Chapter 49. Organization and Corporate Powers; Procedures Of Domestic Stock and Mutual Insurers
TITLE 18
Insurance Code
Insurance
CHAPTER 49. ORGANIZATION AND CORPORATE POWERS; PROCEDURES OF DOMESTIC STOCK AND MUTUAL INSURERS
§ 4901. Scope of chapter.
This chapter shall apply only to domestic stock insurers and domestic mutual insurers. This chapter shall apply to domestic mutual assessment property insurers only as stated in § 5306 of this title.
18 Del. C. 1953, § 4901; 56 Del. Laws, c. 380, § 1.;
§ 4902. "Stock," "mutual" insurer, definitions.
"Stock" insurer and "mutual" insurer are as defined in §§ 501 and 502, respectively, of this title.
18 Del. C. 1953, § 4902; 56 Del. Laws, c. 380, § 1.;
§ 4903. General corporation statutes; applicability.
Domestic stock and mutual insurers shall be governed by the applicable provisions of the general statutes of this State relating to private corporations except where such general statutes are in conflict with the express provisions of this title and the reasonable implications of such provisions, in which case the provisions of this title shall govern.
18 Del. C. 1953, § 4903; 56 Del. Laws, c. 380, § 1.;
§ 4904. Insurance business exclusive.
No domestic insurer heretofore or hereafter formed shall engage directly or indirectly in any business other than the insurance business and in business activities reasonably and necessarily incidental to such insurance business, except that:
(1) A title insurer may also engage in business as an escrow agent; and
(2) Any insurer may also engage in business activities reasonably relating to the management, supervision, servicing of and protection of its interests as to its lawful investments and to the full utilization of its facilities; and
(3) It may invest in corporations engaged or organized to engage in the marketing of financial, insurance or service products, in accordance with § 1313 of this title; and
(4) A corporation established under Chapter 7 or regulated under Chapter 9 of Title 5 may also engage in the other activities authorized by such chapter; and
(5) This section shall not preclude a corporation heretofore or hereafter formed under the laws of this State from possessing corporate powers to engage in business additional to the insurance business or preclude such a corporation, prior to issuance of a certificate of authority thereto as an insurer, from engaging in any such additional business or businesses.
18 Del. C. 1953, § 4904; 56 Del. Laws, c. 380, § 1; 66 Del. Laws, c. 179, § 2; 67 Del. Laws, c. 223, § 31.;
§ 4905. Mutual insurers -- Initial qualifications.
(a) When newly organized, a domestic mutual insurer may be authorized to transact any one of the kinds of insurance listed in the schedule contained in subsection (b) below.
(b) When applying for an original certificate of authority, the insurer must be otherwise qualified therefor under this title and must have received and accepted bona fide applications as to substantial insurable subjects for insurance coverage of a substantial character of the kind of insurance proposed to be transacted, must have collected in cash the full premium therefor at a rate not less than that usually charged by other insurers for comparable coverages, must have surplus funds on hand and deposited as of the date such insurance coverages are to become effective or, in lieu of such applications, premiums and surplus, may deposit and thereafter maintain surplus, all in accordance with that part of the following schedule which applies to the 1 kind of insurance the insurer proposed to transact:
|
(A) |
(B) |
(C) |
(D) |
(E) |
(F) |
(G) |
(H) |
|
Kind of Ins. |
Min. No. Apps. Accepte |
Min. No Subjects Covered |
Minimum Premium Collected |
Minimum Amt. Ins. Ea. Subj. |
Max. Amt. Ins. Ea. Subject |
Deposit Min. Surplus Fund |
Deposit Surplus in lieu |
|
Life(i) |
500 |
500 |
Annual |
$2,000 |
$5,000 |
$100,000 |
$200,000 |
|
Health(ii) |
500 |
500 |
Quarterly |
$ 25 |
$ 50 |
$100,000 |
$200,000 |
|
(weekly indem.) |
(weekly indem.) |
Subjects |
Covered |
||||
|
Property (iii) |
100 |
250 |
Annual |
$3,000 |
$ 7,000 |
$100,000 |
$200,000 |
|
Casualty (iv) |
250 |
250 |
Annual |
$5,000 |
$25,000 |
$200,000 |
$300,000 |
Expendable surplus: In addition to surplus deposited and thereafter to be maintained as shown in columns (G) or (H) above, the insurer when first authorized must have on hand surplus funds, which it can thereafter expend in the conduct of its business, in amount not less than 50% of the applicable deposited and maintained surplus required of it under the above schedule. The following provisos are respectively applicable to the foregoing schedule and provisions as indicated by like Roman numerals appearing in such schedule:
(i) No group insurance or term policies for terms of less than 10 years shall be included.
(ii) No group, blanket or family plans of insurance shall be included. In lieu of weekly indemnity a like premium value in medical, surgical and hospital benefits may be provided. Any accidental death or dismemberment benefit provided shall not exceed $5,000.
(iii) Only insurance of the owner's interest in real property may be included.
(iv) Insurance of legal liability for bodily injury and property damage, to which the maximum and minimum insured amounts apply, must be included.
(v) The maximums provided for in column (F) are the net of applicable reinsurance.
(vi) The deposit of surplus in the amount specified in columns (G) and (H) must thereafter be maintained unimpaired. The deposit is subject to the provisions of Chapter 15 (Administration of Deposits) of this title.
18 Del. C. 1953, § 4905; 56 Del. Laws, c. 380, § 1.;
§ 4906. Same -- Permit; deposit.
