Chapter 5. Authorization Of Insurers and General Requirements
TITLE 18
Insurance Code
Insurance
CHAPTER 5. AUTHORIZATION OF INSURERS AND GENERAL REQUIREMENTS
§ 501. "Stock insurer" defined.
A "stock insurer" is an incorporated insurer with its capital divided into shares and owned by its stockholders. Unless otherwise provided, the insurance department or division of a corporation established under Chapter 7 of Title 5 (but not the corporation itself) shall be deemed to be a stock insurer for purposes of this title, even though it has no capital divided into shares and owned by stockholders.
18 Del. C. 1953, § 501; 56 Del. Laws, c. 380, § 1; 67 Del. Laws, c. 223, § 18.;
§ 502. "Mutual" insurer defined.
A "mutual" insurer is an incorporated insurer without capital stock and the governing body of which is elected by its policyholders. This definition shall not be deemed to exclude as "mutual" insurers certain foreign insurers found by the Commissioner to be organized on the mutual plan under the laws of their states of domicile but having temporary share capital or providing for election of the insurer's governing body on a reasonable basis.
18 Del. C. 1953, § 502; 56 Del. Laws, c. 380, § 1.;
§ 503. "Reciprocal" insurer defined.
A "reciprocal" insurer is an unincorporated aggregation of subscribers operating individually and collectively through an attorney-in-fact common to all such persons to provide reciprocal insurance among themselves.
18 Del. C. 1953, § 503; 56 Del. Laws, c. 380, § 1.;
§ 504. "Charter" defined.
"Charter" means certificate of incorporation, articles of incorporation, articles of agreement, articles of association, charter granted by legislative act or other basic constituent document of a corporation or the power of attorney of the attorney-in-fact of a reciprocal insurer.
18 Del. C. 1953, § 504; 56 Del. Laws, c. 380, § 1.;
§ 505. Certificate of authority required.
(a) No person shall act as an insurer and no insurer shall transact insurance in this State by mail or otherwise, except as authorized by a subsisting certificate of authority granted to it by the Commissioner and except as to such transactions as are expressly otherwise provided for in this title.
(b) No insurer formed under the laws of this State and no insurer from offices or with personnel or facilities located in this State shall solicit insurance applications or otherwise transact insurance in another state or country unless it holds a subsisting certificate of authority granted to it by the Commissioner authorizing it to transact the same kind or kinds of insurance in this State.
(c) Any wilful violation of this section by a domestic corporation shall constitute misuse of its corporate powers, and the Attorney General shall proceed for the forfeiture of its charter under § 284 of Title 8.
(d) Notwithstanding any other provision of law, and except as provided herein, any person or other entity which provides coverage in this State for medical, surgical, chiropractic, physical therapy, speech pathology, audiology, professional mental health, dental, hospital or optometric expenses, whether such coverage is by direct payment, reimbursement or otherwise, shall be presumed to be subject to the jurisdiction and authority of the Commissioner unless the person or other entity shows that while providing such services it is subject to the jurisdiction of another agency of this or another state, any subdivisions thereof, or the federal government. The jurisdiction and authority of the Commissioner shall be governed by the following provisions:
(1) A person or entity may show that it is subject to the jurisdiction of another agency of this or another state, any subdivision thereof, or the federal government by providing the Commissioner the appropriate certificate, license or other document issued by the other governmental agency which permits or qualifies it to provide those services.
(2) Any person or entity which is unable to show that it is subject to the jurisdiction of another agency of this or another state, any subdivision thereof or the federal government shall submit to an examination by the Commissioner to determine the organization and solvency of the person or the entity, and to determine whether or not such person or entity is in compliance with the applicable provisions of this Code.
(3) Any person or entity unable to show that it is subject to the jurisdiction of another agency of this or another state, any subdivision thereof or the federal government shall be subject to all appropriate provisions of this Code regarding the conduct of its business.
(4) Any production agency or administrator which advertises, sells, transacts or administers coverage in this State, described in this subsection, which is provided by any person or entity described in paragraph (2) of this subsection shall, if that coverage is not fully insured or otherwise fully covered by an admitted life or disability insurer, nonprofit hospital service plan or nonprofit health care plan, advise any purchaser, prospective purchaser and covered person of such lack of insurance or other coverage.
(5) Any administrator which advertises or administers coverage in this State, described in this subsection, which is provided by any person or entity described in paragraph (2) of this subsection, shall advise any production agency of the elements of the coverage including the amount of "stop-loss" insurance in effect.
18 Del. C. 1953, § 505; 56 Del. Laws, c. 380, § 1; 64 Del. Laws, c. 348, § 1.;
§ 506. Exceptions to certificate of authority requirement.
A certificate of authority shall not be required of an insurer with respect to the following:
(1) Investigation, settlement or litigation of claims under its policies lawfully written in this State or liquidation of assets and liabilities of the insurer (other than collection of new premiums), all as resulting from its former authorized operations in this State;
(2) Transactions thereunder subsequent to issuance of a policy covering only subjects of insurance not resident, located or expressly to be performed in this State at time of issuance and lawfully solicited, written and delivered outside this State;
(3) Prosecution or defense of suits at law;
(4) Transactions pursuant to surplus lines coverages lawfully written under Chapter 19 of this title;
(5) Reinsurance, except as to domestic reinsurers;
(6) Underwriting-membership in a regulated insurance exchange.
(7) An automobile club so long as its activities are restricted to those defined in § 1707(b)(4) of this title.
