Sec. 38a-140. (Formerly Sec. 38-39l). Remedial and penal provisions.
Sec. 38a-140. (Formerly Sec. 38-39l). Remedial and penal provisions. (a)(1)
Whenever it appears to the commissioner that any insurance company or any director,
officer, employee or agent thereof has committed or is about to commit a violation
of sections 38a-129 to 38a-140, inclusive, or of any regulation or order issued by the
commissioner hereunder, the commissioner may apply to the superior court or any judge
thereof for the judicial district in which the principal office of the insurance company
is located or, if such insurance company has no such office in this state, to the superior
court or any judge thereof for the judicial district of Hartford, for an order enjoining such
insurance company or such director, officer, employee or agent thereof from violating or
continuing to violate said sections or any such regulation or order, and for such other
equitable relief as the nature of the case and the interests of the insurance company's
policyholders, creditors and securityholders or the public may require.
(2) No security which is the subject of any agreement or arrangement regarding
acquisition, or which is acquired or to be acquired, in contravention of the provisions
of sections 38a-129 to 38a-140, inclusive, or of any regulation or order issued by the
commissioner hereunder may be voted at any shareholders' meeting, or may be counted
for quorum purposes, and any action of shareholders requiring the affirmative vote of
a percentage of shares may be taken as though such securities were not issued and
outstanding; but no action taken at any such meeting shall be invalidated by the voting
of such securities, unless the action would materially affect control of the insurer or
unless the courts of this state have so ordered. If an insurer or the commissioner has
reason to believe that any security of the insurer has been or is about to be acquired in
contravention of the provisions of sections 38a-129 to 38a-140, inclusive, or of any
regulation or order issued by the commissioner hereunder, the insurer or the commissioner may apply to the superior court or any judge thereof for the judicial district of
Hartford, to enjoin any offer, request, invitation, agreement or acquisition made in contravention of sections 38a-129 to 38a-140, inclusive, or any regulation or order issued
by the commissioner thereunder to enjoin the voting of any security so acquired, to void
any vote of such security already cast at any meeting of shareholders and for such other
equitable relief as the nature of the case and the interest of the insurer's policyholders,
creditors and shareholders or the public may require.
(3) In any case where a person has acquired or is proposing to acquire any voting
securities in violation of sections 38a-129 to 38a-140, inclusive, or any regulation or
order issued by the commissioner hereunder, the superior court for the judicial district
of Hartford, on notice as the court deems appropriate, upon application of the insurer
or the commissioner, may seize or sequester any voting securities of the insurer owned
directly or indirectly by the person, and issue the order with respect thereto as may be
appropriate to effectuate the purposes of sections 38a-129 to 38a-140, inclusive.
(4) Notwithstanding any other provisions of law, for the purposes of sections 38a-129 to 38a-140, inclusive, the situs of the ownership of the securities of domestic insurers
shall be deemed to be in this state.
(b) Whenever it appears to the commissioner that any person has committed a violation of sections 38a-129 to 38a-l40, inclusive, which so impairs the financial condition
of a domestic insurance company as to threaten insolvency or make the further transaction of business by it hazardous to its policyholders, creditors, securityholders or the
public, the commissioner may proceed as provided in section 38a-18 to take possession
of the property of such domestic insurance company and to conduct the business thereof.
(c) (1) Whenever it appears to the commissioner that any insurance company or
any director, officer, employee or agent thereof has committed a wilful violation of
sections 38a-129 to 38a-140, inclusive, the commissioner may cause criminal proceedings to be instituted by the state's attorney for the judicial district in which the principal
office of the insurance company is located or, if such insurance company has no such
office in the state, by the state's attorney for the judicial district of Hartford against such
insurance company or the responsible director, officer, employee or agent thereof. Any
insurance company that wilfully violates said sections shall be fined not more than fifty
thousand dollars. Any individual who wilfully violates said sections shall be fined not
more than fifteen thousand dollars or, if such wilful violation involves the deliberate
perpetration of a fraud upon the commissioner, shall be imprisoned not more than two
years or so fined or both.
(2) Any officer, director or employee of an insurance holding company system who
wilfully and knowingly subscribes to or makes or causes to be made any false statement
or false report or false filing with the intent to deceive the commissioner in the performance of his or her duties under sections 38a-129 to 38a-140, inclusive, upon conviction
thereof, shall be imprisoned not more than five years or fined not more than fifty thousand
dollars or both. Any fines imposed shall be paid by the officer, director or employee in
his or her individual capacity.
(d) Whenever it appears to the commissioner that any person has committed a violation of sections 38a-129 to 38a-140, inclusive, that makes the continued operation of
an insurance company contrary to the interests of its policyholders or the public, the
commissioner may, after giving notice and an opportunity to be heard, suspend, revoke
or refuse to renew such insurance company's license or authority to do business in this
state for such period as he finds is required for the protection of its policyholders or the
public.