(a) Before soliciting any applications for insurance as required under § 4905 of this title, the incorporators of the proposed insurer shall procure a solicitation permit as required by § 4702 of this title and shall deposit with the Commissioner $10,000 in cash or in certificate of deposit issued by a bank located in this State or in United States Government bonds at market value to be held in trust for the use and benefit of the State and of applicant members and creditors of the corporation. The deposit shall be conditioned as follows:
(1) Upon due accounting for and deposit, as required under § 4908 of this title, of funds received as premium upon preliminary applications for insurance; and
(2) In event the corporation fails to complete its organization and secure a certificate of authority issued by the Commissioner within 1 year after the date of its solicitation permit, all premiums collected in advance from applicant members will be promptly returned to them, all other indebtedness of the corporation other than any compensation to directors, officers or solicitors of insurance applications will be paid and for payment of costs incurred by the State in the event of any legal proceedings for liquidation or dissolution of the corporation.
(b) If the corporation or an affiliate corporation proposes also to issue securities for initial financing of the proposed insurer in addition to the securing of qualifying applications for insurance, the deposit required by this section may be combined with that required under § 4713 of this title, with appropriate extension of the conditions of such deposit to comply with the requirements of both sections, in order that only 1 such deposit of $10,000 shall be necessary for all such purposes.
(c) The Commissioner shall release such deposit or remaining portion thereof held under this section upon written request of the person entitled thereto and upon proof to the Commissioner's satisfaction that all liabilities and obligations, with respect to which the deposit was made and held, have been fully settled or terminated or otherwise adequately provided for.
(d) Any such bond filed or deposit or remaining portion thereof held under this section may be released and discharged upon settlement and termination of all liabilities against it hereunder.
18 Del. C. 1953, § 4906; 56 Del. Laws, c. 380, § 1.;
§ 4907. Same -- Qualifying applications for insurance.
(a) Upon receipt of the Commissioner's approval of the deposit as provided in § 4906 of this title, the directors and officers of the proposed domestic mutual insurer may commence solicitation of such requisite applications for insurance policies as they may accept and may receive deposits of premiums thereon.
(b) All such applications shall be in writing signed by the applicant, covering subjects of insurance resident, located or to be performed in this State.
(c) All such applications shall provide that:
(1) Issuance of the policy is contingent upon the insurer's qualifying for and receiving a certificate of authority;
(2) No insurance is in effect unless and until the certificate of authority has been issued; and
(3) The prepaid premium or deposit and membership or policy fee, if any, shall be refunded in full to the applicant if organization is not completed and the certificate of authority is not issued and received by the insurer before a specified reasonable date, which date shall be not later than 1 year after the date of the solicitation permit.
(d) All qualifying premiums collected shall be in cash.
(e) Solicitation for such qualifying applications for insurance shall be by licensed agents of the corporation, and the Commissioner shall, upon the corporation's application therefor, issue temporary agent's licenses, expiring on the date specified pursuant to subsection (c)(3) above, to individuals qualified for an agent's license. The Commissioner may suspend or revoke any such license for any of the causes and pursuant to the same procedures as are applicable to suspension or revocation of licenses of agents in general under Chapter 17 of this title.
18 Del. C. 1953, § 4907; 56 Del. Laws, c. 380, § 1.;
§ 4908. Same -- Trust deposit of qualifying premiums; issuance of policies.
(a) All sums collected by a domestic mutual corporation as premiums or fees on qualifying applications for insurance therein shall be deposited in trust in a bank or trust company in this State under a written trust agreement approved by the Commissioner and consistent with this section and with § 4907 of this title. The corporation shall file an executed copy of such trust agreement with the Commissioner.
(b) Upon issuance to the corporation of a certificate of authority as an insurer for the kind of insurance for which such applications were solicited, all funds so held in trust shall become the funds of the insurer, and the insurer shall thereafter in due course issue and deliver its policies for which premiums had been paid and accepted. The insurance provided by such policies shall be effective as of the date of the certificate of authority or thereafter as provided by the respective policies.
18 Del. C. 1953, § 4908; 56 Del. Laws, c. 380, § 1.;
§ 4909. Same -- Failure to qualify.
If the proposed domestic mutual insurer fails to complete its organization and to secure its original certificate of authority within 1 year from and after date of its solicitation permit, the corporation shall transact no further business, and the Commissioner shall return or cause to be returned to the persons entitled thereto all advance deposits or payments of premiums held in trust under § 4907 of this title.
18 Del. C. 1953, § 4909; 56 Del. Laws, c. 380, § 1.;
§ 4910. Same -- Additional kinds of insurance.
A domestic mutual insurer, after being authorized to transact 1 kind of insurance, may be authorized to transact such additional kinds of insurance as are permitted under § 510 of this title, while otherwise in compliance with this title and while maintaining unimpaired surplus funds in an amount not less than the amount of paid-in capital stock required of a domestic stock insurer transacting like kinds of insurance, subject further, when first so authorized to transact an additional kind of insurance, in the case of insurers other than those to which § 511(a)(1) of this title is applicable, to the additional expendable surplus requirements of such § 511 applicable to such a stock insurer.
18 Del. C. 1953, § 4910; 56 Del. Laws, c. 380, § 1.;
§ 4911. Membership in mutual.
(a) Each policyholder of a domestic mutual insurer, other than of a reinsurance contract, is a member of the insurer during the period of the insurance with all rights and obligations of such membership, and the policy shall so specify.