18 Del. C. 1953, § 506; 56 Del. Laws, c. 380, § 1; 62 Del. Laws, c. 192, § 1; 75 Del. Laws, c. 49, § 4.;
§ 507. General eligibility for certificate of authority.
To qualify for and hold authority to transact insurance in this State, an insurer must be otherwise in compliance with this title and with its charter powers and must be an incorporated stock or mutual insurer or a reciprocal insurer of the same general type as may be formed as a domestic insurer under this title, except that:
(1) No foreign insurer shall be authorized to transact insurance in this State which does not maintain reserves as required by Chapter 11 (Assets and Liabilities) of this title, as applicable to the kind or kinds of insurance transacted by such insurer wherever transacted in the United States, or which transacts business anywhere in the United States on the assessment plan or stipulated premium plan or any similar plan;
(2) No insurer shall be authorized to transact workers' compensation insurance in this State unless approved by the Department of Labor of this State under the provisions of Part II of Title 19;
(3) No insurer shall be authorized to transact a kind of insurance in this State unless duly authorized or qualified for authorization to transact such insurance in the state or country of its domicile.
18 Del. C. 1953, § 507; 56 Del. Laws, c. 380, § 1; 71 Del. Laws, c. 84, § 25.;
§ 508. Ownership; management.
(a) No foreign insurer which is directly or indirectly owned or controlled in whole or substantial part by any government or governmental agency shall be authorized to transact insurance in Delaware. Membership in a mutual insurer or subscribership in a reciprocal insurer or ownership of stock of an insurer by the alien property custodian or similar official of the United States or ownership of stock or other security which does not have voting rights with respect to the management of the insurer or supervision of an insurer by public authority shall not be deemed to be an ownership or control of the insurer for the purposes of this provision.
(b) The Commissioner shall not grant or continue authority to transact insurance in this State as to any insurer or proposed insurer the management of which is found by the commissioner after investigation or upon reliable information to be incompetent or dishonest or untrustworthy or of unfavorable business repute or so lacking in insurance company managerial experience in operations of the kind proposed in this State as to make such operation, currently or prospectively, hazardous to or contrary to the best interests of, the insurance-buying or investing public of this State, or which the commissioner has good reason to believe is affiliated directly or indirectly through ownership, control, reinsurance transactions or other business relations with any person or persons of unfavorable business repute or whose business operations are or have been marked, to the injury of insurers, stockholders, policyholders, creditors, or the public, by illegality, or by manipulation of assets or of accounts or of reinsurance or by bad faith.
18 Del. C. 1953, § 508; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;
§ 509. Name of insurer.
(a) No insurer shall be formed or authorized to transact insurance in this State which has or uses a name which is the same as or deceptively similar to that of another insurer already so authorized without the written consent of such other insurer.
(b) No life insurer shall be so authorized which has or uses a name deceptively similar to that of another insurer authorized to transact insurance in this State within the preceding 10 years if life insurance policies originally issued by such other insurer are still outstanding in this State.
(c) No insurer shall be formed or authorized to transact insurance which has or uses a name the same as or deceptively similar to that of any foreign insurer not so authorized if such foreign insurer has within the next preceding 12 months signified its intention to secure an incorporation in this State under such name or to do business as a foreign insurer in this State under such name by filing notice of such intention with the Commissioner, unless the written consent to the use of such name or deceptively similar name has been given by such foreign insurer.
(d) No foreign insurer seeking admission to this State shall be authorized to transact insurance which has or uses a name the same as or deceptively similar to that of a domestic corporation which has been incorporated as an insurer but has not yet secured a certificate of authority until an expiration of 3 years from date of incorporation of such domestic corporation and of filing with the Commissioner a written notice of intent to use such name.
(e) No insurer shall be so authorized which has or uses a name which tends to deceive or mislead as to the type of organization of the insurer.
(f) In case of conflict of names between 2 insurers or a conflict otherwise prohibited under this section, the Commissioner may permit (or shall require as a condition to the issuance of an original certificate of authority to an applicant insurer) the insurer to use in this State such supplementation or modification of its name or such business name as may reasonably be necessary to avoid the conflict.
(g) Except as provided in subsection (f) above, an insurer shall conduct its business in this State in its own corporate (if incorporated) or proper (if reciprocal insurer) name.
18 Del. C. 1953, § 509; 56 Del. Laws, c. 380, § 1.;
§ 510. Combinations of insuring powers.
(a) A reciprocal insurer shall not be a life insurer.
(b) A title insurer shall be a stock insurer and shall not transact any other kind of insurance. This provision shall not prohibit acceptance of reinsurance of title insurance risks by insurers not otherwise authorized to transact title insurance.
18 Del. C. 1953, § 510; 56 Del. Laws, c. 380, § 1.;
§ 511. Capital funds required.
