CHAPTER 8. INDIANA LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION LAW
IC 27-8-8
Chapter 8. Indiana Life and Health Insurance Guaranty
Association Law
IC 27-8-8-1
Repealed
(Repealed by P.L.193-2006, SEC.32.)
IC 27-8-8-1.5
Repealed
(Repealed by P.L.193-2006, SEC.32.)
IC 27-8-8-2
Definitions
Sec. 2. (a) The definitions in this section apply throughout this
chapter.
(b) "Account" means one (1) of the two (2) accounts created
under section 3 of this chapter.
(c) "Annuity contract", except as provided in section 2.3(e) of this
chapter, includes:
(1) a guaranteed investment contract;
(2) a deposit administration contract;
(3) a structured settlement annuity;
(4) an annuity issued to or in connection with a government
lottery; and
(5) an immediate or a deferred annuity contract.
(d) "Assessment base year" means, for an impaired insurer or
insolvent insurer, the most recent calendar year for which required
premium information is available preceding the calendar year during
which the impaired insurer's or insolvent insurer's coverage date
occurs.
(e) "Association", except when the context otherwise requires,
means the Indiana life and health insurance guaranty association
created by section 3 of this chapter.
(f) "Benefit plan" means a specific plan, fund, or program that is
established or maintained by an employer or an employee
organization, or both, that:
(1) provides retirement income to employees; or
(2) results in a deferral of income by employees for a period
extending to or beyond the termination of employment.
(g) "Board" refers to the board of directors of the association
selected under IC 27-8-8-4.
(h) "Called", when used in the context of assessments, means that
notice has been issued by the association to member insurers
requiring the member insurers to pay, within a time frame set forth
in the notice, an assessment that has been authorized by the board.
(i) "Commissioner" refers to the insurance commissioner
appointed under IC 27-1-1-2.
(j) "Contractual obligation" means an enforceable obligation
under a covered policy for which and to the extent that coverage is
provided under section 2.3 of this chapter.
(k) "Coverage date" means, with respect to a member insurer, the
date on which the earlier of the following occurs:
(1) The member insurer becomes an insolvent insurer.
(2) The association determines that the association will provide
coverage under section 5(a) of this chapter with respect to the
member insurer.
(l) "Covered policy" means a:
(1) nongroup policy or contract;
(2) certificate under a group policy or contract; or
(3) part of a policy, contract, or certificate described in
subdivisions (1) and (2);
for which coverage is provided under section 2.3 of this chapter.
(m) "Extracontractual claims" includes claims that relate to bad
faith in the payment of claims, punitive or exemplary damages, or
attorney's fees and costs.
(n) "Funding agreement" has the meaning set forth in
IC 27-1-12.7-1.
(o) "Impaired insurer" means a member insurer that is:
(1) not an insolvent insurer; and
(2) placed under an order of rehabilitation or conservation by a
court with jurisdiction.
(p) "Insolvent insurer" means a member insurer that is placed
under an order of liquidation with a finding of insolvency by a court
with jurisdiction.
(q) "Member insurer" means any person that holds a certificate of
authority to transact in Indiana any kind of insurance for which
coverage is provided under section 2.3 of this chapter. The term
includes an insurer whose certificate of authority to transact such
insurance in Indiana may have been suspended, revoked, not
renewed, or voluntarily withdrawn but does not include the
following:
(1) A for-profit or nonprofit hospital or medical service
organization.
(2) A health maintenance organization under IC 27-13.
(3) A fraternal benefit society under IC 27-11.
(4) The Indiana Comprehensive Health Insurance Association
or any other mandatory state pooling plan or arrangement.
(5) An assessment company or another person that operates on
an assessment plan (as defined in IC 27-1-2-3(y)).
(6) An interinsurance or reciprocal exchange authorized by
IC 27-6-6.
(7) A prepaid limited service health maintenance organization
or a limited service health maintenance organization under
IC 27-13-34.
(8) A farm mutual insurance company under IC 27-5.1.
(9) A person operating as a Lloyds under IC 27-7-1.
(10) The political subdivision risk management fund established
by IC 27-1-29-10 and the political subdivision catastrophic
liability fund established by IC 27-1-29.1-7.
(11) The small employer health reinsurance board established
by IC 27-8-15.5-5.
(12) A person similar to any person described in subdivisions
(1) through (11).
(r) "Moody's Corporate Bond Yield Average" means:
(1) the monthly average of the composite yield on seasoned
corporate bonds as published by Moody's Investors Service,
Inc.; or
(2) if the monthly average described in subdivision (1) is no
longer published, an alternative publication of interest rates or
yields determined appropriate by the association.
(s) "Multiple employer welfare arrangement" has the meaning set
forth in IC 27-1-34-1.
(t) "Owner" means the person:
(1) identified as the legal owner of a policy or contract
according to the terms of the policy or contract; or
(2) otherwise vested with legal title to a policy or contract
through a valid assignment completed in accordance with the
terms of the policy or contract and properly recorded as the
owner on the books of the insurer.
