Sec. 38a-865. (Formerly Sec. 38-308). Powers.
Sec. 38a-865. (Formerly Sec. 38-308). Powers. (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 commissioner, (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; or (2) provide such moneys, pledges, loans, notes, guarantees
or other means as are proper to effectuate subdivision (1) of this subsection and assure
payment of the contractual obligations of the impaired insurer pending action under
subdivision (1) of this subsection.
(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 of benefits pursuant to subparagraph (A)
of this subdivision;
(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 subparagraph (D) of this subdivision, 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 to make unilateral changes in
any provision of the policy or annuity or had a right only to make changes in premium
by class;
(D) In providing the substitute coverage required under subparagraph (C) of this
subdivision, the association may offer either to reissue the terminated coverage or to
issue an alternative policy. Alternative or reissued policies shall be offered without
requiring evidence of insurability, and shall not provide for any waiting period or exclusion that would not have applied under the terminated policy. The association may
reinsure any alternative or reissued policy;
(E) Alternative policies adopted by the association shall be subject to the approval
of the domiciliary insurance commissioner and the receivership court. The association
may adopt alternative policies of various types for future issuance without regard to any
particular impairment or insolvency;
(F) Alternative policies adopted by the association shall contain at least the minimum statutory provisions required in this state and provide benefits that shall 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
shall not reflect any changes in the health of the insured after the original policy was
last underwritten;
(G) 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;
(H) 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 commissioner and the receivership
court;
(I) 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 owner, the
insured or the association;
(J) When proceeding under this subdivision 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 subparagraph (C) of subdivision (2) of
subsection (f) of section 38a-860.
(c) Nonpayment of premiums by the thirty-first day 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
sections 38a-858 to 38a-875, inclusive, with respect to the policy or coverage, except
with respect to any claims incurred or any net surrender value that may be due in accordance with the provisions of sections 38a-858 to 38a-875, inclusive.
(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, and 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 sections 38a-858 to 38a-875, inclusive, shall 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) Repealed by P.A. 87-290, S. 7, 8.
(g) In carrying out its duties under subsection (b) of this section, 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 sections 38a-858 to 38a-875,
inclusive, are less than the amounts needed to assure full and prompt performance of the
association's duties under sections 38a-858 to 38a-875, inclusive, 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.
(h) If the association fails to act within a reasonable period of time with respect to
any insolvent insurer, as provided in subsection (b) of this section, the commissioner
shall have the powers and duties of the association under sections 38a-858 to 38a-875,
inclusive, with respect to the insolvent insurer.
(i) The association may render assistance and advice to the commissioner, upon the
commissioner's request, concerning rehabilitation, payment of claims, continuation 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 sections 38a-858 to 38a-875,
inclusive, or with jurisdiction over any person or property against which the association
may have rights through subrogation or otherwise. Such standing shall extend to all
matters germane to the powers and duties of the association, including, but not limited
to, proposals for reinsuring, modifying or guaranteeing the policies or contracts and
contractual obligations. The association shall also have 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 sections 38a-858 to 38a-875, inclusive,
whether the benefits are payments of or on account of contractual obligations, continuation of coverage or provision of substitute or alternative coverages, shall be deemed to
have assigned (A) the rights under the covered policy or contract to the association to
the extent of the benefits received under sections 38a-858 to 38a-875, inclusive, and
(B) 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 sections 38a-858 to 38a-875, inclusive. The association
may require an assignment to it of such rights or 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 under sections 38a-858 to 38a-875, inclusive, upon the
person.
(2) The subrogation rights of the association under this subsection 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 sections 38a-858 to 38a-875, inclusive.
(3) In addition to subdivisions (1) and (2) of this subsection, the association shall
have, originally or by succession, 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, against a person responsible for the losses arising from the personal injury
relating to the annuity or payment thereof, except any such person responsible solely
by reason of serving as an assignee with respect to a qualified assignment under Section
130 of the Internal Revenue Code of 1986, or any subsequent corresponding internal
revenue code of the United States, as from time to time amended. Such rights of the
association shall include, but are not limited to, in the case of a structured settlement
annuity, any rights of the owner, beneficiary or payee of the annuity, to the extent of
benefits received pursuant to sections 38a-858 to 38a-875, inclusive.