(a) To transact any one kind of insurance (as defined in Chapter 9 of this title), or combinations of kinds of insurance as shown below, an insurer shall possess and thereafter maintain in cash or cash equivalents unimpaired paid-in capital stock (if a stock insurer) or a capital account (if an insurance department or division of a corporation established under Chapter 7 or regulated under Chapter 9 of Title 5) or unimpaired basic surplus (if a foreign mutual or a reciprocal insurer), and when first so authorized shall possess free surplus, all in amounts not less than as follows:
|
Kind or kinds of insurance |
Stock Insurers |
Mutual Insurers |
Reciprocal insurers |
|||
|
Capital |
Free |
Basic |
Free |
Basic |
Free |
|
|
stock |
surplus |
surplus |
surplus |
surplus |
surplus |
|
|
Life |
$300,000 |
$150,000 |
$300,000 |
$150,000 |
||
|
Health |
300,000 |
150,000 |
300,000 |
150,000 |
$300,000 |
$150,000 |
|
Life & health |
350,000 |
200,000 |
350,000 |
200,000 |
||
|
Property |
300,000 |
150,000 |
300,000 |
150,000 |
300,000 |
150,000 |
|
Casualty |
400,000 |
200,000 |
400,000 |
200,000 |
400,000 |
200,000 |
|
Marine & transportation |
350,000 |
175,000 |
350,000 |
175,000 |
350,000 |
175,000 |
|
Surety |
300,000 |
150,000 |
300,000 |
150,000 |
300,000 |
150,000 |
|
Multiple line |
500,000 |
250,000 |
500,000 |
250,000 |
500,000 |
250,000 |
|
Title |
250,000 |
125,000 |
Except:
(1) A domestic insurer holding a valid certificate of authority to transact insurance in this State immediately prior to November 1, 1968 may, if otherwise qualified therefor, for a period of 5 years after such date continue to be so authorized while possessing paid-in capital stock (if a stock insurer) or surplus (if a mutual insurer) as required for such authority immediately prior to such date. The Commissioner shall not authorize such an insurer to transact any other kinds of insurance unless it then complies with the requirements as to capital and surplus, as applied to all kinds of insurance it then proposes to transact, as provided by this title as to foreign insurers applying for original certificates of authority under this title.
(2) An insurer which otherwise possesses funds as required under subsection (a) above, shall at all times maintain policyholders' surplus (combined paid-in capital stock, if any, and surplus) reasonable in amount, as determined by the Commissioner, in relation to the kinds and amount of insurance it has in force, or being written and retained by it, net of applicable reinsurance. In making any such determination the Commissioner shall give due consideration to any applicable standards approved or adopted by the National Association of Insurance Commissioners and to the desirability of substantial uniformity as to such requirements among the respective states.
(b) Capital and surplus requirements are based upon all the kinds of insurance transacted by the insurer in any and all areas in which it operates or proposes to operate, whether or not only a portion of such kinds is to be transacted in this State.
(c) As to surplus required for authority to transact one or more kinds of insurance and thereafter to be maintained, domestic mutual insurers shall be governed by Chapter 49 of this title.
18 Del. C. 1953, § 511; 56 Del. Laws, c. 380, § 1; 67 Del. Laws, c. 223, § 19; 68 Del. Laws, c. 70, § 1.;
§ 512. Insuring combinations without additional capital funds.
Without additional capital or additional surplus, an authorized insurer is also authorized:
(1) If a life insurer, to grant annuities;
(2) If a health insurer, to insure against congenital defects, as defined in § 906(a)(12) of this chapter;
(3) If a casualty insurer, to transact also health insurance. Except, that this provision shall not apply to a domestic insurer authorized to transact casualty insurance pursuant to § 511(a)(1) of this chapter.
18 Del. C. 1953, § 512; 56 Del. Laws, c. 380, § 1.;
§ 513. Deposit requirements -- In general.
(a) The Commissioner shall not authorize a foreign insurer (other than an alien insurer) to transact insurance in this State unless it makes and thereafter continuously maintains on deposit in this State through the Commissioner, or in another state, cash or securities eligible for such deposit under the laws of this State or of such other state of a fair market value not less than $100,000, for the protection of all its policyholders wherever located or all of its policyholders in the United States or of all its policyholders and creditors. The Commissioner shall accept the certificate in proper form of the public official having supervision over insurers in any other state to the effect that such deposit or part thereof by such insurer is being maintained in public custody or control pursuant to law in such state. The insurer shall at the time of filing its annual statement with the Commissioner as provided in § 526 of this title also file with the Commissioner a certificate from such public official showing the amount and character of the securities composing its deposit held in such other state.
(b) The Commissioner shall not authorize an insurer to transact surety insurance unless it makes and thereafter continuously maintains in this State through the Commissioner a special and additional deposit of cash or securities eligible therefor under § 1503 of this title, of a fair market value not less than $10,000, to answer any default of such insurer upon surety contracts issued by it in this State. The foregoing requirement shall not be applicable to any insurer having a paid-in capital and surplus of $10,000,000 or more and continuously maintaining on deposit in this State through the Commissioner, or in another state, cash or securities eligible for such deposit under the laws of this State or of such other state of a fair market value of not less than $400,000 for the protection of all its policyholders wherever located, or all of its policyholders in the United States or all of its policyholders and creditors.
(c) No insurer shall transact workers' compensation insurance in this State unless it makes and thereafter maintains in this State through the Commissioner a special and additional deposit of cash or securities eligible therefor under § 1503 of this title, of a fair market value of not less than $100,000 for the protection of persons in this State covered under the insurance so transacted. Upon any insurer's inability to pay workers' compensation claims as a result of a court of competent jurisdiction finding of financial impairment or insolvency, which prevents the regular payment of workers' compensation benefits, this deposit shall be immediately available upon their request to the Delaware Insurance Guaranty Association for continuation of claims benefits to eligible workers.
(d) The Commissioner shall not authorize a domestic title insurer to transact insurance unless it makes and thereafter continuously maintains on deposit in this State through the Commissioner cash or securities eligible for such deposit under § 1503 of this title of a fair market value not less than $25,000 for the protection of its policyholders in this State.
