are proper to
effectuate subdivision (1) and assure payment of the contractual obligations of the
impaired insurer pending action under subdivision (1).
B. If a member insurer is an insolvent insurer, the association shall, in its discretion, either:
(1)(a)(i) Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured,
the policies or contracts of the insolvent insurer; or
(ii) Assure payment of the contractual obligations of the insolvent insurer; and
(b) Provide moneys, pledges, loans, notes, guarantees, or other means reasonably
necessary to discharge the association's duties; or
(2) Provide benefits and coverages in accordance with the following provisions:
(a) With respect to life and health insurance policies and annuities, assure payment of
benefits for premiums identical to the premiums and benefits (except for terms of
conversion and renewability) that would have been payable under the policies or
contracts of the insolvent insurer, for claims incurred:
(i) With respect to group policies and contracts, not later than the earlier of the
next renewal date under those policies or contracts or forty-five days, but in
no event less than thirty days, after the date on which the association
becomes obligated with respect to the policies and contracts;
(ii) With respect to nongroup policies, contracts, and annuities not later than the
earlier of the next renewal date, if any, under the policies or contracts or one
year, but in no event less than thirty days, from the date on which the
association becomes obligated with respect to the policies or contracts;
(b) Make diligent efforts to provide all known insureds or annuitants (for nongroup
policies and contracts), or group policy owners with respect to group policies and
contracts, thirty days notice of the termination (pursuant to subsection (a) of this
subdivision) of the benefits provided;
(c) With respect to nongroup life and health insurance policies and annuities covered
by the association, make available to each known insured or annuitant, or owner
if other than the insured or annuitant, and with respect to an individual formerly
insured or formerly an annuitant under a group policy who is not eligible for
replacement group coverage, make available substitute coverage on an individual
basis in accordance with the provisions of subsection (d), if the insureds or
annuitants had a right under law or the terminated policy or annuity to convert
coverage to individual coverage or to continue an individual policy or annuity in
force until a specified age or for a specified time, during which the insurer had no
right unilaterally to make changes in any provision of the policy or annuity or had
a right only to make changes in premium by class;
(d)(i) In providing the substitute coverage required under subsection (c), the association
may offer either to reissue the terminated coverage or to issue an alternative policy;
(ii) Alternative or reissued policies shall be offered without requiring evidence
of insurability, and may not provide for any waiting period or exclusion that
would not have applied under the terminated policy;
(iii) The association may reinsure any alternative or reissued policy;
(e)(i) Alternative policies adopted by the association are subject to the approval of the
domiciliary insurance director and the receivership court. The association may
adopt alternative policies of various types for future issuance without regard to any
particular impairment or insolvency;
(ii) Alternative policies shall contain at least the minimum statutory provisions
required in this state and provide benefits that may not be unreasonable in
relation to the premium charged. The association shall set the premium in
accordance with a table of rates that it shall adopt. The premium shall reflect
the amount of insurance to be provided and the age and class of risk of each
insured, but may not reflect any changes in the health of the insured after the
original policy was last underwritten;
(iii) Any alternative policy issued by the association shall provide coverage of
a type similar to that of the policy issued by the impaired or insolvent
insurer, as determined by the association;
(f) If the association elects to reissue terminated coverage at a premium rate different
from that charged under the terminated policy, the premium shall be set by the
association in accordance with the amount of insurance provided and the age and
class of risk, subject to approval of the domiciliary insurance director and the
receivership court;
(g) The association's obligations with respect to coverage under any policy of the
impaired or insolvent insurer or under any reissued or alternative policy shall cease
on the date the coverage or policy is replaced by another similar policy by the
policy owner, the insured, or the association;
(h) When proceeding under this subdivision B(2) with respect to a policy or contract
carrying guaranteed minimum interest rates, the association shall assure the
payment or crediting of a rate of interest consistent with subsection 58-29C-46(B)(2)(c).
C. Nonpayment of premiums within thirty-one days after the date required under the terms of any
guaranteed, assumed, alternative, or reissued policy or contract or substitute coverage shall terminate
the association's obligations under the policy or coverage under this chapter with respect to the policy
or coverage, except with respect to any claims incurred or any net cash surrender value which may
be due in accordance with the provisions of this chapter.
D. Premiums due for coverage after entry of an order of liquidation of an insolvent insurer shall
belong to and be payable at the direction of the association. If the liquidator of an insolvent insurer
requests, the association shall provide a report to the liquidator regarding such premium collected
by the association. The association shall be liable for unearned premiums due to policy or contract
owners arising after the entry of the order.
E. The protection provided by this chapter does not apply where any guaranty protection is
provided to residents of this state by the laws of the domiciliary state or jurisdiction of the impaired
or insolvent insurer other than this state.