(4) If the provisions of subdivisions (1) to (3), inclusive, of this subsection 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
subdivisions (1) to (4), inclusive, of this subsection, 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 sections 38a-858 to 38a-875,
inclusive, the association may:
(1) Enter into such contracts as are necessary or proper to carry out the provisions
and purposes of sections 38a-858 to 38a-875, inclusive;
(2) Sue or be sued, including, but not limited to, taking any legal actions necessary
or proper to recover any unpaid assessments under section 38a-866, and to settle claims
or potential claims against it;
(3) Borrow money to effect the purposes of sections 38a-858 to 38a-875, inclusive,
and 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 proper to handle the financial
transactions of the association, and to perform such other functions as become necessary
or proper under sections 38a-858 to 38a-875, inclusive;
(5) Take such legal action as may be necessary or proper to avoid or recover payment
of improper claims;
(6) Exercise, for the purposes of sections 38a-858 to 38a-875, inclusive, and to the
extent approved by the commissioner, 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 sections 38a-858 to 38a-875, inclusive;
(7) Request information from a person seeking coverage from the association in
order to aid the association in determining its obligations under sections 38a-858 to 38a-875, inclusive, with respect to the person, and the person shall promptly comply with
the request; and
(8) Take other necessary or proper action to discharge its duties and obligations
under sections 38a-858 to 38a-875, inclusive, or to exercise its powers under sections
38a-858 to 38a-875, inclusive.
(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) At any time within one year after the date on which the association becomes
responsible for the obligations of a member insurer, which date shall be deemed the
coverage date, the association may elect to succeed to the rights and obligations of the
member insurer that accrue on or after the coverage date and that relate to contracts
covered, in whole or in part, by the association, under any one or more indemnity reinsurance agreements entered into by the member insurer as a ceding insurer and selected
by the association, except that the association may not exercise an election with respect
to a reinsurance agreement if the receiver, rehabilitator or liquidator of a member insurer
has previously and expressly disaffirmed the reinsurance agreement. The election shall
be effected by a notice to the receiver, rehabilitator or liquidator and to the affected
reinsurers. If the association makes an election, then subparagraphs (A) to (D), inclusive,
of this subdivision shall apply with respect to the agreements selected by the association:
(A) The association shall be responsible for all unpaid premiums due under the
agreements for periods before, on and after the coverage date, and shall be responsible
for the performance of all other obligations to be performed after the coverage date, in
each case which relate to contracts covered in whole or in part by the association. The
association may charge contracts covered in part by the association, through reasonable
allocation methods, the costs for reinsurance in excess of the obligations of the association. (B) The association shall be entitled to any amounts payable by the reinsurer under
the agreements with respect to losses or events that occur in periods after the coverage
date and that relate to contracts covered by the association in whole or in part, and upon
the association's receipt of any such amount, the association shall pay any beneficiary
of a policy or contract under which the association paid only a portion of the policy or
contract amount: (i) The amount received by the association that exceeds the benefits
paid the beneficiary under the policy, less (ii) the benefits paid by the association on
account of the policy or contract less the retention of the impaired or insolvent member
insurer applicable to the loss or event. (C) Not later than thirty days after the association's
election, the association and each indemnity reinsurer shall calculate the net balance
due to or from the association under each reinsurance agreement as of the date of the
association's election, giving full credit to all items paid by either the member insurer
or its receiver, rehabilitator or liquidator or the indemnity reinsurer during the period
between the coverage date and the date of the association's election. Either the association or indemnity reinsurer shall pay the net balance due the other not later than five
days after the completion of the calculation. If the receiver, rehabilitator or liquidator
has received any amounts due the association pursuant to subparagraph (B) of this subdivision, the receiver, rehabilitator or liquidator shall remit the same to the association as
promptly as practicable. (D) If the association, not later than sixty days after the election,
pays the premiums due for periods before, on and after the coverage date that relate to
contracts covered by the association in whole or in part, the reinsurer shall not be entitled
to terminate the reinsurance agreements insofar as the agreements relate to contracts
covered by the association in whole or in part and shall not be entitled to set off any
unpaid premium due for periods prior to the coverage date against amounts due the
association.