(b) Any person, government or governmental agency, state or political subdivision thereof, public or private corporation, board, association, estate, trustee or fiduciary may be a member of a domestic mutual insurer. The right of certain governmental bodies or agencies of this State to become and be members of mutual insurers shall be subject further to the laws of this State governing such bodies or agencies.
18 Del. C. 1953, § 4911; 56 Del. Laws, c. 380, § 1.;
§ 4912. Bylaws of mutual insurer.
Every domestic mutual insurer shall promptly file with the Commissioner a copy, certified by the insurer's secretary, of its bylaws and of every modification thereof or addition thereto. The bylaws and modifications thereof shall be subject to the Commissioner's approval. The Commissioner shall not disapprove any such bylaw or modification unless found by the Commissioner, after a hearing held thereon, to be unlawful, unreasonable, inadequate, unfair or injurious to the proper interests or protection of the insurer's members or any class thereof. The insurer shall not, after receiving written notice of such disapproval and during the existence thereof, effectuate any bylaw provision so disapproved.
18 Del. C. 1953, § 4912; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;
§ 4913. Minutes of corporate meetings of mutual insurers.
A domestic mutual insurer upon the Commissioner's written request therefor shall promptly file with the Commissioner a copy, certified by the insurer's secretary, of the notice, minutes and other record of every meeting of the insurer's board of directors or other similar governing body and of every meeting of the insurer's members. All such copies so filed shall constitute confidential records for the information of the Commissioner only, and shall not constitute or be treated as public records or be open to public inspection.
18 Del. C. 1953, § 4913; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;
§ 4914. Contingent liability of mutual members.
(a) Except as provided otherwise in § 4916 of this title with respect to nonassessable policies, each member of a domestic mutual insurer shall have a contingent liability, pro rata and not one for another, for the discharge of its obligations, which contingent liability shall be in such maximum amount -- not less than 1 nor more than 6 times the premium for the member's policy at the annual premium rate -- as shall be specified in the insurer's certificate of incorporation or bylaws.
(b) Every policy issued by the insurer shall contain a statement of the contingent liability.
(c) Termination of the policy of any such member shall not relieve the member of contingent liability for such member's proportion of the obligations of the insurer which accrued while the policy was in force.
(d) Unrealized contingent liability of members does not constitute an asset of the insurer in any determination of its financial condition.
18 Del. C. 1953, § 4914; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;
§ 4915. Levy of contingent liability.
(a) If at any time the assets of a domestic mutual insurer are less than its liabilities and the minimum amount of surplus required to be maintained by it under this title for authority to transact the kinds of insurance being transacted and the deficiency is not cured from other sources, its directors may, if the same is approved by the Commissioner as being reasonable and in the best interests of the insurer and its members, levy an assessment only on its members who held the policies providing for contingent liability at any time within the 12 months next preceding the date the levy was authorized by the board of directors, and such members shall be liable to the insurer for the amount so assessed.
(b) The levy of assessment shall be for such an amount as is required to cure such deficiency and to provide a reasonable amount of working funds above such minimum amount of surplus, but such working funds so provided shall not exceed 5% of the sum of the insurer's liabilities and such minimum required surplus as of the date of the levy.
(c) As to the respective policies subject to the levy, the assessment shall be computed upon the basis of premium earned during the period covered by the levy.
(d) No member shall have an offset against any assessment for which such member is liable, on account of any claim for unearned premium or loss payable.
(e) As to life insurance, any part of such an assessment upon a member which remains unpaid following notice of assessment, demand for payment, and lapse of a reasonable waiting period as specified in such notice, may, if approved by the Commissioner as being in the best interests of the insurer and its members, be secured by placing a lien upon the cash surrender values and accumulated dividends held or to be held by the insurer to the credit of the member's policy.
18 Del. C. 1953, § 4915; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;
§ 4916. Enforcement of contingent liability.
(a) The insurer shall notify each member of the amount of the assessment to be paid by written notice mailed to the address of the member last of record with the insurer. Failure of the member to receive the notice so mailed, within the time specified therein for the payment of the assessment or at all, shall be no defense in any action to collect assessment.
(b) If a member fails to pay the assessment within the period specified in the notice, which period shall not be less than 20 days after mailing, the insurer may institute suit to collect the same.
18 Del. C. 1953, § 4916; 56 Del. Laws, c. 380, § 1.;
§ 4917. Nonassessable policies, mutual insurers; revocation of authority.
(a) A domestic mutual insurer, by depositing through the Commissioner and thereafter maintaining unimpaired surplus funds not less in amount than the minimum paid-in capital stock required of a domestic stock insurer for authority to transact the same kind or kinds of insurance, may, upon receipt of the Commissioner's order so authorizing, extinguish the contingent liability to assessment of its members as to all its policies in force and, so long as such surplus and deposit are maintained, may omit provisions imposing contingent liability in all policies currently issued. Any deposit of the insurer made through the Commissioner as prerequisite to its certificate of authority may be included as part of the deposit required under this section.
(b) The Commissioner shall not authorize a domestic insurer to extinguish the contingent liability of any of its members or in any of its policies to be issued, unless it qualifies to and does extinguish such liability of all its members and in all such policies for all kinds of insurance transacted by it.
(c) The Commissioner shall revoke the authority of a domestic mutual insurer to issue policies without contingent liability if:
(1) At any time the insurer's assets are less than the sum of its liabilities and the surplus required for such authority, or
(2) The insurer, by resolution of its board of directors approved by a majority of its members, requests that the authority be revoked.