F. In carrying out its duties under subpart B, the association may:
(1) Subject to approval by a court in this state, impose permanent policy or contract liens in
connection with a guarantee, assumption, or reinsurance agreement, if the association
finds that the amounts which can be assessed under this chapter are less than the amounts
needed to assure full and prompt performance of the association's duties under this
chapter, or that the economic or financial conditions as they affect member insurers are
sufficiently adverse to render the imposition of such permanent policy or contract liens,
to be in the public interest;
(2) Subject to approval by a court in this state, impose temporary moratoriums or liens on
payments of cash values and policy loans, or any other right to withdraw funds held in
conjunction with policies or contracts, in addition to any contractual provisions for
deferral of cash or policy loan value. In addition, in the event of a temporary moratorium
or moratorium charge imposed by the receivership court on payment of cash values or
policy loans, or on any other right to withdraw funds held in conjunction with policies or
contracts, out of the assets of the impaired or insolvent insurer, the association may defer
the payment of cash values, policy loans, or other rights by the association for the period
of the moratorium or moratorium charge imposed by the receivership court, except for
claims covered by the association to be paid in accordance with a hardship procedure
established by the liquidator or rehabilitator and approved by the receivership court.
G. A deposit in this state, held pursuant to law or required by the director for the benefit of
creditors, including policy owners, not turned over to the domiciliary liquidator upon the entry of a
final order of liquidation or order approving a rehabilitation plan of an insurer domiciled in this state
or in a reciprocal state, pursuant to §§ 58-29B-144 and 58-29B-149, shall be promptly paid to the
association. The association shall be entitled to retain a portion of any amount so paid to it equal to
the percentage determined by dividing the aggregate amount of policy owners' claims related to that
insolvency for which the association has provided statutory benefits by the aggregate amount of all
policy owners' claims in this state related to that insolvency and shall remit to the domiciliary
receiver the amount so paid to the association less the amount retained pursuant to this subpart. Any
amount so paid to the association and retained by it shall be treated as a distribution of estate assets
pursuant to § 58-29B-98 or similar provision of the state of domicile of the impaired or insolvent
insurer.
H. If the association fails to act within a reasonable period of time with respect to an insolvent
insurer, as provided in subpart B of this section, the director shall have the powers and duties of the
association under this chapter with respect to the insolvent insurer.
I. The association may render assistance and advice to the director, upon the director's request,
concerning rehabilitation, payment of claims, continuance of coverage, or the performance of other
contractual obligations of an impaired or insolvent insurer.
J. The association shall have standing to appear or intervene before a court or agency in this state
with jurisdiction over an impaired or insolvent insurer concerning which the association is or may
become obligated under this chapter or with jurisdiction over any person or property against which
the association may have rights through subrogation or otherwise. Standing shall extend to all
matters germane to the powers and duties of the association, including proposals for reinsuring,
modifying, or guaranteeing the policies or contracts of the impaired or insolvent insurer and the
determination of the policies or contracts and contractual obligations. The association also has the
right to appear or intervene before a court or agency in another state with jurisdiction over an
impaired or insolvent insurer for which the association is or may become obligated or with
jurisdiction over any person or property against whom the association may have rights through
subrogation or otherwise.
K. (1) A person receiving benefits under this chapter shall be deemed to have assigned the rights
under, and any causes of action against any person for losses arising under, resulting from, or
otherwise relating to, the covered policy or contract to the association to the extent of the benefits
received because of this chapter, whether the benefits are payments of or on account of contractual
obligations, continuation of coverage, or provision of substitute or alternative coverages. The
association may require an assignment to it of such rights and cause of action by any payee, policy,
or contract owner, beneficiary, insured, or annuitant as a condition precedent to the receipt of any
right or benefits conferred by this chapter upon the person.
(2) The subrogation rights of the association under this subpart shall have the same priority
against the assets of the impaired or insolvent insurer as that possessed by the person
entitled to receive benefits under this chapter.
(3) In addition to subdivisions (1) and (2) of this subpart, the association shall have all
common law rights of subrogation and any other equitable or legal remedy that would
have been available to the impaired or insolvent insurer or owner, beneficiary, or payee
of a policy or contract with respect to the policy or contracts.
(4) If the preceding provisions of this subpart are invalid or ineffective with respect to any
person or claim for any reason, the amount payable by the association with respect to the
related covered obligations shall be reduced by the amount realized by any other person
with respect to the person or claim that is attributable to the policies (or portion thereof)
covered by the association.
(5) If the association has provided benefits with respect to a covered obligation and a person
recovers amounts as to which the association has rights as described in the preceding
subdivisions of this subpart, the person shall pay to the association the portion of the
recovery attributable to the policies (or portion thereof) covered by the association.