The term does not include a person with a mere beneficial interest in
a policy or contract.
(u) "Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a governmental entity, a
voluntary organization, a trust, a trustee, or another business entity
or organization.
(v) "Plan sponsor" refers to only one (1) of the following with
respect to a benefit plan:
(1) The employer, in the case of a benefit plan established or
maintained by a single employer.
(2) The holding company or controlling affiliate, in the case of
a benefit plan established or maintained by affiliated companies
comprising a consolidated corporation.
(3) The employee organization, in the case of a benefit plan
established or maintained by an employee organization.
(4) In a case of a benefit plan established or maintained:
(A) by two (2) or more employers;
(B) by two (2) or more employee organizations; or
(C) jointly by one (1) or more employers and one (1) or
more employee organizations;
and that is not of a type described in subdivision (2), the
association, committee, joint board of trustees, or other similar
group of representatives of the parties that establish or maintain
the benefit plan.
(w) "Premiums" means amounts, deposits, and considerations
received on covered policies, less returned premiums, returned
deposits, returned considerations, dividends, and experience credits.
The term does not include the following:
(1) Amounts, deposits, and considerations received for policies
or contracts or parts of policies or contracts for which coverage
is not provided under section 2.3(d) of this chapter, as qualified
by section 2.3(e) of this chapter, except that an assessable
premium must not be reduced on account of the limitations set
forth in section 2.3(e)(3), 2.3(e)(15), or 2.3(f)(2) of this chapter.
(2) Premiums in excess of five million dollars ($5,000,000) on
an unallocated annuity contract not issued or not connected
with a governmental benefit plan established under Section 401,
403(b), or 457 of the United States Internal Revenue Code.
(x) "Principal place of business" refers to the single state in which
individuals who establish policy for the direction, control, and
coordination of the operations of an entity as a whole primarily
exercise the direction, control, and coordination, as determined by
the association in the association's reasonable judgment by
considering the following factors:
(1) The state in which the primary executive and administrative
headquarters of the entity is located.
(2) The state in which the principal office of the chief executive
officer of the entity is located.
(3) The state in which the board of directors or similar
governing person of the entity conducts the majority of the
board of directors' or governing person's meetings.
(4) The state in which the executive or management committee
of the board of directors or similar governing person of the
entity conducts the majority of the committee's meetings.
(5) The state from which the management of the overall
operations of the entity is directed.
However, in the case of a plan sponsor, if more than fifty percent
(50%) of the participants in the plan sponsor's benefit plan are
employed in a single state, that state is considered to be the principal
place of business of the plan sponsor. The principal place of business
of a plan sponsor of a benefit plan described in subsection (v)(4), if
more than fifty percent (50%) of the participants in the plan sponsor's
benefit plan are not employed in a single state, is considered to be the
principal place of business of the association, committee, joint board
of trustees, or other similar group of representatives of the parties
that establish or maintain the benefit plan and, in the absence of a
specific or clear designation of a principal place of business, is
considered to be the principal place of business of the employer or
employee organization that has the largest investment in the benefit
plan in question on the coverage date.
(y) "Receivership court" refers to the court in an insolvent
insurer's or impaired insurer's state that has jurisdiction over the
conservation, rehabilitation, or liquidation of the insolvent insurer or
impaired insurer.
(z) "Resident" means a person that resides or has the person's
principal place of business in Indiana on the applicable coverage
date.
(aa) "State" includes a state, the District of Columbia, Puerto
Rico, and a United States possession, territory, or protectorate.
(bb) "Structured settlement annuity" means an annuity purchased
to fund periodic payments for a plaintiff or other claimant in payment
for or with respect to personal injury suffered by the plaintiff or other
claimant.
(cc) "Supplemental contract" means a written agreement entered
into for the distribution of proceeds under a life, health, or annuity
policy or contract.
(dd) "Unallocated annuity contract" means an annuity contract or
group annuity certificate:
(1) the owner of which is not a natural person; and
(2) that does not identify at least one (1) specific natural person
as an annuitant;
except to the extent of any annuity benefits guaranteed to a natural
person by an insurer under the contract or certificate. For purposes
of this chapter, an unallocated annuity contract shall not be
considered a group policy or group contract.
As added by Acts 1978, P.L.129, SEC.3. Amended by P.L.8-1993,
SEC.431; P.L.251-1995, SEC.20; P.L.129-2003, SEC.13;
P.L.193-2006, SEC.9.
IC 27-8-8-2.1
Policy and contract descriptions; plan sponsor
Sec. 2.1. (a) For purposes of this chapter:
(1) a policy or contract issued on a blanket basis is a group
policy or group contract;
(2) each individual insured under a policy or contract issued on
a blanket basis is a certificate holder under the policy or
contract; and
(3) a policy or contract issued on a franchise plan to members
of a qualified group is a nongroup policy or nongroup contract.
(b) For purposes of this chapter, a benefit plan may have only one
(1) plan sponsor.
As added by P.L.193-2006, SEC.10.