(d) During the absence of such authority, the insurer shall not issue any policy without providing therein for the contingent liability of the policyholder, nor renew any policy which is then in force without endorsing the same to provide for such contingent liability.
18 Del. C. 1953, § 4917; 56 Del. Laws, c. 380, § 1.;
§ 4918. Information to stockholders and proxy regulations.
(a) This section shall apply to all domestic stock insurers except:
(1) A domestic stock insurer having less than 100 stockholders, except, that if 95% or more of the insurer's stock is owned or controlled by a parent or affiliated insurer, this section shall not apply to such insurer unless its remaining shares are held by 500 or more stockholders;
(2) Domestic stock insurers which file with the Securities and Exchange Commission forms of proxies, consents and authorizations pursuant to the Securities Exchange Act of 1934, as amended [15 U.S.C. § 78a et seq.]; and
(3) Insurance departments or divisions of corporations established under Chapter 7 of Title 5.
(b) Every insurer to which this section is applicable shall seasonably furnish its stockholders, in advance of stockholder meetings, information in writing reasonably adequate to inform them relative to all matters to be presented by the insurer's management for consideration of stockholders at such meeting.
(c) No person shall solicit a proxy, consent or authorization in respect of any stock or other voting security of such an insurer unless that person furnishes the person so solicited with written information reasonably adequate as to:
(1) The material matters in regard to which the powers so solicited are proposed to be used; and
(2) The person or persons on whose behalf the solicitation is made and the interest of such person or persons in relation to such matters.
(d) No person shall so furnish to another information which the informer knows or has reason to believe is false or misleading as to any material fact or which fails to state any material fact reasonably necessary to prevent any other statement made from being misleading.
(e) The form of all such proxies shall:
(1) Conspicuously state on whose behalf the proxy is solicited;
(2) Provide for dating the proxy;
(3) Impartially identify each matter or group of related matters intended to be acted upon;
(4) Provide means for the principal to instruct the vote of the principal's shares as to approval or disapproval of each matter or group, other than election to office; and
(5) Be legibly printed, with context suitably organized.
Except, that a proxy may confer discretionary authority as to matters as to which choice is not specified pursuant to item (4), above, if the form conspicuously states how it is intended to vote the proxy or authorization in each such case, and may confer discretionary authority as to other matters which may come before the meeting but unknown for a reasonable time prior to the solicitation by the persons on whose behalf the solicitation is made.
(f) No proxy shall confer authority:
(1) To vote for election of any person to any office for which a bona fide nominee is not named in the proxy statement; or
(2) To vote in any annual meeting (or adjournment thereof) other than the annual meeting next following the date on which the proxy statement and form were furnished stockholders.
(g) The Commissioner shall have authority to make and promulgate reasonable rules and regulations for the effectuation of this section, and in so doing shall give due consideration to rules and regulations promulgated for similar purposes by the insurance supervisory officials of other states.
(h) Any proxy, consent or authorization obtained in violation of this section or of the lawful rules and regulations of the Commissioner hereunder shall be void.
18 Del. C. 1953, § 4918; 56 Del. Laws, c. 380, § 1; 67 Del. Laws, c. 223, § 32; 70 Del. Laws, c. 186, § 1.;
§ 4919. Change of directors, officers; notice.
Every domestic stock or mutual insurer shall promptly notify the Commissioner in writing of any change of personnel among its directors or principal officers.
18 Del. C. 1953, § 4919; 56 Del. Laws, c. 380, § 1.;
§ 4920. Prohibited pecuniary interest of officials.
(a) Any officer or director, or any member of any committee or an employee of a domestic insurer, having the duty or power of investing or handling the insurer's funds, shall not deposit or invest such funds except in the insurer's name, shall not borrow the funds of the insurer or be pecuniarily interested in any loan, pledge, deposit, security, investment, sale, purchase, exchange, reinsurance or other similar transaction or property of the insurer, except as a stockholder, member, employee or director, unless the transaction is authorized or approved by the insurer's board of directors, with knowledge and recording of such pecuniary interest, by affirmative vote of not less than two thirds of the directors, and shall not take or receive to his or her own use any fee, brokerage, commission, gift or other similar consideration for or on account of any such transaction made by or on behalf of the insurer.
(b) No insurer shall guarantee the financial obligation of any of its officers or directors.
(c) This section shall not prohibit such a director, officer, member of a committee, or employee from becoming a policyholder of the insurer and enjoying the usual rights of a policyholder, or from participating as beneficiary in any pension trust, deferred compensation plan, profit sharing plan, stock option plan or similar plan authorized by the insurer and to which such person may be eligible, or prohibit any director or member of a committee from receiving a reasonable fee for lawful services actually rendered to the insurer.
(d) The Commissioner may, by regulation from time to time, define and permit additional exceptions to the prohibition contained in subsection (a) of this section solely to enable payment of a reasonable compensation to a director who is not otherwise an officer or employee of the insurer, or to a corporation or firm in which a director is interested, for necessary services performed or sales or purchases made to or for the insurer in the ordinary course of the insurer's business and in the usual private professional or business capacity of such director, corporation or firm.
18 Del. C. 1953, § 4920; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;
§ 4921. Management and exclusive agency contracts.