(e) All such deposits in this State are subject to the applicable provisions of Chapter 15 (Administration of Deposits) of this title.
(f) The Commissioner shall not authorize a domestic insurer, other than a title insurer, to transact insurance unless it makes and thereafter continuously maintains on deposit in this State through the Commissioner cash or securities eligible therefor under § 1503 of this title of a fair market value of not less than $100,000 for the protection of all its policyholders wherever located, or all its policyholders in the United States, or all its policyholders and creditors.
18 Del. C. 1953, § 513; 56 Del. Laws, c. 380, § 1; 59 Del. Laws, c. 79, §§ 32-34; 64 Del. Laws, c. 269, § 1; 65 Del. Laws, c. 409, § 1.;
§ 514. Same -- Alien insurers.
The Commissioner shall not authorize an alien insurer to transact insurance in this State unless it makes and thereafter continuously maintains on deposit in this State through the Commissioner, or in another state, a surplus of assets in cash or securities eligible for such deposit under the laws of this State or such other state of a value not less than the combined capital and surplus initially required of a like foreign insurer transacting like kinds of insurance in this State. The deposit shall be held in trust for the benefit and security of all the insurer's policyholders and creditors in the United States or of all the insurer's policyholders in the United States.
18 Del. C. 1953, § 514; 56 Del. Laws, c. 380, § 1.;
§ 515. Application for certificate of authority.
To apply for an original certificate of authority an insurer shall file with the Commissioner its written application therefor, accompanied by the applicable fees specified in § 701 of this title, stating under the oath of the president or vice-president, or other chief officer, and the secretary of the insurer, or of the attorney-in-fact if the insurer is a reciprocal insurer, the insurer's name, location of its home office or principal office in the United States (if an alien insurer), the kinds of insurance to be transacted, date of organization or incorporation, form of organization, state or country of domicile and such additional information as the Commissioner may reasonably require, together with the following documents, as applicable:
(1) If a corporation, a copy of its charter or certificate or articles of incorporation, together with all amendments thereto, or as restated and amended under the laws of its state or country of domicile, currently certified by the public official with whom the originals are on file in such state or country;
(2) If an incorporated insurer, a copy of its bylaws, certified by the insurer's corporate secretary;
(3) If a reciprocal insurer, a copy of the power of attorney of its attorney-in-fact, certified by the attorney-in-fact, and, if a domestic reciprocal insurer, the declaration provided for in § 5706 of this title;
(4) A complete copy of its financial statement as of not earlier than the December 31 next preceding in form as customarily used in the United States by like insurers, sworn to by at least 2 executive officers of the insurer or certified by the public insurance supervisory official of the insurer's state of domicile, or of entry into the United States (if an alien insurer);
(5) A copy of the report of the last examination, if any, made of the insurer within not more than the 3 years next preceding, certified by the public insurance supervisory official of the insurer's state of domicile, or of entry into the United States (if an alien insurer);
(6) Appointment of the Commissioner pursuant to § 524 of this title as its attorney to receive service of legal process;
(7) If a foreign or alien insurer, a certificate of the public insurance supervisory official of its state or country of domicile showing that it is authorized to transact in such state or country the kinds of insurance proposed to be transacted in this State;
(8) If a foreign insurer, certificate as to deposit if to be tendered pursuant to § 513 of this title;
(9) If an alien insurer, certificate as to deposit in another state if to be tendered pursuant to § 514 of this title;
(10) If a life or health insurer, a copy of the insurer's rate book and of each form of policy currently proposed to be issued in this State and of the form of application therefor;
(11) If an alien insurer, a copy of the appointment and authority of its United States manager, certified by its officer having custody of its records;
(12) Designation by the insurer of its officer or representative authorized to appoint and remove its agents in this State.
18 Del. C. 1953, § 515; 56 Del. Laws, c. 380, § 1.;
§ 516. Issuance, refusal of authority; ownership of certificate.
(a) If upon completion of its application the Commissioner finds that the insurer has met the requirements therefor under this title, the commissioner shall issue to the insurer a proper certificate of authority; if he/she does not so find, the Commissioner shall issue his/her order refusing such certificate. The Commissioner shall act upon an application for certificate of authority within a reasonable period after its completion.
(b) The Commissioner shall issue certificates of authority under his/her seal of office, showing the date of actual issuance, the kinds of insurance the insurer is authorized to transact in this State, and such other matters as the Commissioner deems necessary. At the insurer's request, the Commissioner may issue a certificate of authority limited to particular types of insurance or coverages within a kind of insurance as defined in Chapter 9 of this title.
(c) Although issued and delivered to the insurer, the certificate of authority at all times shall be the property of the State. Upon any expiration, suspension or termination thereof the insurer shall promptly deliver the certificate to the Commissioner.
18 Del. C. 1953, § 516; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;
§ 517. Authority conferred; surety insurers; certificate as evidence.
(a) The certificate of authority confers upon the insurer authority to transact in this State only the kind or kinds of insurance therein specified. No surety insurer shall be deemed thereby to possess power to act in capacity of executor, administrator, guardian, trustee, receiver, assignee, or agent, or in any other capacity than that of surety, notwithstanding contrary provisions in its charter.
(b) An insurer's valid and subsisting certificate of authority shall be prima facie evidence of its right to transact in this State the kind or kinds of insurance specified therein.