IC 27-8-8-2.3
Coverage provided; exclusions; limitations
Sec. 2.3. (a) Except as otherwise excluded or limited by this
chapter, this chapter provides coverage for policies and contracts
specified in subsection (d) as follows:
(1) To a person, other than a certificate holder under a group
policy or a group contract, that, regardless of where the person
resides, is the beneficiary, nonowner assignee, or payee of a
person covered under subdivision (2).
(2) To a person that is a certificate holder under a group policy
or group contract, and to a person that is the owner of a
nongroup policy or nongroup contract that is not an unallocated
annuity contract or a structured settlement annuity, and that:
(A) is a resident; or
(B) is not a resident if all the following conditions are
satisfied:
(i) The member insurer that issued the policy or contract
is domiciled in Indiana.
(ii) The state in which the person resides has an
association similar to the association.
(iii) The nonresident is not eligible for coverage by the
other association referred to in item (ii) solely because the
member insurer was not licensed in the state of residence
at the time specified in the guaranty association law of the
state of residence.
(3) For an unallocated annuity contract, subdivisions (1) and (2)
do not apply, and this chapter provides coverage to the
following:
(A) A person that is the owner of the unallocated annuity
contract, if the contract was issued to or in connection with
a benefit plan whose plan sponsor is a resident or, if the plan
sponsor is not a resident, if all the following conditions are
satisfied:
(i) The member insurer that issued the unallocated annuity
contract is domiciled in Indiana.
(ii) The state in which the plan sponsor resides has an
association similar to the association.
(iii) The other association referred to in item (ii) does not
provide coverage of the unallocated annuity contract
solely because the member insurer was not licensed in the
state of residence at the time specified in the guaranty
association law of the state of residence.
(B) A person that is the owner of an unallocated annuity
contract issued to or in connection with a government
lottery, if the owner is a resident or, if the owner is not a
resident, if all the following conditions are satisfied:
(i) The member insurer that issued the unallocated annuity
contract is domiciled in Indiana.
(ii) The state in which the owner resides has an association
similar to the association.
(iii) The other association referred to in item (ii) does not
provide coverage of the unallocated annuity contract
solely because the member insurer was not licensed in the
state of residence at the time specified in the guaranty
association law of the state of residence.
(4) For a structured settlement annuity, subdivisions (1) and (2)
do not apply, and this chapter provides coverage to a person that
is a payee under the structured settlement annuity (or
beneficiary of a payee if the payee is deceased), if the payee:
(A) is a resident, regardless of where the contract owner
resides; or
(B) is not a resident if all the following conditions are
satisfied:
(i) The member insurer that issued the structured
settlement annuity is domiciled in Indiana.
(ii) The state in which the payee resides has an association
similar to the association.
(iii) Neither the payee nor the beneficiary of the payee (if
the payee is deceased) is eligible for coverage by the other
association referred to in item (ii) solely because the
member insurer was not licensed in the state of residence
at the time specified in the guaranty association law of the
state of residence.
(b) This chapter does not provide coverage to a person that is:
(1) a payee or beneficiary of a contract owner that is a resident,
if the payee or beneficiary is afforded any coverage by the
association of another state; or
(2) otherwise covered under subsection(a)(3), if any coverage
is provided to the person by the association of another state.
(c) To avoid duplicate coverage, if a person that would otherwise
receive coverage under this chapter is provided coverage under the
laws of another state, the person is not eligible for coverage under
this chapter. In determining the application of this subsection when
a person may be covered by the association of more than one (1)
state as an owner, a payee, a beneficiary, or an assignee, this chapter
must be construed in conjunction with the laws of the other state to
result in coverage by only one (1) association.
(d) Except as otherwise excluded or limited by this chapter, this
chapter provides coverage to the persons specified in subsection (a)
for:
(1) direct nongroup life, health, or annuity policies and
contracts and supplemental contracts to direct nongroup life,
health, or annuity policies and contracts;
(2) certificates under direct group life, health, and annuity
policies and contracts; and
(3) unallocated annuity contracts;
issued by member insurers.
(e) This chapter does not provide coverage for or with respect to
the following:
(1) A part of a certificate, policy, or contract:
(A) not guaranteed by the insurer; or
(B) under which the risk is borne by the payee, certificate
holder, or the policy or contract owner.
(2) A reinsurance policy or contract, unless and to the extent
that assumption certificates have been issued under the
reinsurance policy or contract.
(3) A part of a certificate, policy, or contract to the extent that
the certificate's, policy's, or contract's interest rate, crediting
rate, or similar factor employed in calculating returns or
changes in values, whether expressly stated in the certificate,
policy, or contract or determined by use of an index or other
external referent stated in the certificate, policy, or contract,
either:
(A) when averaged over a period of four (4) years
immediately before the applicable coverage date, exceeds
the rate of interest determined by subtracting two (2)
percentage points from Moody's Corporate Bond Yield
Average averaged for the same four (4) year period or for a
lesser period if the certificate, policy, or contract was issued
less than four (4) years before the applicable coverage date;
or
(B) in effect under the certificate, policy, or contract on and
after the applicable coverage date, exceeds the rate of
interest determined by subtracting three (3) percentage
points from Moody's Corporate Bond Yield Average as most
recently available on the applicable coverage date.