L. In addition to the rights and powers elsewhere in this chapter, the association may:
(1) Enter into such contracts as are necessary or proper to carry out the provisions and
purposes of this chapter;
(2) Sue or be sued, including taking any legal actions necessary or proper to recover any
unpaid assessments under § 58-29C-52 and to settle claims or potential claims against it;
(3) Borrow money to effect the purposes of this chapter; any notes or other evidence of
indebtedness of the association not in default shall be legal investments for domestic
insurers and may be carried as admitted assets;
(4) Employ or retain such persons as are necessary or appropriate to handle the financial
transactions of the association, and to perform such other functions as become necessary
or proper under this chapter;
(5) Take such legal action as may be necessary or appropriate to avoid or recover payment
of improper claims;
(6) Exercise, for the purposes of this chapter and to the extent approved by the director, the
powers of a domestic life or health insurer, but in no case may the association issue
insurance policies or annuity contracts other than those issued to perform its obligations
under this chapter;
(7) Organize itself as a corporation or in other legal form permitted by the laws of the state;
(8) Request information from a person seeking coverage from the association in order to aid
the association in determining its obligations under this chapter with respect to the person,
and the person shall promptly comply with the request; and
(9) Take other necessary or appropriate action to discharge its duties and obligations under
this chapter or to exercise its powers under this chapter.
M. The association may join an organization of one or more other state associations of similar
purposes, to further the purposes and administer the powers and duties of the association.
N. (1)(a) At any time within one hundred eighty days of the date of the order of liquidation, the
association may elect to succeed to the rights and obligations of the ceding member insurer that
relate to policies or annuities covered, in whole or in part, by the association, in each case under any
one or more reinsurance contracts entered into by the insolvent insurer and its reinsurers and selected
by the association. Any such assumption shall be effective as of the date of the order of liquidation.
The election shall be effected by the association or the National Organization of Life and Health
Insurance Guaranty Associations (NOLHGA) on its behalf sending written notice, return receipt
requested, to the affected reinsurers.
(b) To facilitate the earliest practicable decision about whether to assume any of the
contracts of reinsurance, and in order to protect the financial position of the estate,
the receiver and each reinsurer of the ceding member insurer shall make available
upon request to the association or to NOLHGA on its behalf as soon as possible
after commencement of formal delinquency proceedings:
(i) Copies of in-force contracts of reinsurance and all related files and records
relevant to the determination of whether such contracts should be assumed;
and
(ii) Notices of any defaults under the reinsurance contracts or any known event
or condition which with the passage of time could become a default under
the reinsurance contracts.
(c) Subparagraphs (i) to (iv) apply to reinsurance contracts so assumed by the
association:
(i) The association shall be responsible for all unpaid premiums due under the
reinsurance contracts for periods both before and after the date of the order
of liquidation, and shall be responsible for the performance of all other
obligations to be performed after the date of the order of liquidation, in each
case which relate to policies or annuities covered, in whole or in part, by the
association. The association may charge policies or annuities covered in part
by the association, through reasonable allocation methods, the costs for
reinsurance in excess of the obligations of the association and shall provide
notice and an accounting of these charges to the liquidator;
(ii) The association is entitled to any amounts payable by the reinsurer under the
reinsurance contracts with respect to losses or events that occur in periods
after the date of the order of liquidation and that relate to policies or
annuities covered, in whole or in part, by the association, provided that,
upon receipt of any such amounts, the association is obliged to pay to the
beneficiary under the policy or annuity on account of which the amounts
were paid a portion of the amount equal to the lesser of:
(A) The amount received by the association; and
(B) The excess of the amount received by the association, over the
amount equal to the benefits paid by the association on account of the
policy or annuity less the retention of the insurer applicable to the
loss or event.
(iii) Within thirty days following the association's election (the "election date"),
the association and each reinsurer under contracts assumed by the
association shall calculate the net balance due to or from the association
under each reinsurance contract as of the election date with respect to
policies or annuities covered, in whole or in part, by the association, which
calculation shall give full credit to all items paid by either the insurer or its
receiver or the reinsurer prior to the election date. The reinsurer shall pay the
receiver any amounts due for losses or events prior to the date of the order
of liquidation, subject to any set-off for premiums unpaid for periods prior
to the date, and the association or reinsurer shall pay any remaining balance
due the other, in each case within five days of the completion of the
aforementioned calculation. Any disputes over the amounts due to either the
association or the reinsurer shall be resolved by arbitration pursuant to the
terms of the affected reinsurance contracts or, if the contract contains no
arbitration clause, as otherwise provided by law. If the receiver has received
any amounts due the association pursuant to subsection (1)(c)(ii), the
receiver shall remit the same to the association as promptly as practicable.