18 Del. C. 1953, § 517; 56 Del. Laws, c. 380, § 1.;
§ 518. Continuance, expiration, reinstatement of certificate of authority.
(a) A certificate of authority shall continue in force as long as the insurer is entitled thereto under this title, and until suspended or revoked by the Commissioner or terminated at the insurer's request; subject, however, to continuance of the certificate by the insurer each year by:
(1) Payment on or before March 1 of the continuation fee provided in § 701 (fee schedule) of this title;
(2) Due filing by the insurer of its annual statement for the next preceding calendar year as required by § 526 of this title; and
(3) Payment by the insurer of premium taxes with respect to the preceding calendar year.
(b) If not so continued by the insurer, its certificate of authority shall expire as of midnight on the May 31 next following such failure of the insurer to continue it in force, unless earlier revoked for failure to pay taxes as provided in § 519 of this title. The Commissioner shall promptly notify the insurer of the occurrence of any failure resulting in impending expiration of its certificate of authority.
(c) The Commissioner may, in his/her discretion, upon the insurer's request made within 3 months after expiration, reinstate a certificate of authority which the insurer has inadvertently permitted to expire after the insurer has fully cured all its failures which resulted in the expiration, and upon payment by the insurer of the fee for reinstatement specified in § 701(1) (fee schedule) of this title. Otherwise the insurer shall be granted another certificate of authority only after filing application therefor and meeting all other requirements as for an original certificate of authority in this State.
18 Del. C. 1953, § 518; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;
§ 519. Suspension or revocation of certificate of authority -- Mandatory grounds.
(a) The Commissioner shall refuse to continue or shall suspend or revoke an insurer's certificate of authority:
(1) If such action is required by any provision of this title;
(2) If a foreign insurer and it no longer meets the requirements for a certificate of authority, on account of deficiency of assets or otherwise;
(3) If a domestic insurer and it has failed to cure an impairment of capital or surplus within the time allowed therefor by the Commissioner under this title, or is otherwise no longer qualified for the certificate of authority;
(4) If the insurer's certificate of authority to transact insurance therein is suspended or revoked by its state of domicile, or state of entry into the United States (if an alien insurer); or
(5) For failure of the insurer to pay taxes on its premiums as required by the laws of this State.
(b) Except in case of insolvency or impairment of required capital or surplus, or suspension or revocation by another state as referred to in subdivision (4) above, the Commissioner shall give the insurer at least 10 days notice in advance of any such refusal, suspension or revocation under this section, and of the particulars of the reasons therefor. If the insurer requests a hearing thereon within such 10 days, such request shall automatically stay the Commissioner's proposed action until his/her order is made on such hearing.
18 Del. C. 1953, § 519; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;
§ 520. Suspension or revocation of certificate of authority -- Discretionary and special grounds.
(a) The Commissioner may, in his/her discretion, refuse to continue or may suspend or revoke an insurer's certificate of authority if he/she finds after a hearing thereon, or upon waiver of hearing by the insurer, that the insurer has violated or failed to comply with any lawful order of the Commissioner, or has wilfully violated or wilfully failed to comply with any lawful regulation of the Commissioner, or has violated any provision of this title other than those for violation of which suspension or revocation is mandatory, or, in lieu of such suspension or revocation, the Commissioner may, in his/her discretion, levy upon the insurer, and the insurer shall pay forthwith, an administrative fine of not over $5,000.
(b) The Commissioner shall suspend or revoke an insurer's certificate of authority on any of the following grounds, if the Commissioner finds after a hearing thereon that the insurer:
(1) Is in unsound condition, or is being fraudulently conducted, or is in such condition or using such methods and practices in the conduct of its business as to render its further transaction of insurance in this State currently or prospectively hazardous or injurious to policyholders or to the public;
(2) With such frequency as to indicate its general business practice in this State, has without just cause failed to pay or delayed payment of claims arising under its policies, whether the claim is in favor of an insured or is in favor of a third person with respect to the liability of an insured to such third person; or, with like frequency, without just cause compels insureds or claimants to accept less than the amount due them or to employ attorneys or to bring suit against the insurer or such an insured to secure full payment or settlement of such claims;
(3) Refuses to be examined, or if its directors, officers, employees or representatives refuse to submit to examination relative to its affairs, or to produce its accounts, records and files for examination by the Commissioner when required, or refuse to perform any legal obligation relative to the examination;
(4) Has failed to pay any final judgment rendered against it in this State upon any policy, bond, recognizance or undertaking as issued or guaranteed by it, within 30 days after the judgment became final, or within 30 days after dismissal of an appeal before final determination, whichever date is the later;
(5) As defined in Chapter 40 of this title, has failed to comply with § 4006 of this title;
(6) As defined in Chapter 40 of this title, has failed to accept the State's right of recovery and the assignment to the State of any right of an individual or other entity to payment from the party for an item or service for which payment has been made under the state Medicaid Plan;
(7) As defined in Chapter 40 of this title, has failed to respond to any inquiry by the State regarding a claim for payment for any health care item or service that is submitted within 3 years of the date of the provision of such health care item or service;
(8) As defined in Chapter 40 of this title, has denied a claim submitted by the State on the basis of lack of prior authorization; has denied a claim submitted by the State based solely on the date of submission of the claim, the type or format of the claim, or a failure to present proper documentation at the point-of-sale that is the basis of the claim, if:
a. The claim submitted by the State is made within 3 years of the date when the item or service was furnished; and
b. Any action by the State to enforce its rights with respect to such claim is commenced within 6 years of the State's submission of such claim.