(e) Any insurance company failing, without just cause, to file any registration statement as required in section 38a-135 shall be required, after notice and hearing, to pay
a penalty of one hundred fifty dollars for each day's delay, to be recovered by the commissioner, and the penalty so recovered shall be paid into the Insurance Fund established
under section 38a-52a. The maximum penalty under this section shall be fifteen thousand
dollars. The commissioner may reduce the penalty if the insurance company demonstrates to the commissioner that the imposition of the penalty would constitute a hardship
to the insurance company.
(f) Each director or officer of any insurance holding company system who wilfully
and knowingly violates, participates in, or assents to, or who wilfully and knowingly
permits any of the officers or agents of the insurance company to engage in transactions
or make investments that have not been properly reported or submitted pursuant to
section 38a-135 or 38a-136, or that violate sections 38a-129 to 38a-140, inclusive, shall
pay, in their individual capacity, a civil forfeiture of not more than seven thousand five
hundred dollars per violation, after notice and hearing before the commissioner. Any
civil forfeiture so recovered shall be paid into the Insurance Fund as established under
section 38a-52a. In determining the amount of the civil forfeiture, the commissioner
shall take into account the appropriateness of the forfeiture with respect to the gravity
of the violation, the history of previous violations, and such other matters as the commissioner deems necessary.
(g) Whenever it appears to the commissioner that any insurance company subject
to sections 38a-129 to 38a-140, inclusive, or any director, officer, employee or agent
thereof has engaged in any transaction or entered into a contract which is subject to
section 38a-136 and which would not have been approved had such approval been requested, the commissioner may order the insurance company to cease and desist immediately any further activity under that transaction or contract. After notice and hearing,
the commissioner may also order the insurance company to void any such contracts and
restore the status quo if such action is in the best interests of the policyholders, creditors
or the public.
(h) If any person required to file an information statement under subsection (c) of
section 38a-130 or any required amendment thereto has (1) failed to do so within the
prescribed time, or (2) files a false or misleading information statement or amendment
thereto, or (3) obstructed the conduct of any hearing required by the commissioner, or
(4) consummated a change of control of the domestic insurance company in the absence
of a determination by the commissioner that such change of control would not be prejudicial to the interest of its policyholders, the commissioner, and any interested party,
including the domestic insurance company, may apply to the superior court for the
judicial district of Hartford or to the superior court for the judicial district in which the
domestic insurance company has its principal place of business, or to any judge thereof
for any injunctive or other relief necessary to remedy any such act or failure to act. Such
relief may include an injunction prohibiting any consummation of the change of control
until such act or failure to act is remedied. In addition, the commissioner may proceed
under section 38a-912 for an order permitting him to take possession and control of the
property and affairs of the domestic insurance company in accordance with the provisions of said section.
(1969, P.A. 444, S. 12-15; P.A. 78-280, S. 2, 6, 127; P.A. 85-16, S. 5, 6; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2;
P.A. 92-93, S. 43; P.A. 93-142, S. 4, 7, 8; 93-239, S. 24; May 25 Sp. Sess. P.A. 94-1, S. 34, 130; P.A. 95-220, S. 4-6; P.A.
08-178, S. 6.)
History: P.A. 78-280 replaced "county" with "judicial district" and "Hartford county" with "judicial district of Hartford-New Britain" where necessary; P.A. 85-16 added Subsec. (e); P.A. 88-230 replaced "judicial district of Hartford-New
Britain" with "judicial district of Hartford", effective September 1, 1991; P.A. 90-98 changed the effective date of P.A.
88-230 from September 1, 1991, to September 1, 1993; Sec. 38-39l transferred to Sec. 38a-140 in 1991; P.A. 92-93 added
Subsec. (c)(2) re false statements intended to deceive the commissioner in the performance of his duties, added new Subsecs.
(e) to (g) re insurance company failure to file registration statement, re improperly reported investments and re transactions
resulting from unapproved contracts, relettered former Subsec. (e) as (h) and made technical corrections for statutory
consistency; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996, effective
June 14, 1993; P.A. 93-239 amended Subsec. (a), adding new Subdivs. (2) to (4) re securities acquired in contravention
of Secs. 38a-129 to 38a-140, inclusive, and voting by the shareholders based on such acquisition; May 25 Sp. Sess. P.A.
94-1 amended Subsec. (a)(3) by making technical change, effective July 1, 1994; P.A. 95-220 changed the effective date
of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995; P.A. 08-178 made technical changes
in Subsecs. (c) to (f), amended Subsec. (c) by increasing maximum fines from $10,000 and $3,000 to $50,000 and $15,000,
respectively, in Subdiv. (1) and from $25,000 to $50,000 in Subdiv. (2), amended Subsec. (e) by increasing per day penalty
from $100 to $150 and maximum penalty from $10,000 to $15,000, and amended Subsec. (f) by increasing maximum
civil forfeiture from $5,000 to $7,500 per violation.
Annotation to former section 38-39l:
Cited. 184 C. 352.