(iv) If the association or receiver, on the association's behalf, within sixty days
of the election date, pays the unpaid premiums due for periods both before
and after the election date that relate to policies or annuities covered, in
whole or in part by the association, the reinsurer is not entitled to terminate
the reinsurance contracts for failure to pay premium insofar as the
reinsurance contracts relate to policies or annuities covered, in whole or in
part, by the association, and is not entitled to set off any unpaid amounts due
under other contracts, or unpaid amounts due from parties other than the
association, against amounts due the association.
(2) During the period from the date of the order of liquidation until the election date (or, if
the election date does not occur, until one hundred eighty days after the date of the order
of liquidation);
(a)(i) Neither the association nor the reinsurer shall have any rights or obligations under
reinsurance contracts that the association has the right to assume under subsection
(1), whether for periods prior to or after the date of the order of liquidation; and
(ii) The reinsurer, the receiver, and the association shall, to the extent
practicable, provide each other data and records reasonably requested;
(b) Provided that once the association has elected to assume a reinsurance contract, the
parties' rights and obligations shall be governed by subsection (1).
(3) If the association does not elect to assume a reinsurance contract by the election date
pursuant to subsection (1), the association shall have no rights or obligations, in each case
for periods both before and after the date of the order of liquidation, with respect to the
reinsurance contract.
(4) When policies or annuities, or covered obligations with respect thereto, are transferred to
an assuming insurer, reinsurance on the policies or annuities may also be transferred by
the association, in the case of contracts assumed under subsection (1), subject to the
following:
(a) Unless the reinsurer and the assuming insurer agree otherwise, the reinsurance
contract transferred may not cover any new policies of insurance or annuities in
addition to those transferred;
(b) The obligations described in subsection (1) of this section no longer apply with
respect to matters arising after the effective date of the transfer; and
(c) The transferring party shall give notice in writing, return receipt requested, to the
affected reinsurer not less than thirty days prior to the effective date of the transfer;
(5) The provisions of subsection N shall supersede the provisions of any state law or of any
affected reinsurance contract that provides for or requires any payment of reinsurance
proceeds, on account of losses or events that occur in periods after the date of the order
of liquidation, to the receiver of the insolvent insurer or any other person. The receiver
shall remain entitled to any amounts payable by the reinsurer under the reinsurance
contracts with respect to losses or events that occur in periods prior to the date of the
order of liquidation, subject to applicable setoff provisions; and
(6) Except as otherwise provided in this section, nothing in subsection N alters or modifies
the terms and conditions of any reinsurance contract. Nothing in this section abrogates or
limits any rights of any reinsurer to claim that it is entitled to rescind a reinsurance
contract. Nothing in this section gives a policy owner or beneficiary an independent cause
of action against a reinsurer that is not otherwise set forth in the reinsurance contract. No
provision in this section limits or affects the association's rights as a creditor of the estate
against the assets of the estate. No provision in this section applies to reinsurance
agreements covering property or casualty risks.
O. The board of directors of the association shall have discretion and may exercise reasonable
business judgment to determine the means by which the association is to provide the benefits of this
chapter in an economical and efficient manner.
P. Where the association has arranged or offered to provide the benefits of this chapter to a
covered person under a plan or arrangement that fulfills the association's obligations under this
chapter, the person is not entitled to benefits from the association in addition to or other than those
provided under the plan or arrangement.
Q. Venue in a suit against the association arising under the chapter shall be in Hughes County.
The association may not be required to give an appeal bond in an appeal that relates to a cause of
action arising under this chapter.
R. In carrying out its duties in connection with guaranteeing, assuming, or reinsuring policies or
contracts under subpart A or B, the association may, subject to approval of the receivership court,
issue substitute coverage for a policy or contract that provides an interest rate, crediting rate, or
similar factor determined by use of an index or other external reference stated in the policy or
contract employed in calculating returns or changes in value by issuing an alternative policy or
contract in accordance with the following provisions:
(1) In lieu of the index or other external reference provided for in the original policy or
contract, the alternative policy or contract provides for (i) a fixed interest rate or (ii)
payment of dividends with minimum guarantees or (iii) different methods for calculating
interest or changes in value;
(2) There is no requirement for evidence of insurability, waiting period, or other exclusion
that would not have applied under the replaced policy or contract; and
(3) The alternative policy or contract is substantially similar to the replaced policy or contract
in all other material terms.