(c) The Commissioner may, in his/her discretion and without advance notice or a hearing thereon, immediately suspend the certificate of authority of any insurer as to which proceedings for receivership, conservatorship, rehabilitation or other delinquency proceedings have been commenced in any state by the public insurance supervisory official of such state.
18 Del. C. 1953, § 520; 56 Del. Laws, c. 380, § 1; 58 Del. Laws, c. 278, § 2; 70 Del. Laws, c. 186, § 1; 76 Del. Laws, c. 190, § 1.;
§ 521. Order and notice of suspension, revocation; effect upon agents' authority.
(a) All suspensions or revocations of or refusals to continue an insurer's certificate of authority shall be, by the Commissioner's order, given to the insurer.
(b) Upon issuance of the order, the Commissioner shall forthwith give notice thereof to the insurer's agents in this State of record in the Department, and shall likewise suspend or revoke the authority of such agents to represent the insurer.
18 Del. C. 1953, § 521; 56 Del. Laws, c. 380, § 1.;
§ 522. Duration of suspension; insurer's obligations during suspension period; reinstatement.
(a) Suspension of an insurer's certificate of authority shall be for such period as the Commissioner specifies in the order of suspension, but not to exceed 1 year. During the suspension period the Commissioner may rescind or shorten the suspension by his/her further order.
(b) During the suspension period the insurer shall not solicit or write any new business in this State, but shall file its annual statement, pay fees, licenses and taxes as required under this title, and may service its business already in force in this State, as if the certificate of authority had continued in full force.
(c) Upon expiration of the suspension period, if within such period the certificate of authority has not terminated, the insurer's certificate of authority shall automatically reinstate, unless the Commissioner finds that the causes of the suspension, being other than a past event, are continuing, or that the insurer is otherwise not in compliance with the requirements of this title, and of which the Commissioner shall give the insurer notice not less than 30 days in advance of expiration of the suspension period. If not so automatically reinstated, the certificate of authority shall be deemed to have terminated as of the end of the suspension period.
(d) Upon reinstatement of the insurer's certificate of authority, the authority of its agents in this State to represent the insurer shall likewise reinstate. The Commissioner shall promptly notify the insurer and its agents in this State, of record in the Department, of such reinstatement.
18 Del. C. 1953, § 522; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;
§ 523. General corporation laws inapplicable to foreign insurers.
The general corporation laws of this State as contained in Title 8 of the Delaware Code shall not apply as to foreign insurers holding certificates of authority to transact insurance in this State.
18 Del. C. 1953, § 523; 56 Del. Laws, c. 380, § 1.;
§ 524. Commissioner as process agent for certain insurers.
(a) Before the Commissioner shall authorize it to transact insurance in this State, each insurer shall appoint the Commissioner, and his/her successors in office, as its attorney to receive service of legal process issued against the insurer in this State. The appointment shall be made on a form as designated and furnished by the Commissioner, and shall be accompanied by a copy of a resolution of the board of directors or like governing body of the insurer, if an incorporated insurer, showing that those officers who executed the appointment were duly authorized to do so on behalf of the insurer.
(b) The appointment shall be irrevocable, shall bind the insurer and any successor in interest or to the assets or liabilities of the insurer, and shall remain in effect as long as there is in force any contract of the insurer in this State or any obligation of the insurer arising out of its transactions in this State.
(c) Service of such process against a foreign or alien insurer shall be made only by service thereof upon the Commissioner.
(d) Service of such process against a domestic insurer may be made as provided hereunder, or in any other manner provided by law.
(e) At the time of application for a certificate of authority the insurer shall file the appointment with the Commissioner, together with designation of the person to whom process against it served upon the Commissioner is to be forwarded. The insurer may change such designation by a new filing.
18 Del. C. 1953, § 524; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;
§ 525. Serving process.
(a) Service of process against an insurer for whom the Commissioner is attorney shall be made by delivering to and leaving with the Commissioner, his or her deputy, or a person in apparent charge of his or her office during the Commissioner's absence, 2 copies of the process, together with fee prescribed in § 701 of this title.
(b) Upon such service the Commissioner shall forthwith mail by certified mail 1 of the copies of such process to the person currently designated by the insurer to receive the same as provided in § 524(e) of this title. Service of such process shall not be complete until 3 days after the same has been so mailed.
(c) Service of process in the manner provided by this section shall for all purposes constitute valid and binding personal service upon the insurer within this State.
(d) The Commissioner shall keep a record of the day of service upon him/her of all legal process.
18 Del. C. 1953, § 525; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1; 73 Del. Laws, c. 90, § 1.;
§ 526. Annual statement.
(a) Each authorized insurer shall annually on or before March 1, or within any reasonable extension of time therefor which the Commissioner for good cause may have granted, file with the Commissioner a full and true statement of its financial condition, transactions and affairs as of December 31 preceding. The statement filing shall be the annual statement form approved by the National Association of Insurance Commissioners ("NAIC") prepared in accordance with NAIC annual statement requirements and the NAIC accounting practices and procedures manual, except as otherwise prescribed or permitted by this title or by the Commissioner. The statement shall be verified by the oath of the insurer's president or vice-president, and secretary or actuary, as applicable, or, in the absence of the foregoing, by 2 other principal officers, or, if a reciprocal insurer, by the oath of the attorney-in-fact or its like officers if a corporation.