(4) The obligations of a plan or program of an employer, an
association, or another person to provide life, health, or annuity
benefits to the employer's, association's, or other person's
employees, members, or others, including obligations arising
under and benefits payable by the employer, association, or
other person under a multiple employer welfare arrangement.
(5) A minimum premium group insurance plan.
(6) A stop-loss or excess loss insurance policy or contract
providing for the indemnification of or payment to a policy
owner, a contract owner, a plan, or another person obligated to
pay life, health, or annuity benefits or to provide services in
connection with a benefit plan or another plan, fund, or program
for the provision of employee welfare or pension benefits.
(7) An administrative services only contract.
(8) A part of a certificate, policy, or contract to the extent that
the certificate, policy, or contract provides for:
(A) dividends or experience rating credits;
(B) voting rights; or
(C) payment of fees or allowances to a person, including the
certificate holder or policy or contract owner, in connection
with service with respect to or administration of the
certificate, policy, or contract.
(9) A certificate, policy, or contract issued in Indiana by a
member insurer when the member insurer did not have a
certificate of authority to issue the certificate, policy, or
contract in Indiana.
(10) An unallocated annuity contract issued to or in connection
with a benefit plan protected by the federal Pension Benefit
Guaranty Corporation, regardless of whether the federal
Pension Benefit Guaranty Corporation has yet been required to
make payments with respect to the benefit plan.
(11) An unallocated annuity contract or part of an unallocated
annuity contract that is not issued to or in connection with a
benefit plan or a government lottery.
(12) A certificate, policy, or contract or part of a certificate,
policy, or contract with respect to which the Class B
assessments contemplated by section 6 of this chapter may not
be made or collected under federal or state law.
(13) An obligation or claim that does not arise under the express
written terms of the policy or contract issued by the member
insurer to the contract owner or policy owner, including any of
the following obligations and claims:
(A) Obligations and claims based on marketing materials.
(B) Obligations and claims based on side letters, riders, or
other documents issued by the member insurer without
meeting applicable policy form filing or approval
requirements.
(C) Obligations and claims based on actual or alleged
misrepresentations.
(D) Obligations and claims that are extracontractual claims.
(E) Obligations and claims for penalties or consequential,
incidental, punitive, or exemplary damages.
(14) An obligation to provide a book value accounting guaranty
for defined contribution benefit plan participants by reference
to a portfolio of assets that is owned by the:
(A) benefit plan; or
(B) benefit plan's trustee;
that is not an affiliate of the member insurer.
(15) A part of a certificate, policy, or contract to the extent the:
(A) certificate, policy, or contract provides for the
certificate's, policy's, or contract's interest rate, crediting
rate, or similar factor employed in calculating returns or
changes in values, to be determined by use of an index or
other external referent stated in the certificate, policy, or
contract; and
(B) returns or changes in value have not been credited to the
certificate, policy, or contract, or as to which the certificate
holder's or policy or contract owner's rights are subject to
forfeiture, as of the applicable coverage date.
If a certificate's, policy's, or contract's returns or changes in
values are credited to the certificate, policy, or contract less
frequently than annually, for purposes of determining the
returns and values that have been credited and are not subject
to forfeiture under this subdivision, the returns and changes in
value determined by using the procedures defined in the
certificate, policy, or contract must be considered credited as if
the contractual date of crediting returns or changes in values
were the applicable coverage date, and those credited returns or
changes in value are not subject to forfeiture under this
subdivision, but will be subject to any other applicable
limitations under this chapter.
(16) A funding agreement.
(17) An annuity not subject to regulation as described in
IC 27-1-12.4.
(f) The benefits that the association is obligated to cover do not
exceed the lesser of the following:
(1) The contractual obligations for which the member insurer is
liable or would have been liable if the member insurer were not
an impaired insurer or insolvent insurer.
(2) The applicable limitations as follows:
(A) With respect to certificates, policies, and contracts not
subject to clause (B), (C), (E), or (F), with respect to one (1)
life, regardless of the number of policies or contracts, the
following limitations:
(i) Three hundred thousand dollars ($300,000) in life
insurance death benefits, but not more than one hundred
thousand dollars ($100,000) in net cash surrender and net
cash withdrawal values.
(ii) Three hundred thousand dollars ($300,000) in health
insurance benefits, but not more than one hundred
thousand dollars ($100,000) in net cash surrender and net
cash withdrawal values.
(iii) One hundred thousand dollars ($100,000) in the
present value of annuity benefits, including net cash
surrender and net cash withdrawal values.
(B) With respect to unallocated annuity contracts issued to
or in connection with a governmental benefit plan
established under Section 401, 403(b), or 457 of the United
States Internal Revenue Code, one hundred thousand dollars
($100,000) in the present value of annuity benefits,
including net cash surrender and net cash withdrawal values,
per participant.