Section 5. That § 58-29C-52 be amended to read as follows:
58-29C-52. A. For the purpose of providing the funds necessary to carry out the powers and
duties of the association, the board of directors shall assess the member insurers, separately for each
account, at such time and for such amounts as the board finds necessary. Assessments shall be due
not less than thirty days after prior written notice to the member insurers and shall accrue interest
at ten percent per annum on and after the due date.
B. There shall be two classes of assessments, as follows:
(1) Class A assessments shall be authorized and called for the purpose of meeting
administrative and legal costs and other expenses. Class A assessments may be authorized
and called whether or not related to a particular impaired or insolvent insurer.
(2) Class B assessments shall be authorized and called to the extent necessary to carry out the
powers and duties of the association under § 58-29C-51 with regard to an impaired or an
insolvent insurer.
C. (1) The amount of a Class A assessment shall be determined by the board and may be
authorized and called on a pro rata or nonpro rata basis. If pro rata, the board may provide that it be
credited against future Class B assessments. The total of all nonpro rata assessments may not exceed
three hundred dollars per member insurer in any one calendar year. The amount of a Class B
assessment shall be allocated for assessment purposes among the accounts pursuant to an allocation
formula which may be based on the premiums or reserves of the impaired or insolvent insurer or any
other standard deemed by the board in its sole discretion as being fair and reasonable under the
circumstances.
(2) Class B assessments against member insurers for each account and subaccount shall be
in the proportion that the premiums received on business in this state by each assessed
member insurer on policies or contracts covered by each account for the three most recent
calendar years for which information is available preceding the year in which the insurer
became insolvent (or, in the case of an assessment with respect to an impaired insurer, the
three most recent calendar years for which information is available preceding the year in
which the insurer became impaired) bears to premiums received on business in this state
for those calendar years by all assessed member insurers.
(3) Assessments for funds to meet the requirements of the association with respect to an
impaired or insolvent insurer may not be authorized or called until necessary to implement
the purposes of this chapter. Classification of assessments under subpart B and
computation of assessments under this subpart shall be made with a reasonable degree of
accuracy, recognizing that exact determinations may not always be possible. The
association shall notify each member insurer of its anticipated pro rata share of an
authorized assessment not yet called within one hundred eighty days after the assessment
is authorized.
D. The association may abate or defer, in whole or in part, the assessment of a member insurer
if, in the opinion of the board, payment of the assessment would endanger the ability of the member
insurer to fulfill its contractual obligations. In the event an assessment against a member insurer is
abated, or deferred in whole or in part, the amount by which the assessment is abated or deferred may
be assessed against the other member insurers in a manner consistent with the basis for assessments
set forth in this section. Once the conditions that caused a deferral have been removed or rectified,
the member insurer shall pay all assessments that were deferred pursuant to a repayment plan
approved by the association.
E. (1)(a) Subject to the provisions of subsection (b) of this subdivision, the total of all
assessments authorized by the association with respect to a member insurer for each subaccount of
the life insurance and annuity account and for the health account may not in one calendar year exceed
two percent of that member insurer's average annual premiums received in this state on the policies
and contracts covered by the subaccount or account during the three calendar years preceding the
year in which the insurer became an impaired or insolvent insurer.
(b) If two or more assessments are authorized in one calendar year with respect to
insurers that become impaired or insolvent in different calendar years, the average
annual premiums for purposes of the aggregate assessment percentage limitation
referenced in subsection (a) of this subdivision shall be equal and limited to the
higher of the three-year average annual premiums for the applicable subaccount or
account as calculated pursuant to this section.
(c) If the maximum assessment, together with the other assets of the association in an
account, does not provide in one year in either account an amount sufficient to
carry out the responsibilities of the association, the necessary additional funds shall
be assessed as soon thereafter as permitted by this chapter.
(2) The board may provide in the plan of operation a method of allocating funds among
claims, whether relating to one or more impaired or insolvent insurers, when the
maximum assessment will be insufficient to cover anticipated claims.
(3) If the maximum assessment for a subaccount of the life and annuity account in one year
does not provide an amount sufficient to carry out the responsibilities of the association,
then pursuant to subdivision C(2), the board shall access the other subaccounts of the life
and annuity account for the necessary additional amount, subject to the maximum stated
in subdivision (1) of this section.
F. The board may, by an equitable method as established in the plan of operation, refund to
member insurers, in proportion to the contribution of each insurer to that account, the amount by
which the assets of the account exceed the amount the board finds is necessary to carry out during
the coming year the obligations of the association with regard to that account, including assets
accruing from assignment, subrogation, net realized gains, and income from investments. A
reasonable amount may be retained in any account to provide funds for the continuing expenses of
the association and for future losses claims.
G. It shall be proper for any member insurer, in determining its premium rates and policy owner
dividends as to any kind of insurance within the scope of this chapter, to consider the amount
reasonably necessary to meet its assessment obligations under this chapter.