(a) No domestic insurer shall hereafter make any contract whereby any person is granted or is to enjoy in fact the management of the insurer to the material exclusion of its board of directors or to have the controlling or preemptive right to produce substantially all insurance business for the insurer, or, if an officer, director or otherwise part of the insurer's management, is to receive any commission, bonus or compensation based upon the volume of the insurer's business or transactions, unless the contract is filed with and not disapproved by the Commissioner. The contract shall become effective in accordance with its terms unless disapproved by the Commissioner within 20 days after date of filing, subject to such reasonable extension of time as the Commissioner may require by notice given within such 20 days. Any disapproval shall be delivered to the insurer in writing stating the grounds therefor.
(b) Any such contract shall provide that any such manager, producer of its business, or contract holder shall within 90 days after expiration of each calendar year furnish the insurer's board of directors a written statement of amounts received under or on account of the contract and amounts expended thereunder during such calendar year, with specification of the emoluments received therefrom by the respective directors, officers and other principal management personnel of the manager or producer, and with such classification of items and further detail as the insurer's board of directors may reasonably require.
(c) The Commissioner shall disapprove any such contract if the Commissioner finds that it:
(1) Subjects the insurer to excessive charges; or
(2) Is to extend for an unreasonable length of time; or
(3) Does not contain fair and adequate standards of performance; or
(4) Contains other inequitable provision or provisions which impair the proper interests of stockholders or members of the insurer.
(d) The Commissioner may, after a hearing held thereon, disapprove any such contract theretofore permitted to become effective if the Commissioner finds that the contract should be disapproved on any of the grounds referred to in subsection (c) above.
(e) This section does not apply as to contracts entered into prior to November 1, 1968, or to extensions or amendments of such contracts.
18 Del. C. 1953, § 4921; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;
§ 4922. Dividends to stockholders.
(a) A domestic stock insurer shall not pay any cash dividend to stockholders except out of that part of its available and accumulated surplus funds which is derived from realized net operating profits on its business and realized capital gains.
(b) A cash dividend otherwise lawful may be payable out of the insurer's earned surplus even though its total surplus is then less than the aggregate of its past contributed or paid-in surplus.
(c) A stock dividend may be paid out of any available surplus funds.
(d) The insurance department or division of a corporation established under Chapter 7 of Title 5 shall only make distributions (other than for payment of expenses) to such corporation out of that part of its available and accumulated surplus funds which is derived from realized net operating profits on its business and realized capital gains.
18 Del. C. 1953, § 4922; 56 Del. Laws, c. 380, § 1; 67 Del. Laws, c. 223, § 33.;
§ 4923. Participating policies.
(a) If provided for in its certificate of incorporation or charter, a stock insurer or mutual insurer may issue any or all of its policies or contracts with or without participation in profits, savings, unabsorbed portions of premiums, or surplus, may classify policies issued and perils insured on a participating and nonparticipating basis, and may determine the right to participate and the extent of participation of any class or classes of policies. Any such classification or determination shall be reasonable and shall not unfairly discriminate as between policies so classified.
(b) A life insurer may issue both participating and nonparticipating policies or contracts if the right or absence of right to participate is reasonably related to the premium charged.
(c) After the first policy year, no dividend, otherwise earned, shall be made contingent upon the payment of renewal premium on any policy or contract, except, that a participating life or health insurance policy providing for participation at the end of the first and/or second policy year may provide that the dividend or dividends will be paid subject to payment of premium for the next ensuing year.
18 Del. C. 1953, § 4923; 56 Del. Laws, c. 380, § 1.;
§ 4924. Dividends to policyholders.
(a) The directors of a domestic mutual insurer may from time to time apportion and pay or credit to its members dividends only out of that part of its surplus funds which represents net realized savings, net realized earnings, and net realized capital gains, all in excess of the surplus required by law to be maintained by the insurer.
(b) A dividend otherwise proper may be payable out of such savings, earnings and gains even though the insurer's total surplus is then less than the aggregate of contributed surplus remaining unpaid by the insurer.
(c) A domestic stock insurer may pay dividends to holders of its participating policies out of any available surplus funds.
(d) No dividend shall be paid which is inequitable or which unfairly discriminates as between classifications of policies or policies within the same classifications.
18 Del. C. 1953, § 4924; 56 Del. Laws, c. 380, § 1.;
§ 4925. Solicitation of business; issuance of policies in other jurisdictions.
(a) No domestic insurer shall knowingly solicit insurance business in any reciprocating state in which not then licensed as an authorized insurer. This subsection shall not prohibit advertising through publications and radio, television and other media originating outside such reciprocating state, if the insurer is licensed in the state in which the advertising originates and the advertising is not specifically directed to residents of such reciprocating state. This subsection shall not apply as to surplus line insurance, or prohibit insurance covering persons or risks located in a reciprocating state, under contracts solicited and issued in states in which the insurer is then licensed, or insurance otherwise effectuated in accordance with the laws of the reciprocating state. A "reciprocating" state, as used herein, is one under the laws of which a similar prohibition is imposed upon and enforced against insurers domiciled in that state.
(b) A domestic insurer duly authorized to transact insurance in another jurisdiction may frame and issue policies for delivery in such jurisdiction pursuant to applications for insurance solicited and obtained therein, in accordance with the laws thereof, subject only to such restrictions, if any, as may be contained in the insurer's certificate of incorporation or bylaws, and subject, in the case of health insurers, to the provisions of § 3330 of this title (policies issued for delivery in another state).
18 Del. C. 1953, § 4925; 56 Del. Laws, c. 380, § 1.;
§ 4926. Payment of taxes; exoneration.