(C) With respect to structured settlement annuities, one
hundred thousand dollars ($100,000) in the present value of
annuity benefits, including net cash surrender and net cash
withdrawal values, per payee.
(D) In addition to the foregoing limitations, the association
is not obligated to cover more than:
(i) an aggregate of three hundred thousand dollars
($300,000) in benefits with respect to any one (1) person
under clauses (A), (B), and (C); or
(ii) with respect to one (1) owner of multiple nongroup
policies of life insurance, whether the policy owner is an
individual, a firm, a corporation, or another person, and
whether the persons insured are officers, managers,
employees, or other persons, five million dollars
($5,000,000) in benefits, including net cash surrender and
net cash withdrawal values, regardless of the number of
policies and contracts held by the owner.
(E) With respect to unallocated annuity contracts issued to
or in connection with a government lottery, five million
dollars ($5,000,000) in benefits per contract owner,
regardless of the number of contracts held by the contract
owner.
(F) With respect to unallocated annuity contracts:
(i) issued to or in connection with a benefit plan; and
(ii) not subject to clause (B);
five million dollars ($5,000,000) in benefits per plan
sponsor, regardless of the number of unallocated annuity
contracts entitled to coverage under this chapter.
(g) The limitations set forth in subsection (f) are limitations on the
benefits for which the association is obligated before taking into
account the:
(1) association's subrogation and assignment rights; or
(2) extent to which the benefits could be provided out of the
assets of the impaired insurer or insolvent insurer attributable
to covered policies.
The costs of discharging the association's obligations under this
chapter may be met by the use of assets attributable to covered
policies or reimbursed to the association under the association's
subrogation and assignment rights.
(h) In discharging the association's obligations to provide
coverage under this chapter, the association is not required to:
(1) guarantee, assume, reinsure, or perform;
(2) cause to be guaranteed, assumed, reinsured, or performed;
or
(3) otherwise assure the discharge of;
the obligations of the insolvent insurer or impaired insurer under a
covered policy that do not materially affect the economic values or
economic benefits of the covered policy.
As added by P.L.193-2006, SEC.11.
IC 27-8-8-3
Creation of association; membership; accounts; supervision
Sec. 3. (a) There is created a nonprofit legal entity referred to as
the Indiana Life and Health Insurance Guaranty Association. A
member insurer shall be and remain a member of the association as
a condition of the member insurer's authority to transact insurance in
Indiana. The association shall perform its functions under the plan of
operation established and approved under section 7 of this chapter.
The association shall exercise its powers through a board of directors
established under section 4 of this chapter. For purposes of
administration and assessment the association shall maintain the
following two (2) accounts:
(1) The health insurance account.
(2) The life insurance and annuity account, which includes the
following subaccounts:
(A) The life insurance subaccount.
(B) The annuity subaccount, which includes annuity
contracts issued to or in connection with a governmental
benefit plan established under Section 401, 403(b), or 457 of
the United States Internal Revenue Code, but otherwise
excludes unallocated annuities.
(C) The unallocated annuity subaccount, which excludes
annuity contracts issued to or in connection with a
governmental benefit plan established under Section 401,
403(b), or 457 of the United States Internal Revenue Code.
(b) The association is under the immediate supervision of the
commissioner and subject to the applicable provisions of the
insurance laws of Indiana.
As added by Acts 1978, P.L.129, SEC.3. Amended by P.L.130-1994,
SEC.43; P.L.116-1994, SEC.61; P.L.193-2006, SEC.12.
IC 27-8-8-4
Board of directors
Sec. 4. (a) The board of directors of the association shall consist
of not less than five (5) nor more than nine (9) member insurers
serving terms established in the plan of operation. The members of
the board shall be selected by member insurers subject to the
approval of the commissioner.
(b) Vacancies on the board shall be filled for the remaining period
of the term by a majority vote of the remaining board members,
subject to the approval of the commissioner.
(c) To select the initial board and initially organize the
association, the commissioner shall give notice to all member
insurers of the time and place of the organizational meeting. At the
organizational meeting, each member insurer is entitled to one (1)
vote in person or by proxy. If the board is not selected within sixty
(60) days after notice of the organizational meeting, the
commissioner may appoint the initial members of the board.
(d) In approving selections to the board, the commissioner shall
consider whether all member insurers are fairly represented.
(e) Members of the board may be reimbursed from the assets of
the association for expenses incurred by the members as members of
the board. The association shall not otherwise compensate members
of the board for the members' services on the board.
As added by Acts 1978, P.L.129, SEC.3. Amended by P.L.193-2006,
SEC.13.
IC 27-8-8-5
Impaired insurers; insolvent insurers; liens; association powers
and duties
Sec. 5. (a) If a member insurer is an impaired insurer, the
association may, in the association's sole discretion and subject to
any conditions imposed by the association that do not impair the
contractual obligations of the impaired insurer and that are approved
by the commissioner:
(1) guarantee, assume, reinsure, or perform, or cause to be
guaranteed, assumed, reinsured, or performed, the contractual
obligations of any of the covered policies of the impaired
insurer or otherwise assure the discharge of the contractual
obligations of the covered policies of the impaired insurer; and
(2) provide money, pledges, loans, notes, guarantees, or use
other means as determined by the association in the
association's sole discretion to be necessary or appropriate to
effectuate subdivision (1).