H. The association shall issue to each insurer paying an assessment under this chapter, other than
a Class A assessment, a certificate of contribution, in a form prescribed by the director, for the
amount of the assessment so paid. All outstanding certificates shall be of equal dignity and priority
without reference to amounts or dates of issue. A certificate of contribution may be shown by the
insurer in its financial statement as an asset in such form and for such amount, if any, and period of
time as the director may approve.
I. (1) A member insurer that wishes to protest all or part of an assessment shall pay when due the
full amount of the assessment as set forth in the notice provided by the association. The payment
shall be available to meet association obligations during the pendency of the protest or any
subsequent appeal. Payment shall be accompanied by a statement in writing that the payment is made
under protest and setting forth a brief statement of the grounds for the protest.
(2) Within sixty days following the payment of an assessment under protest by a member
insurer, the association shall notify the member insurer in writing of its determination
with respect to the protest unless the association notifies the member insurer that
additional time is required to resolve the issues raised by the protest.
(3) Within thirty days after a final decision has been made, the association shall notify the
protesting member insurer in writing of that final decision. Within sixty days of receipt
of notice of the final decision, the protesting member insurer may appeal that final action
to the director.
(4) In the alternative to rendering a final decision with respect to a protest based on a question
regarding the assessment base, the association may refer protests to the director for a final
decision, with or without a recommendation from the association.
(5) If the protest or appeal on the assessment is upheld, the amount paid in error or excess
shall be returned to the member company. Interest on a refund due a protesting member
shall be paid at the rate actually earned by the association.
J. The association may request information of member insurers in order to aid in the exercise of
its power under this section and member insurers shall promptly comply with a request.
Section 6. That § 58-29C-53 be amended to read as follows:
58-29C-53. A. (1) The association shall submit to the director a plan of operation and any
amendments thereto necessary or suitable to assure the fair, reasonable, and equitable administration
of the association. The plan of operation and any amendments thereto shall become effective upon
the director's written approval or unless it has not been disapproved within thirty days.
(2) If the association fails to submit a suitable plan of operation within one hundred twenty
days following July 1, 2003, or if at any time thereafter the association fails to submit
suitable amendments to the plan, the director shall, after notice and hearing, adopt and
promulgate such reasonable rules as are necessary or advisable to effectuate the provisions
of this chapter. The rules shall continue in force until modified by the director or
superseded by a plan submitted by the association and approved by the director.
B. All member insurers shall comply with the plan of operation.
C. The plan of operation shall, in addition to requirements enumerated elsewhere in this chapter:
(1) Establish procedures for handling the assets of the association;
(2) Establish the amount and method of reimbursing members of the board of directors under
§ 58-29C-50;
(3) Establish regular places and times for meetings including telephone conference calls of
the board of directors;
(4) Establish procedures for records to be kept of all financial transactions of the association,
its agents, and the board of directors;
(5) Establish the procedures whereby selections for the board of directors will be made and
submitted to the director;
(6) Establish any additional procedures for assessments under § 58-29C-52;
(7) Contain additional provisions necessary or proper for the execution of the powers and
duties of the association;
(8) Establish procedures whereby a director may be removed for cause, including in the case
where a member insurer director becomes an impaired or insolvent insurer;
(9) Require the board of directors to establish a policy and procedures for addressing conflicts
of interests.
D. The plan of operation may provide that any or all powers and duties of the association, except
those under subdivision 58-29C-51L(3) and § 58-29C-52, are delegated to a corporation, association,
or other organization which performs or will perform functions similar to those of this association,
or its equivalent, in two or more states. Such a corporation, association, or organization shall be
reimbursed for any payments made on behalf of the association and shall be paid for its performance
of any function of the association. A delegation under this subpart shall take effect only with the
approval of both the board of directors and the director, and may be made only to a corporation,
association, or organization which extends protection not substantially less favorable and effective
than that provided by this chapter.
Section 7. That § 58-29C-54 be amended to read as follows:
58-29C-54. In addition to the duties and powers enumerated elsewhere in this chapter,
A. The director shall:
(1) Upon request of the board of directors, provide the association with a statement of the
premiums in this and any other appropriate states for each member insurer;
(2) When an impairment is declared and the amount of the impairment is determined, serve
a demand upon the impaired insurer to make good the impairment within a reasonable
time; notice to the impaired insurer shall constitute notice to its shareholders, if any; the
failure of the insurer to promptly comply with such demand shall not excuse the
association from the performance of its powers and duties under this chapter.