(b) The statement of an alien insurer shall be verified by its United States manager or other officer duly authorized, and shall relate only to the insurer's transactions and affairs in the United States, unless the Commissioner requires otherwise. If the Commissioner requires a statement as to such an insurer's affairs throughout the world, the insurer shall file such statement with the Commissioner as soon as reasonably possible.
(c) The Commissioner may refuse to continue or may suspend or revoke the certificate of authority of any insurer failing to file its annual statement when due.
(d) At time of filing, the insurer shall pay the fee for filing its annual statement as prescribed by § 701 of this title.
(e) Each domestic, foreign and alien insurer who is authorized to transact insurance in this State shall annually on or before March 1 of each year, file with the National Association of Insurance Commissioners a copy of its annual statement blank, along with such additional filings as prescribed by the Commissioner for the preceding year. The information filed with the National Association of Insurance Commissioners shall be in the same format and scope as that required by the Commissioner and shall include the signed jurat page and the actuarial certification. Any amendments and addendums to the annual statement filing subsequently filed with the Commissioner shall also be filed with the NAIC. Foreign insurers that are domiciled in a state which has a law substantially similar to this subsection shall be deemed in compliance with this section.
(f) In the absence of actual malice, members of the NAIC, their duly authorized committees, sub-committees and task forces, their delegates, NAIC employees and all others charged with the responsibility of collecting, reviewing and analyzing and disseminating the information developed from the filing of the annual statement convention blanks shall be acting as agents of the Commissioner under the authority of this section and shall not be subject to civil liability for libel, slander or any other cause of action by virtue of their collection review, and analysis or dissemination of the data and information collected from the filings required hereunder. All financial analysis ratios and examination synopses concerning insurance companies that are submitted to the Department by the National Association of Insurance Commissioners' Insurance Regulatory Information System are confidential and may not be disclosed by the Department.
18 Del. C. 1953, § 526; 56 Del. Laws, c. 380, § 1; 68 Del. Laws, c. 50, §§ 1, 2; 71 Del. Laws, c. 327, § 1.;
§ 526A. Supplement to annual statement.
(a) Each insurer licensed to write property or casualty insurance in this State, as a supplement to Schedule T of its annual statement, shall submit a report on a form furnished by the Commissioner showing its direct writings and experience, prior to reinsurance, in this State and the United States. All such writings and experience shall be required on a line-by-line basis both for the State and in total, and where appropriate, on a subline-by-subline basis.
(b) The supplemental report required by this section shall include but not be limited to the following types of insurance written by such insurer:
(1) Motor vehicle bodily injury liability insurance;
(2) Motor vehicle property liability insurance;
(3) Motor vehicle personal injury protection insurance;
(4) Uninsured motorist insurance;
(5) Underinsured motorist insurance;
(6) Products liability insurance;
(7) Medical negligence insurance, by specialty and in total;
(8) Dental malpractice insurance;
(9) Attorneys' malpractice insurance;
(10) Other professional malpractice insurance;
(11) Midwives' insurance;
(12) Political subdivision liability insurance reported separately as to municipalities, counties, school districts and other authorities;
(13) Errors and omissions liability insurance;
(14) Officers' and directors' liability insurance reported separately as to nonprofit and for-profit entities;
(15) Day care facility liability insurance;
(16) Entertainment, recreational and sporting facility liability insurance, by specialty;
(17) Workers' compensation insurance;
(18) Liquor liability insurance.
(c) Such supplemental report shall include the following data, both specific to this State and also to the United States, by the type of insurance for the previous year ending on the 31st day of December:
(1) Direct premiums written;
(2) Direct premiums earned;
(3) Investment income derived from unearned premium and loss reserves reflecting the overage rate of return on invested assets. Forms to be used in transmitting this data and the formula for the calculations shall be promulgated by the Insurance Commissioner;
(4) Incurred claims, developed as the sum of the following (the report shall include data for each of the following categories used to develop the sum of incurred claims):
a. Dollar amount of claims closed with payment; plus
b. Reserves for reported claims at the end of the current year; minus
c. Reserves for reported claims at the end of the previous year; plus
d. Reserves for incurred but not reported claims at the end of the current year; minus
e. Reserves for incurred but not reported claims at the end of the previous year; plus
f. Loss adjustment expenses for claims closed; plus
g. Reserves for loss adjustment expense at the end of the current year; minus
h. Reserves for loss adjustment expense at the end of the previous year;
(5) Actual incurred expenses allocated separately to loss adjustment; commissions, other acquisition costs, advertising, general office expenses, taxes, licenses and fees, and all other expenses. This consolidated insurance expense exhibit must be filed in Delaware on or before April 1 of each year;
(6) Net underwriting gain or loss;
(7) Net operation gain or loss, including net investment income;
(8) The number and dollar amount of claims closed with payment, by year incurred and the amount reserved for these claims;
(9) The number of claims closed without payment and the dollar amount reserved for these claims; and
(10) The number of claims pending at the end of each year and the amount reserved for these claims.
(d) This report shall be due by the 1st of May of each year.
(e) For the first year only in which the insurer is required to file this supplemental report, the data required by subsection (c) of this section shall include the previous calendar year and each of the preceding calendar years.
(f) It shall be the duty of the Commissioner to annually compile and review all such supplemental reports submitted by insurers pursuant to this section to determine the appropriateness of premium rates for property or casualty insurance in this State. The Commissioner's findings and the filings shall be published and made available to any interested insured or citizen.