(b) An obligation undertaken by the association under subsection
(a) with respect to a covered policy of an impaired insurer ceases on
the date the covered policy is replaced by the policy owner, insured,
or association.
(c) If a member insurer is an insolvent insurer, the association
shall, in the association's sole discretion, do one (1) of the following
for each covered policy:
(1) Guarantee, assume, reinsure, or perform, or cause to be
guaranteed, assumed, reinsured, or performed, the contractual
obligations of the covered policy or otherwise assure the
discharge of the contractual obligations of the covered policy.
(2) Terminate existing benefits and coverage and provide
benefits and coverages in accordance with the following
provisions:
(A) For premiums identical to the premiums that would have
been payable under the covered policy, assure payment of
benefits arising under the contractual obligations, except for
terms of conversion and nonrenewability, for:
(i) with respect to a group covered policy, claims incurred
not later than the earlier of the next renewal date under the
covered policy or forty-five (45) days, but not less than
thirty (30) days, after the coverage date for the insolvent
insurer; and
(ii) with respect to a nongroup covered policy, claims
incurred not later than the earlier of the next renewal date
under the covered policy or one (1) year, but in no event
less than thirty (30) days, after the coverage date for the
insolvent insurer.
(B) Make diligent efforts to provide each:
(i) known insured or annuitant, for a nongroup covered
policy; and
(ii) owner, for a group covered policy;
at least thirty (30) days notice of the termination of the
benefits provided.
(C) Make available substitute coverage, on an individual
basis, to each:
(i) owner of a nongroup covered policy if the owner had a
right to continue the nongroup covered policy in force
until a specified age or for a specified period, during
which time the insurer had no unilateral right to make
changes in the nongroup covered policy's provisions or
had only a unilateral right to make changes in premiums
only by class; and
(ii) insured or annuitant under a group covered policy if
the insured or annuitant is not eligible for any replacement
group coverage and had a right, before termination of the
group covered policy, to convert to individual coverage.
(D) In making available any substitute coverage under clause
(C), the association may offer to reissue the terminated
coverage or to issue an alternative policy or contract. If made
available under clause (C), alternative or reissued policies
and contracts must be offered without requiring evidence of
insurability and must not impose any waiting period or
coverage exclusion, other than a waiting period or coverage
exclusion provided for in this chapter, that would not have
applied under the terminated covered policy. The association
may cause any alternative or reissued policy or contract to be
assumed or reinsured.
(E) Use of alternative policies and contracts by the
association is subject to the approval of the domiciliary
insurance regulatory authority and the receivership court.
The association may adopt alternative policies and contracts
of various types for future issuance without regard to any
particular impairment or insolvency. Alternative policies and
contracts must contain at least the minimum statutory
provisions required in Indiana and provide benefits that are
reasonable in relation to the premium charged. The
association shall set the premium in accordance with a table
of rates adopted by the association. The premium must:
(i) reflect the amount of insurance to be provided and the
age and class of risk of each insured; and
(ii) not reflect changes in the health of the insured after the
terminated covered policy was last underwritten.
Subject to coverage exceptions, exclusions, and limitations
provided for in this chapter, an alternative policy or contract
issued by the association must provide coverage similar, in
material respects, to the coverage under the terminated
covered policy as determined by the association.
(F) If the association elects to reissue terminated coverage at
a premium rate different from the premium rate charged
under the terminated covered policy, the association shall set
the premium in accordance with a table of rates adopted by
the association. The premium:
(i) must reflect the amount of insurance to be provided and
the age and class of risk of each insured; and
(ii) is subject to approval of the domiciliary insurance
regulatory authority and the receivership court.
(G) The association's obligations with respect to coverage
under a covered policy of an insolvent insurer or under a
reissued or alternative policy or contract ceases on the date
the coverage or covered policy is replaced by another similar
policy by the policy owner, insured, or association.
(H) Subject to subsection (u), when proceeding under this
subdivision with respect to a covered policy carrying
guaranteed minimum interest rates, the association shall
assure the payment or crediting of a rate of interest
consistent with section 2.3(e)(3) of this chapter.
(3) Take any combination of the actions set forth in
subdivisions (1) and (2).
(d) The association may provide money, pledges, loans, notes, or
guarantees, or use other means that the association, in the
association's sole discretion, determines are necessary or appropriate
to discharge the association's duties under subsection (c).
(e) Failure to pay premiums within thirty-one (31) days after the
date that payment is due under the terms of a guaranteed, assumed,
alternative, or reissued policy or contract or substitute coverage
terminates the association's obligations under this chapter with
respect to the policy, contract, or coverage, except with respect to
claims incurred or net cash surrender value due under this chapter.