(a) Every domestic insurer may comply with any law of any state or political subdivision imposing any license, excise, privilege, premium, occupation or other fee or tax, and pay such fee or tax, unless prior to such payment the law shall have been expressly held invalid by the state court having final appellate jurisdiction in the premises or by the Supreme Court of the United States.
(b) No officer, director or trustee of any insurer shall be subject to personal liability by reason of any payment, or determination not to contest payment, deemed by the board of directors or trustee to be in the corporate interests of the insurer, of any license, excise, privilege, premium, occupation or other fee or tax to any such state or political subdivision, unless prior to such payment the law imposing such fee or tax shall have been expressly held invalid by the state court having final appellate jurisdiction in the premises or by the Supreme Court of the United States.
18 Del. C. 1953, § 4926; 56 Del. Laws, c. 380, § 1.;
§ 4927. Impairment of capital or assets.
(a) If a domestic stock insurer's paid-in capital stock (as represented by the aggregate par value of its outstanding capital stock) or capital account (of an insurance department or division of a corporation established under Chapter 7 of Title 5) becomes impaired, or the assets of a domestic mutual insurer are less than its liabilities and the minimum amount of surplus required to be maintained by it under this title for authority to transact the kinds of insurance being transacted, the Commissioner shall at once determine the amount of deficiency and serve notice upon the insurer to cure the deficiency and file proof thereof with the Commissioner within the period specified in the notice, which period shall be not less than 30 nor more than 90 days from the date of the notice. Such notice may be so served by delivery to the insurer or by mailing to the insurer addressed to its registered office in this State.
(b) The deficiency may be made good in cash or in assets eligible under Chapter 13 (Investments) of this title for the investment of the insurer's funds or by amendment of the insurer's certificate of authority to cover only such kind or kinds of insurance thereafter for which the insurer has sufficient paid-in capital stock (if a stock insurer) or surplus (if a mutual insurer) under this title, or, if a stock insurer, by reduction of the number of shares of the insurer's authorized capital stock or the par value thereof through amendment of its articles of incorporation, to an amount of authorized and unimpaired paid-in capital stock not below the minimum required for the kinds of insurance thereafter to be transacted.
(c) If the deficiency is not made good and proof thereof filed with the Commissioner within the period required by the notice, as specified in subsection (a) above, the insurer shall be deemed insolvent and the Commissioner shall institute delinquency proceedings against it under Chapter 59 of this title.
18 Del. C. 1953, § 4927; 56 Del. Laws, c. 380, § 1; 67 Del. Laws, c. 223, § 34; 70 Del. Laws, c. 186, § 1.;
§ 4928. Mutualization of stock insurer.
(a) A stock insurer other than a title insurer may become a mutual insurer under such plan and procedure as may be approved by the Commissioner after a hearing thereon.
(b) The Commissioner shall not approve any such plan, procedure or mutualization unless:
(1) It is equitable to stockholders and policyholders;
(2) It is subject to approval by the holders of not less than two thirds of the insurer's outstanding capital stock having voting rights, and, provided there are any qualified policyholders, by not less than two thirds of the insurer's policyholders who vote on such plan in person, by proxy or by mail, pursuant to such notice and procedure as may be approved by the Commissioner;
(3) If a life insurer, the right to vote thereon is limited to holders of policies other than term or group policies, and whose policies have been in force for more than 1 year;
(4) Mutualization will result in retirement of shares of the insurer's capital stock at a price not in excess of the fair market value thereof as determined by competent disinterested appraisers;
(5) The plan provides for the purchase of the shares of any nonconsenting stockholder in the same manner and subject to the same applicable conditions as provided by the general corporation law of the State as to rights of nonconsenting stockholders, with respect to consolidation or merger of private corporations;
(6) The plan provides for definite conditions to be fulfilled by a designated early date upon which such mutualization will be deemed effective; and
(7) The mutualization leaves the insurer with surplus funds reasonably adequate for the security of its policyholders and to enable it to continue successfully in business in the states in which it is then authorized to transact insurance, and for the kinds of insurance included in its certificates of authority in such states.
(c) No director, officer, agent or employee of the insurer, or any other person, shall receive any fee, commission or other valuable consideration whatsoever, other than their customary salaries or other regular compensation, for in any manner aiding, promoting or assisting in the mutualization, except as set forth in the plan of mutualization as approved by the Commissioner.
(d) This section shall not apply to mutualization under order of court pursuant to rehabilitation or reorganization of an insurer under Chapter 59 of this title.
18 Del. C. 1953, § 4928; 56 Del. Laws, c. 380, § 1; 59 Del. Laws, c. 79, § 36.;
§ 4929. Conversion to ordinary business corporation.
(a) A domestic stock insurer may convert to a Delaware ordinary business corporation through the following procedures:
(1) The insurer must give the Commissioner written notice of its intent to convert to an ordinary business corporation;
(2) The insurer must bulk reinsure all of its insurance in force, if any, with another authorized insurer under a bulk reinsurance agreement approved by the Commissioner as provided in § 4944 of this title. The agreement of bulk reinsurance may be made contingent upon approval of stockholders as provided in subdivision (4) below;
(3) The insurer must set aside in a special reserve fund, in such amount and subject to such administration as may be found by the Commissioner to be adequate and reasonable for the purpose, for payment of all obligations, if any, of the insurer incurred by it under its insurance contracts prior to the effective date of such bulk reinsurance and remaining unpaid or make other reasonable disposition satisfactory to the Commissioner for such payment;
(4) The proposed conversion must be approved by affirmative vote of not less than two thirds of the holders of each class of the outstanding securities of the insurer having voting rights at a special meeting of holders of such securities called for the purpose. At such meeting and by a like vote the certificate of incorporation of the corporation must be amended to remove therefrom the power to transact an insurance business as an insurer and to provide for such new powers and purposes as may be consistent with the purposes for which the corporation is thereafter to exist;
(5) Security holders of the corporation who dissent from such proposed conversion shall have the same applicable rights as exist under the general corporation laws of this State with respect to dissent from a proposed merger of the corporation;
(6) Upon compliance with subdivisions (1) through (4) above, and upon filing of the amendment of the certificate of incorporation as required by law, the conversion shall thereupon become effective.