B. The director may suspend or revoke, after notice and hearing, the certificate of authority to
transact insurance in this state of any member insurer which fails to pay an assessment when due or
fails to comply with the plan of operation. As an alternative the director may levy a forfeiture on any
member insurer that fails to pay an assessment when due. The forfeiture may not exceed five percent
of the unpaid assessment per month, but no forfeiture shall be less than one hundred dollars per
month.
C. A final action of the board of directors or the association may be appealed to the director by
a member insurer if the appeal is taken within sixty days of its receipt of notice of the final action
being appealed. A final action or order of the director shall be subject to judicial review in a court
of competent jurisdiction in accordance with the laws of this state that apply to the actions or orders
of the director.
D. The liquidator, rehabilitator, or conservator of an impaired or insolvent insurer may notify all
interested persons of the effect of this chapter.
Section 8. That § 58-29C-57 be amended to read as follows:
58-29C-57. A. This chapter may not be construed to reduce the liability for unpaid assessments
of the insureds of an impaired or insolvent insurer operating under a plan with assessment liability.
B. Records shall be kept of all meetings of the board of directors to discuss the activities of the
association in carrying out its powers and duties under § 58-29C-51. The records of the association
with respect to an impaired or insolvent insurer may not be disclosed prior to the termination of a
liquidation, rehabilitation, or conservation proceeding involving the impaired or insolvent insurer,
except (i) upon the termination of the impairment or insolvency of the insurer, or (ii) upon the order
of a court of competent jurisdiction. Nothing in this subpart shall limit the duty of the association
to render a report of its activities under § 58-29C-58.
C. For the purpose of carrying out its obligations under this chapter, the association shall be
deemed to be a creditor of the impaired or insolvent insurer to the extent of assets attributable to
covered policies reduced by any amounts to which the association is entitled as subrogee pursuant
to subpart § 58-29C-51K. Assets of the impaired or insolvent insurer attributable to covered policies
shall be used to continue all covered policies and pay all contractual obligations of the impaired or
insolvent insurer as required by this chapter. Assets attributable to covered policies, as used in this
subpart, are that proportion of the assets which the reserves that should have been established for
such policies bear to the reserves that should have been established for all policies of insurance
written by the impaired or insolvent insurer.
D. As a creditor of the impaired or insolvent insurer as established in subpart C of this section
and consistent with § 58-29B-98, the association and other similar associations shall be entitled to
receive a disbursement of assets out of the marshaled assets, from time to time as the assets become
available to reimburse it, as a credit against contractual obligations under this chapter. If the
liquidator has not, within one hundred twenty days of a final determination of insolvency of an
insurer by the receivership court, made an application to the court for the approval of a proposal to
disburse assets out of marshaled assets to guaranty associations having obligations because of the
insolvency, then the association shall be entitled to make application to the receivership court for
approval of its own proposal to disburse these assets.
E. (1) Prior to the termination of any liquidation, rehabilitation, or conservation proceeding, the
court may take into consideration the contributions of the respective parties, including the
association, the shareholders, and policy owners of the insolvent insurer, and any other party with
a bona fide interest, in making an equitable distribution of the ownership rights of the insolvent
insurer. In such a determination, consideration shall be given to the welfare of the policy owners of
the continuing or successor insurer.
(2) No distribution to stockholders, if any, of an impaired or insolvent insurer shall be made
until and unless the total amount of valid claims of the association with interest thereon
for funds expended in carrying out its powers and duties under 58-29C-51 with respect
to the insurer have been fully recovered by the association.
F. (1) If an order for liquidation or rehabilitation of an insurer domiciled in this state has been
entered, the receiver appointed under the order has a right to recover on behalf of the insurer, from
any affiliate that controlled it, the amount of distributions, other than stock dividends paid by the
insurer on its capital stock, made at any time during the five years preceding the petition for
liquidation or rehabilitation subject to the limitations of subdivisions (2) to (4), inclusive.
(2) No such distribution is recoverable if the insurer shows that when paid the distribution
was lawful and reasonable, and that the insurer did not know and could not reasonably
have known that the distribution might adversely affect the ability of the insurer to fulfill
its contractual obligations.
(3) Any person who was an affiliate that controlled the insurer at the time the distributions
were paid is liable up to the amount of distributions received. Any person who was an
affiliate that controlled the insurer at the time the distributions were declared, shall be
liable up to the amount of distributions which would have been received if they had been
paid immediately. If two or more persons are liable with respect to the same distributions,
they shall be jointly and severally liable.
(4) The maximum amount recoverable under this subpart shall be the amount needed in
excess of all other available assets of the insolvent insurer to pay the contractual
obligations of the insolvent insurer.
(5) If any person liable under subdivision (3) is insolvent, all its affiliates that controlled it
at the time the distribution was paid, shall be jointly and severally liable for any resulting
deficiency in the amount recovered from the insolvent affiliate.