(f) Premiums due for coverage after the coverage date for an
impaired insurer or insolvent insurer belong to and are payable at the
direction of the association, and the association is liable for unearned
premiums payable to policy or contract owners with respect to
premiums received by the association.
(g) The protection provided by this chapter does not apply where
any guaranty protection is provided to residents of this state by the
laws of the domiciliary state of the impaired insurer or insolvent
insurer if the domiciliary state is a state other than Indiana.
(h) In carrying out its duties under subsection (c), the association
may, subject to approval by a court in Indiana, impose:
(1) permanent policy or contract liens, if the association finds
that:
(A) the amounts that can be assessed under this chapter are
less than the amounts needed to assure full and prompt
performance of the association's duties under this chapter; or
(B) economic or financial conditions, as they affect member
insurers, are sufficiently adverse so as to render the
imposition of the permanent policy or contract liens to be in
the public interest; and
(2) temporary moratoriums or liens on payments of cash values
and policy loans or any other right to withdraw funds held in
conjunction with a covered policy, in addition to any
contractual provisions for deferral of cash or policy loan value.
In addition, in the event of a temporary moratorium or moratorium
charge imposed by the receivership court on payments of cash values
or policy loans or any other right to withdraw funds held in
conjunction with a covered policy out of the assets of the impaired
insurer or insolvent insurer, the association may defer the payment
of cash values, policy loans, or other rights by the association for the
period of the moratorium or moratorium charge imposed by the
receivership court, except for claims covered by the association to be
paid in accordance with a hardship procedure established by the
liquidator or rehabilitator and approved by the receivership court.
(i) A deposit in Indiana, held by law or required by the
commissioner for the benefit of creditors, including policy owners,
that is not turned over to the domiciliary receiver before or promptly
after the coverage date for an impaired insurer or insolvent insurer
under IC 27-9-4-3 must be promptly paid to the association. The
association:
(1) may retain a part of an amount paid to the association under
this subsection equal to the percentage determined by dividing
the aggregate amount of policy owners' claims related to the
impairment or insolvency for which the association provides
statutory benefits by the aggregate amount of all policy owners'
claims in Indiana related to the impairment or insolvency; and
(2) shall remit to the domiciliary receiver the difference
between the amount paid to the association and the amount
retained by the association under this subsection.
An amount retained by the association under this subsection must be
treated as a distribution of estate assets under IC 27-9-3-32 or similar
provision of the state of domicile of the impaired insurer or insolvent
insurer.
(j) If the association fails to act within a reasonable period of time
as provided in subsection (c) with respect to an insolvent insurer, the
commissioner has the powers and duties of the association under this
chapter with respect to the insolvent insurer.
(k) The association may, upon the commissioner's request, assist
and advise the commissioner concerning rehabilitation, payment of
claims, continuance of coverage, or the performance of other
contractual obligations of an impaired insurer or insolvent insurer.
(l) The association has standing and the right to appear or
intervene before a court or an agency in Indiana or elsewhere with
jurisdiction over an impaired insurer or insolvent insurer for which
the association is or may become obligated under this chapter or with
jurisdiction over a person or property against which the association
may have rights through subrogation or otherwise. Standing extends
to all matters germane to the rights, powers, and duties of the
association, including proposals for reinsuring, modifying, or
guaranteeing the policies or contracts of the impaired insurer or
insolvent insurer and the determination of the policies or contracts
and contractual obligations.
(m) A person receiving benefits under this chapter is considered
to have assigned:
(1) the person's rights under; and
(2) any cause of action against another person for losses arising
under, resulting from, or otherwise relating to;
the covered policy to the association to the extent of the benefits
received because of this chapter, whether the benefits are payments
of or on account of contractual obligations or continuation of
coverage or provision of substitute or alternative coverage. The
association may require an assignment to it of those rights and causes
of action by a payee, policy or contract owner, certificate holder,
beneficiary, insured, or annuitant as a condition precedent to the
receipt of any right or benefits conferred by this chapter on the
person.
(n) The subrogation rights of the association under subsections
(m) and (o) have the same priority against the assets of the impaired
insurer or insolvent insurer as those possessed by the person entitled
to receive benefits under this chapter.
(o) In addition to the rights conferred by subsections (m) and (n),
the association has all common law rights of subrogation and any
other equitable or legal remedy with respect to a covered policy that
would have been available to the:
(1) impaired insurer or insolvent insurer;
(2) owner, beneficiary, or payee of a policy or contract with
respect to the policy or contract, including, in the case of a
structured settlement annuity, rights of the owner, beneficiary,
or payee of the annuity, to the extent of benefits received under
this chapter, against a person:
(A) who is originally or by succession responsible for the
losses arising from the personal injury relating to the annuity
or payment for the annuity; and
(B) whose responsibility is not solely because of the person
serving as an assignee in respect of a qualified assignment
under Section 130 of the Internal Revenue Code; and
(3) certificate holder, or the beneficiary or payee of the
certificate holder, with respect to a certificate.
