33-10-201. Short title, purpose, scope, and construction.
33-10-201. Short title, purpose, scope, and construction. (1) This part may be cited as the "Montana Life and Health Insurance Guaranty Association Act".
(2) The purpose of this part is to protect policyowners, insureds, beneficiaries, annuitants, payees, and assignees of life insurance policies, health insurance policies, annuity contracts, and supplemental contracts, subject to certain limitations, against failure in the performance of contractual obligations due to the impairment or insolvency of the insurer issuing the policies or contracts.
(3) To provide this protection:
(a) an association of insurers is created to enable the guaranty of payment of benefits and of continuation of coverages;
(b) members of the association are subject to assessment to provide funds to carry out the purpose of this part; and
(c) the association is authorized to assist the commissioner, in the prescribed manner, in the detection and prevention of insurer impairments or insolvencies.
(4) This part applies to direct, nongroup life, health, and annuity policies and contracts and their supplemental contracts, to certificates under direct group policies and contracts, and to unallocated annuity contracts issued by member insurers, except as limited by this part. Annuity contracts and certificates under group annuity contracts include but are not limited to guaranteed investment contracts, deposit administration contracts, unallocated funding agreements, allocated funding agreements, structured settlement annuities, lottery annuities issued in connection with government lotteries, and any immediate or deferred annuity contracts.
(5) This part provides coverage for policies and contracts specified in subsection (4):
(a) to persons who are owners of or certificate holders under covered policies or contracts, other than unallocated annuity contracts and structured settlement annuities that are provided for in subsections (6) and (7), if the persons:
(i) are residents; or
(ii) are not residents, but only under all of the following conditions:
(A) the insurers that issued the policies are domiciled in this state;
(B) the insurers have not held a license or certificate of authority in the state in which the persons reside;
(C) the state has an association similar to the association created under this part; and
(D) the persons are not eligible for coverage by that association; and
(b) to persons who, regardless of where they reside, except for nonresident certificate holders under group policies or contracts, are the beneficiaries, assignees, or payees of the persons covered under subsection (5)(a).
(6) With respect to unallocated annuity contracts, this part provides coverage to:
(a) persons who are the owners of unallocated annuity contracts if the contracts are issued to or in connection with a specific benefit plan whose plan sponsor has its principal place of business in this state; and
(b) persons who are owners of unallocated annuity contracts issued in connection with government lotteries if the owners are residents.
(7) (a) With respect to structured settlement annuities, this part provides coverage to a person who is:
(i) a payee under a structured settlement annuity;
(ii) a beneficiary of a payee if the payee is deceased; or
(iii) a resident payee, regardless of where the contract owner resides.
(b) This part also applies to a payee of a structured settlement annuity contract who is not a resident if:
(i) the contract owner of the structured settlement annuity is a resident, the insurer that issued the structured settlement annuity is domiciled in this state, or the state in which the contract owner resides has an association similar to the association created by this part; and
(ii) the payee, beneficiary, or contract owner is not eligible for coverage by the association in the state in which the payee or contract owner resides.
(8) This part does not provide coverage to:
(a) a person who is a payee or a beneficiary of a contract owner who is the resident of another state if the payee or beneficiary is afforded any coverage by the association of another state; or
(b) a person described in subsection (5) if the person is afforded any coverage by the association of another state.
(9) (a) This part is intended to provide coverage to a person who is a resident of this state and, in special circumstances, to a nonresident. In order to avoid duplicate coverage, if a person who would otherwise receive coverage under this part is provided coverage under the laws of any other state, the person may not be provided coverage under this part.
(b) In determining the application of this subsection (9) to situations in which a person, such as an owner, payee, beneficiary, or assignee, could be covered by the associations of more than one state, this part must be construed in conjunction with other state laws to result in coverage by only one association.
(10) This part does not provide coverage for:
(a) policies or contracts or any part of the policies or contracts not guaranteed by the member insurer or under which the risk is borne by the policyowner;
(b) a policy or contract or part of the policy or contract assumed by the impaired member insurer under a contract of reinsurance, other than reinsurance for which assumption certificates have been issued;
(c) any portion of a policy or contract to the extent that the rate of interest on which it is based or the interest rate, crediting rate, or similar factor determined by the use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value:
(i) averaged over the period of 4 years prior to the date on which the association becomes obligated with respect to the policy or contract, exceeds a rate of interest determined by subtracting 2 percentage points from Moody's corporate bond yield average averaged for that same 4-year period or for the lesser period if the policy or contract was issued less than 4 years before the association became obligated; and
(ii) on and after the date on which the association becomes obligated with respect to the policy or contract, exceeds the rate of interest determined by subtracting 3 percentage points from Moody's corporate bond yield average as is most recently available;
(d) any plan or program of an employer, association, or similar entity to provide life, health, or annuity benefits to its employees, members, or others to the extent that the plan or program is self-funded or uninsured, including but not limited to benefits payable by an employer, association, or other person under:
(i) a multiple employer welfare arrangement, as defined in section 514 of the Employee Retirement Income Security Act of 1974, as amended;
(ii) a minimum premium group insurance plan;
(iii) a stop-loss group insurance plan; or
(iv) an administrative services only contract;
(e) any portion of a policy or contract to the extent that it provides dividends, experience rating credits, or voting rights or provides that any fees or allowances be paid to any person, including the policyowner or contract owner, in connection with the service to or administration of the policy or contract;
(f) any policy or contract issued in this state by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue the policy or contract in this state;
(g) any unallocated annuity contract issued to or in connection with an employee benefit plan that is protected under the federal pension benefit guaranty corporation regardless of whether the federal pension benefit guaranty corporation is liable to make any payments with respect to the employee benefit plan;
(h) any portion of any unallocated annuity contract that is not issued to or in connection with a specific employee, union, or association of natural persons benefit plan or a government lottery;
(i) an obligation that does not arise under the express written terms of the policy or contract issued by the insurer to the policyowner or contract owner, including without limitation:
(i) claims based on marketing materials;
(ii) claims based on side letters, riders, or other documents that were issued by the insurer without meeting applicable requirements for filing policy forms or for policy approval;
(iii) misrepresentations of or regarding policy benefits;
(iv) extracontractual claims; or
(v) a claim for penalties or consequential or incidental damages;
(j) a contractual agreement that establishes the member insurer's obligations 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 benefit plan or its trustee, which in each case is not an affiliate of the member insurer; or
(k) a portion of a policy or contract to the extent it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but which have not been credited to the policy or contract, or as to which the policyowner's or contract owner's rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this part. If a policy's or contract's interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and are not subject to forfeiture under this section, the interest or changes in value determined by using the procedures defined in the policy or contract must be credited as if the contractual date of crediting interest or changes in value was the date of impairment or insolvency and the interest or changes in value are not subject to forfeiture.
(11) This part must be liberally construed to effect the purpose under subsections (2) and (3), which constitute an aid and guide to interpretation.
(12) This part may not be construed to reduce the liability for unpaid assessments of the insureds of an impaired or insolvent insurer operating under a plan with assessment liability.
History: En. 40-5801 thru 40-5804, 40-5814 by Secs. 1 thru 4, 14, Ch. 245, L. 1974; R.C.M. 1947, 40-5801, 40-5802, 40-5803, 40-5804, 40-5814(1); amd. Sec. 1, Ch. 576, L. 1987; amd. Sec. 56, Ch. 596, L. 1993; amd. Sec. 39, Ch. 379, L. 1995; amd. Sec. 3, Ch. 195, L. 2003.