(g) The Commissioner may refuse to continue or may suspend or revoke the certificate of authority of any property or casualty insurer failing to file its supplemental report when due.
(h) The Commissioner may waive, modify or defer the requirements of this section if he/she determines the information required under this section to be reported is not needed.
(i) The Commissioner shall impose a fine of $1,000 for each day a report required by this section is late. Such fine may not be suspended by the Commissioner.
65 Del. Laws, c. 270, § 1; 66 Del. Laws, c. 328, §§ 1, 3; 70 Del. Laws, c. 186, § 1; 71 Del. Laws, c. 373, § 3.;
§§ 527, 528. Resident agent, countersignature law; exceptions to resident agent, countersignature law.
Repealed by 70 Del. Laws, c. 376, §§ 1 and 2, eff. June 21, 1996.
§ 529. Cancellation of insurance agency contracts; arbitration.
(a) Every insurance company shall notify the Insurance Commissioner or the Commissioner's successor and the agency involved of the intent to cancel any written or verbal agency contract, except life insurance contracts, 30 days prior to issuance of the notice of cancellation.
(b) No insurance company may cancel an agency without giving 12 months notice, except where fraud exists or where an agency is more than 60 days in arrears of money owed to the insurance company in question. This notice shall be in writing and, upon the option of the company, may prohibit the agency from writing any new business for this particular company, but will allow the agency to renew all existing business in this 12 month period and will allow the agency to have binding authority to make endorsements or other changes to existing business and will provide for the same rate of commission for the 12 month period.
(c) The Insurance Commissioner shall appoint an arbitration board to arbitrate the cancellation of agency contracts. This board shall consist of 3 arbitrators, 1 of whom shall be from the Insurance Department, and 2 of whom shall be from the insurance industry.
(d) The purpose of this board is to determine whether an agency cancellation will adversely affect the public interest. If such a determination is made, the board shall prescribe a method of cancellation to be followed by both parties. The decision of the board of arbitration shall be binding upon the company and agency involved.
(e)(1) This subsection shall not apply in an instance where such company:
a. Employs an agent directly; or
b. Has an exclusive business arrangement with an agent.
(2) Notwithstanding any other provision of this section, a company may not cancel the contract of an independent agent for property and casualty insurance solely because of adverse underwriting experience in the line of private passenger insurance to the extent losses incurred by the insurer were not the fault of the insured.
(3) This subsection does not apply to adverse underwriting experience on losses incurred by the company on:
a. Bodily injury coverage;
b. Property damage coverage;
c. Collision coverage; or
d. To the extent that the losses incurred by the insurer were the fault of the insured, personal injury protection coverage and comprehensive coverage.
18 Del. C. 1953, § 529; 56 Del. Laws, c. 380, § 1; 58 Del. Laws, c. 184; 70 Del. Laws, c. 186, § 1; 71 Del. Laws, c. 161, § 1.;
§ 530. Emergency requirements.
Whenever in the Commissioner's opinion a public emergency exists by reason of an abnormal disruption of economic and financial processes which affects the conduct of the business of insurance in a normal and ordinary manner, the Commissioner, with the concurrence of the Governor and the General Assembly, may declare the existence of a public emergency. During such emergency the Commissioner may make, alter, amend, revise and rescind rules and regulations, imposing any condition upon the conduct of the business of any insurer which may be necessary or desirable to maintain sound methods of insurance and to safeguard the interests of policyholders, beneficiaries and the public generally during the period of such emergency, which rules and regulations shall become inoperative when such emergency ceases, and an order to that effect shall be made by the Commissioner.
18 Del. C. 1953, § 530; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;
§ 531. Emergency powers to regulate liability insurance cancellations and nonrenewals.
(a)(1) Whenever the Insurance Commissioner in his/her discretion finds that an abnormal disruption has occurred or is occurring in the liability insurance market, which has created or will create a situation where the availability of commercial, municipal or professional liability insurance is affected and such disruption will affect the normal transaction of business in this State, as to mid-term cancellations, or affect the health, safety and welfare of Delaware citizens as to nonrenewals, the Commissioner may promulgate regulations regarding cancellations and nonrenewals to safeguard the interests of policyholders and the public generally.
(2) When the Commissioner has reasonable cause to believe that a specific line of commercial, municipal or professional liability insurance is unavailable and that such unavailability is a threat to the public health, safety and welfare, he/she may declare such line to be "critical" and immediately suspend and enjoin any proposed nonrenewal of coverage of policies of insurance relating to such line and extend policy renewal dates pending a hearing. Within 30 days thereafter, the Commissioner shall hold a public hearing in accordance with procedures mandated by the Administrative Procedures Act. The Commissioner shall serve upon known affected insurers and any other persons involved a copy of such notice, including an order to extend the date of policy terminations pending the public hearing.
(3) Within 15 days after the public hearing the Commissioner shall find whether or not the specific line is in fact "critical." The Commissioner may find that the specific line is "critical" if he/she finds both that:
a. The type of coverage is generally unavailable in Delaware at any price reasonably related to the risk assumed; and
b. The unavailability of this type of coverage constitutes a threat to the public health, safety and welfare.
(4) If the Commissioner finds that subparagraphs a. and b. of paragraph (3) of this subsection are present, he/she may declare the line of coverage is "critical." Such declaration shall be effective for 90 days from the date when first declared critical under paragraph (2) of this subsection.
(b) Such regulation shall apply to commercial liability insurance policies, other than automobile, but including commercial multi-peril insurance policies and municipal or professional liabil