(p) If subsection (m), (n), or (o) is invalid or ineffective with
respect to a person or claim, the amount payable by the association
with respect to the related covered policies must be reduced by the
amount realized by another person with respect to the person or
claim that is attributable to the covered policies.
(q) If the association provides benefits with respect to a covered
policy and a person recovers amounts to which the association has
rights as described in subsection (m), (n), or (o), the person shall pay
to the association the part of the recovery attributable to the covered
policies.
(r) The association may do the following:
(1) Enter into contracts necessary or appropriate to carry out the
provisions and purposes of this chapter.
(2) Sue or, subject to section 14 of this chapter, be sued,
including taking legal actions necessary or appropriate to
recover unpaid assessments under section 6 of this chapter and
to resolve claims or potential claims against or on behalf of the
association.
(3) Borrow money to effect the purposes of this chapter and
issue notes or other evidences of indebtedness of the association
with respect to borrowings. Notes or other evidences of
indebtedness described in this subdivision that are not in default
are legal investments for domestic insurers and may be carried
as admitted assets.
(4) Employ or retain persons necessary or appropriate to handle
the financial transactions of the association and to perform
other functions necessary or appropriate under this chapter.
(5) Take legal action necessary or appropriate to avoid or
recover payment of improper claims.
(6) Exercise, for the purposes of this chapter and to the extent
approved by the commissioner, the powers of a domestic life or
health insurer. However, in no case may the association issue
insurance policies or annuity contracts other than those issued
to perform the association's obligations under this chapter.
(7) Request information from a person seeking coverage from
the association to aid the association in determining and
discharging the association's obligations under this chapter with
respect to the person. The person shall promptly comply with
the request.
(8) Settle claims and potential claims by or against the
association.
(9) Exercise all rights, privileges, and powers granted to the
association by any other laws of Indiana or another jurisdiction.
(10) Take other necessary or appropriate action to discharge the
association's duties and obligations under this chapter or to
exercise the association's rights and powers under this chapter.
(s) The association may belong to one (1) or more organizations
of one (1) or more other state associations of similar purpose to
further the purpose and administer the powers and duties of the
association.
(t) The association has discretion and may exercise reasonable
business judgment to determine the means by which the association
is to discharge, in an economical and efficient manner, the
association's obligations under this chapter.
(u) In discharging the association's obligations and exercising the
association's rights and powers under subsections (a) and (c), the
association may, subject to approval of the receivership court,
provide substitute coverage for a covered policy that provides for the
covered policy's interest rate, crediting rate, or similar factor
employed in calculating returns or changes in value to be determined
by use of an index or other external referent stated in the covered
policy by issuing an alternative policy or contract in accordance with
the following provisions:
(1) Instead of the index or other external referent stated in the
covered policy, the alternative policy or contract may provide
for:
(A) a fixed interest rate;
(B) payment of dividends with minimum guarantees; or
(C) a different method for calculating returns or changes in
value.
(2) A:
(A) requirement for evidence of insurability; or
(B) waiting period or an exclusion, other than a waiting
period or an exclusion provided for in this chapter;
that would not have applied under the covered policy may not
be imposed.
(3) The alternative policy or contract must provide coverage
similar, in material respects, to the coverage under the covered
policy, after taking into account the exceptions, exclusions, and
limitations provided for in this chapter, as determined by the
association.
As added by Acts 1978, P.L.129, SEC.3. Amended by P.L.166-1986,
SEC.1; P.L.130-1994, SEC.44; P.L.116-1994, SEC.62;
P.L.251-1995, SEC.21; P.L.193-2006, SEC.14.
IC 27-8-8-5.2
Association election to succeed to rights and duties of impaired or
insolvent insurer; reinsurance
Sec. 5.2. (a) At any time within one (1) year after the coverage
date for an impaired insurer or insolvent insurer, the association may
elect, subject to subdivisions (1) through (4), to succeed to the rights
and obligations of the impaired insurer or insolvent insurer that
accrue on or after the coverage date and that relate to covered
policies under one (1) or more indemnity reinsurance agreements
entered into by the impaired insurer or insolvent insurer as a ceding
insurer. However, the association may not exercise an election with
respect to a reinsurance agreement if the receiver, rehabilitator, or
liquidator of the impaired insurer or insolvent insurer has previously
and expressly disaffirmed the reinsurance agreement. The election by
the association must be effected by a notice to the receiver,
rehabilitator, or liquidator and to the affected reinsurers specifying
the reinsurance agreement concerning which the association has
made the foregoing election. If the association makes an election, the
following apply with respect to the agreements selected by the
association:
(1) The association is responsible for:
(A) all unpaid premiums due under the agreements for
periods before and after the coverage date; and
(B) the performance of all other obligations of the impaired
insurer or insolvent insurer to be performed after the
coverage date;
that relate to covered policies. The association may charge
covered policies that are only partially covered by the
association, through reasonable allocation methods, the costs
for reinsurance in excess of the obligations of the association.
(2) The association is entitled to any amount payable by the
reinsurer under the selected agreements:
(A) with respect to losses or events that occur during periods
after the coverage date; and
&