(b) An insurer which has once converted to an ordinary business corporation shall not have the power thereafter to reconvert to an insurer.
18 Del. C. 1953, § 4929; 56 Del. Laws, c. 380, § 1.;
§ 4930. Merger, consolidation of stock insurers.
(a) A domestic stock insurer may merge or consolidate with 1 or more domestic or foreign stock insurers by complying with the applicable provisions of the statutes of this State governing the merger or consolidation of stock corporations formed for profit but subject to subsections (b) and (c) below. A domestic stock insurer shall not merge or consolidate with any corporation not formed for the purpose of transacting insurance as an insurer.
(b) No such merger or consolidation shall be effectuated unless in advance thereof the plan and agreement therefor have been filed with the Commissioner and approved in writing by the Commissioner after a hearing thereon after notice to the stockholders of each insurer involved. The Commissioner shall give such approval within a reasonable time after such filing unless the Commissioner finds such plan or agreement:
(1) Is contrary to law; or
(2) Unfair or inequitable to the stockholders of any insurer involved; or
(3) Would substantially reduce the security of and service to be rendered to policyholders of the domestic insurer in this State or elsewhere; or
(4) Would materially tend to lessen competition in the insurance business in this State or elsewhere as to the kinds of insurance involved or would materially tend to create a monopoly as to such business; or
(5) Is subject to other material and reasonable objections.
(c) No director, officer, agent or employee of any insurer party to such merger or consolidation shall receive any fee, commission, compensation or other valuable consideration, whatsoever for, in any manner aiding, promoting or assisting therein except as set forth in such plan or agreement.
(d) If the Commissioner does not approve any such plan or agreement the Commissioner shall so notify the insurer in writing specifying reasons therefor.
18 Del. C. 1953, § 4930; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;
§ 4931. Affiliation of stock insurers.
(a) A domestic stock insurer shall not acquire a controlling interest in the shares of another stock insurer by an exchange of securities or partly in exchange for securities and partly for cash or property, unless the insurer has first submitted the plan for such acquisition and exchange to the Commissioner and the Commissioner has approved the same.
(b) The Commissioner shall not so approve unless the Commissioner finds the plan for such acquisition and the terms and conditions thereof to be fair and equitable to all parties concerned therein after a hearing to which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear.
(c) Notice and conduct of such hearing shall be as provided in Chapter 3 of this title.
18 Del. C. 1953, § 4931; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;
§ 4932. Acquisition of controlling stock.
Repealed by 68 Del. Laws, c. 325, § 3, eff. Aug. 7, 1992.
§ 4933. Converting mutual insurer.
(a) A mutual insurer may become a stock insurer under such reasonable plan and procedure as may be approved by the Commissioner after a hearing thereon of which notice was given to the insurer, its directors or trustees, its officers, employees and its members, all of whom shall have the right to appear at the hearing.
(b) The Commissioner shall not approve any such plan or procedure unless:
(1) Its terms and conditions are fair and equitable;
(2) It is subject to approval by vote of not less than three fourths of the insurer's current members voting thereon in person, by proxy or by mail at a meeting of members called for the purpose pursuant to such reasonable notice and procedure as may be approved by the Commissioner; if a life insurer, right to vote shall be limited to members who hold policies other than group policies or term policies for terms of less than 20 years, and whose policies have been in force for not less than 1 year;
(3) The equity of each member in the insurer is determinable under a fair and reasonable formula approved by the Commissioner, which such equity shall be based upon the insurer's entire surplus including all voluntary reserves but excluding contingently repayable funds and without taking into account nonadmitted assets for insurance business in force;
(4) The plan gives to each member of the insurer, as specified in subdivision (5) below, a preemptive right to acquire such member's proportionate part of all of the proposed capital stock of the insurer within a designated reasonable period, as such part is determinable under the plan of conversion, and to apply upon the purchase thereof the amount of such member's equity in the insurer as determined under subdivision (3) above;
(5) The members entitled to participate in the purchase of stock or distribution of assets shall include not less than all current policyholders of the insurer and each existing person who had been a policyholder of the insurer within 3 years prior to the date such plan was submitted to the Commissioner;
(6) Shares are to be offered to members at a price not greater than to be thereafter offered under the plan to others;
(7) The plan provides for payment to each member not electing to apply equity in the insurer for or upon the purchase price of stock to which preemptively entitled of cash in an amount found to be reasonable by the Commissioner but not in excess of 50% of the amount of the member's equity not so used for the purchase of stock, and which cash payment together with stock so purchased, if any, shall constitute full payment and discharge of the member's equity or property interest as an owner of such mutual insurer;
(8) The plan, when completed, would provide for the converted insurer paid-in capital stock in an amount not less than the minimum paid-in capital stock required of a domestic stock insurer upon initial authorization to transact like kinds of insurance, together with expendable surplus funds in amount not less than one half of such required capital stock; and
(9) The Commissioner finds that the insurer's management has not, through reduction in volume of new business written or cancellation or through any other means sought to reduce, limit or affect the number or identity of the insurer's members to be entitled to participate in such plan or to secure for the individuals comprising management any unfair advantage through such plan.