Section 9. That § 58-29C-60 be amended to read as follows:
58-29C-60. There is no liability on the part of and no cause of action of any nature may arise
against any member insurer or its agents or employees, the association or its agents or employees,
members of the board of directors, or the director or the director's representatives, for any action or
omission by them in the performance of their powers and duties under this chapter. This immunity
shall extend to the participation in any organization of one or more other state associations of similar
purposes and to any such organization and its agents or employees.
Section 10. That § 58-29C-61 be amended to read as follows:
58-29C-61. All proceedings in which the insolvent insurer is a party in any court in this state
shall be stayed one hundred eighty days from the date an order of liquidation, rehabilitation, or
conservation is final to permit proper legal action by the association on any matters germane to its
powers or duties. As to judgment under any decision, order, verdict, or finding based on default the
association may apply to have such judgment set aside by the same court that made such judgment
and shall be permitted to defend against such suit on the merits.
Section 11. That § 58-29C-62 be amended to read as follows:
58-29C-62. A. No person, including an insurer, agent, or affiliate of an insurer may make,
publish, disseminate, circulate, or place before the public, or cause directly or indirectly, to be made,
published, disseminated, circulated, or placed before the public, in any newspaper, magazine, or
other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio
station or television station, or in any other way, any advertisement, announcement, or statement,
written or oral, which uses the existence of the Life and Health Insurance Guaranty Association of
this state for the purpose of sales, solicitation, or inducement to purchase any form of insurance
covered by the South Dakota Life and Health Insurance Guaranty Association chapter. However, this
section does not apply to the South Dakota Life and Health Insurance Guaranty Association or any
other entity which does not sell or solicit insurance.
B. Within one hundred eighty days of July 1, 2003, the association shall prepare a summary
document describing the general purposes and current limitations of the chapter and complying with
subpart C of this section. This document shall be submitted to the director for approval. At the
expiration of the sixtieth day after the date on which the director approves the document, an insurer
may not deliver a policy or contract to a policy or contract owner unless the summary document is
delivered to the policy or contract owner at the time of delivery of the policy or contract. The
document shall also be available upon request by a policy owner. The distribution, delivery, or
contents or interpretation of this document does not guarantee that either the policy or the contract
or the owner of the policy or contract is covered in the event of the impairment or insolvency of a
member insurer. The description document shall be revised by the association as amendments to the
chapter may require. Failure to receive this document does not give the policy owner, contract owner,
certificate holder, or insured any greater rights than those stated in this chapter.
C. The document prepared under subpart B shall contain a clear and conspicuous disclaimer on
its face. The director shall establish the form and content of the disclaimer. The disclaimer shall:
(1) State the name and address of the Life and Health Insurance Guaranty Association and
insurance department;
(2) Prominently warn the policy or contract owner that the Life and Health Insurance
Guaranty Association may not cover the policy or, if coverage is available, it will be
subject to substantial limitations and exclusions and conditioned on continued residence
in this state;
(3) State the types of policies for which guaranty funds will provide coverage;
(4) State that the insurer and its agents are prohibited by law from using the existence of the
Life and Health Insurance Guaranty Association for the purpose of sales, solicitation, or
inducement to purchase any form of insurance;
(5) State that the policy or contract owner should not rely on coverage under the Life and
Health Insurance Guaranty Association when selecting an insurer;
(6) Explain rights available and procedures for filing a complaint to allege a violation of any
provisions of this chapter; and
(7) Provide other information as directed by the director including sources for information
about the financial condition of insurers provided that the information is not proprietary
and is subject to disclosure under that state's public records law.
D. A member insurer shall retain evidence of compliance with subpart B for so long as the policy
or contract for which the notice is given remains in effect.
An Act to revise provisions regarding the South Dakota Life and Health Insurance Guaranty
Association Act.
=========================
I certify that the attached Act
originated in the
HOUSE as Bill No. 1102
____________________________
Chief Clerk
=========================
____________________________
Speaker of the House
____________________________
Chief Clerk
____________________________
President of the Senate
____________________________
Secretary of the Senate
House Bill No. 1102
File No. ____
Chapter No. ______
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Received at this Executive Office
this _____ day of _____________ ,
20____ at ____________ M.
By _________________________
for the Governor
=========================
The attached Act is hereby
approved this ________ day of
______________ , A.D., 20___
____________________________
Governor
=========================
STATE OF SOUTH DAKOTA,
ss.
Office of the Secretary of State
Filed ____________ , 20___
at _________ o'clock __ M.
____________________________
Secretary of State
By _________________________
Asst. Secretary of State
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