(2) If the association transfers its obligations to another insurer, and if the association and the other insurer agree, the other insurer shall succeed to the rights and obligations of the association under subdivision (1) of this subsection, provided: (A) The
indemnity reinsurance agreements shall automatically terminate for new reinsurance
unless the indemnity reinsurer and the other insurer agree to the contrary; and (B) the
association's obligation to pay the beneficiary pursuant to subparagraph (B) of subdivision (1) of this subsection shall no longer apply on or after the date the indemnity reinsurance agreement is transferred to the third party insurer. This subdivision shall not apply
if the association has previously expressly determined in writing that it will not exercise
the election referred to in subdivision (1) of this subsection.
(3) The provisions of this subsection shall supersede the provisions of any law of
this state or of any affected reinsurance agreement that provides for or requires any
payment of reinsurance proceeds on account of losses or events that occur in periods
after the coverage date to the receiver, liquidator or rehabilitator of the insolvent member
insurer. The receiver, rehabilitator or liquidator shall remain entitled to any amount
payable by the reinsurer under the reinsurance agreement with respect to losses or events
that occur in periods prior to the coverage date subject to applicable setoff provisions.
(4) Except as otherwise expressly provided in this subsection, nothing in this section
shall alter or modify the terms and conditions of the indemnity reinsurance agreements
of the insolvent member insurer. Nothing in this section shall abrogate or limit any rights
of any reinsurer to claim that it is entitled to rescind a reinsurance agreement. Nothing
in this section shall give a policy owner or beneficiary an independent cause of action
against an indemnity reinsurer that is not otherwise set forth in the indemnity reinsurance
agreement.
(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 sections 38a-858 to 38a-875, inclusive, in an economical and
efficient manner.
(p) Where the association has arranged or offered to provide the benefits of sections
38a-858 to 38a-875, inclusive, to a covered person under a plan or arrangement that
fulfills the association's obligations under sections 38a-858 to 38a-875, inclusive, the
person shall not be 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 sections 38a-858 to 38a-875, inclusive, shall be in the superior court for the judicial district of Hartford. The
association shall not be required to give an appeal bond in an appeal that relates to a
cause of action arising under sections 38a-858 to 38a-875, inclusive.
(r) In carrying out its duties in connection with guaranteeing, assuming or reinsuring
policies or contracts under subsections (a) or (b) of this section, 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 subdivisions (1) to (3), inclusive, of this subsection: (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 (A) a fixed interest rate, (B) payment of dividends with minimum guarantees, or (C) a different method 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.
(1972, P.A. 280, S. 8; P.A. 75-18; P.A. 78-58, S. 1; P.A. 87-290, S. 7, 8; P.A. 88-76, S. 8, 10; P.A. 01-67, S. 4.)
History: P.A. 75-18 raised liability limit in Subsec. (j) from $25,000 to $300,000; P.A. 78-58 imposed new liability
limits in Subsec. (j); P.A. 87-290 repealed Subsec. (f) which specified that association had no liability under the section
for covered policies of a lien or foreign insurers whose domiciliary jurisdiction or state of entry provides for Connecticut
residents, similar protection provided by the chapter to other states' residents; P.A. 88-76 deleted Subsec. (j) and transferred
its provisions to Subsec. (c) of Sec. 38-303, relettered Subsec. (k) as (j), and added new Subsecs. (k) and (l); Sec. 38-308
transferred to Sec. 38a-865 in 1991; P.A. 01-67 replaced former Subsecs. (a) to (e) and (g) to (1) with new Subsecs. (a) to
(e) and (g) to (r).
Annotations to former section 38-308:
Subsec. (j):
Cited. 173 C. 352.
Cited. 35 CS 13; Id., 186.