(c) Subsection (b) of this section shall not be deemed to prohibit the inclusion in the mutualization plan of provisions under which the individuals comprising the insurer's management and employee group shall be entitled to purchase for cash at the same price as offered to the insurer's members, shares of stock not taken by members on the preemptive offering to members, in accordance with such reasonable classifications of such individuals as may be included in the plan and approved by the Commissioner.
(d) No director, officer, agent or employee of the insurer or any other person shall receive any fee, commission or other valuable consideration whatsoever, other than their usual regular salaries and compensation, for in any manner aiding, promoting or assisting in such conversion except as set forth in the plan approved by the Commissioner. This provision shall not be deemed to prohibit the payment of reasonable fees and compensation to attorneys-at-law, accountants and actuaries for services performed in the independent practice of their professions, even though also directors of the insurer.
(e) In the event the equity of each member is determined under subsection (b)(3) of this section to be $0, the Commissioner may disregard the requirements of subsections (b)(4) and (b)(7) of this section in approving a plan of conversion, if the Commissioner finds that such approval would otherwise be in the best interests of policyholders.
18 Del. C. 1953, § 4933; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1; 71 Del. Laws, c. 403, § 1.;
§ 4934. Merger, consolidation of mutual insurers.
(a) A domestic mutual insurer shall not merge or consolidate with a stock insurer.
(b) A domestic mutual insurer may merge or consolidate with another domestic or foreign mutual insurer under the procedures provided for in this and §§ 4935-4942 of this title.
(c) If for a consolidation and the new corporation is to be domiciled in this State, the new corporation shall be formed under the applicable provisions of the general corporation laws of this State.
(d) For the purposes of this chapter the "surviving insurer" is that which survives and continues as a result of a merger of 2 or more corporations into 1 corporation.
18 Del. C. 1953, § 4934; 56 Del. Laws, c. 380, § 1.;
§ 4935. Same -- Approval of merger; consolidation agreement by boards of directors.
(a) The board of directors of each of the mutual insurers proposing to merge or consolidate shall, by resolution adopted by at least a majority of all the members of each board, approve a joint agreement of merger or consolidation, as the case may be, between the insurer parties, setting forth the terms and conditions of the merger or consolidation, the mode of carrying the same into effect and such other provisions as are deemed advisable.
(b) Upon approving such agreement, each such board shall by resolution direct that the same be submitted to the Commissioner and be subject to the Commissioner's disapproval as provided in § 4936 of this title and to approval of the members of the respective insurers as provided in § 4937 of this title.
18 Del. C. 1953, § 4935; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;
§ 4936. Same -- Effectuation; disapproval by Commissioner.
(a) No such merger or consolidation of a domestic mutual insurer shall be effectuated unless in advance thereof the agreement therefor has been filed with the Commissioner and has not been disapproved by the Commissioner in writing. If the insurer is not then impaired, the Commissioner shall not act with respect to such agreement until after a hearing thereon. The agreement shall be effectuated in accordance with its terms unless the Commissioner disapproves the same within 10 days after the date of such filing or the conclusion of such hearing, if any, whichever is the later date, subject to the Commissioner's right to have a reasonable extension of time not to exceed 10 days upon written notice to the insurers involved. The Commissioner may disapprove the agreement upon one or more of the following grounds--that the agreement:
(1) Is inequitable to the policyholders of any domestic insurers involved; or
(2) Would materially reduce the security of and service to be rendered to policyholders of the domestic insurer in this State and elsewhere; or
(3) Would materially tend to lessen competition in this State or elsewhere as to the kinds of insurance involved or would materially tend to create a monopoly therein; or
(4) Is subject to other reasonable objections.
(b) If the Commissioner disapproves the agreement the Commissioner shall so notify the insurers in writing specifying the reasons therefor.
(c) No director, officer, agent or employee of any insurer involved or any other person shall receive any fee, commission or other valuable consideration whatsoever, other than their usual regular salaries and compensation, for in any manner aiding, promoting or assisting in such merger or consolidation except as set forth in the agreement approved by the Commissioner. This provision shall not be deemed to prohibit payment of reasonable fees and compensation to attorneys-at-law, accountants and actuaries for services performed in the independent practice of their professions even though also directors of the insurer.
18 Del. C. 1953, § 4936; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;
§ 4937. Same -- Approval by members.
(a) After the Commissioner has approved the proposed agreement of merger or consolidation and if the insurer is then unimpaired, the agreement shall be submitted to the domestic insurer's members for approval at a regular or special meeting of members. If a life insurer, right to vote shall be limited to members whose policies are other than term policies for terms of less than 20 years and other than group policies and have been in force for at least 1 year.
(b) Not less than 15 days before such meeting written notice of the meeting and of the proposed merger or consolidation shall be given to each member of the insurer. The notice shall state the day, hour, place and purposes of the meeting and be accompanied by a copy or summary of agreement of merger or consolidation as the case may be. Notice and accompanying copy or summary shall be deemed given when enclosed in an envelope addressed to the member at the member's address last of record with the insurer and deposited postage paid in a depository of the United States post office. In the case of mutual insurers with more than 10