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H0612...........................................................by BUSINESS
LIFE/HEALTH INSURANCE GUARANTY ASSOCIATION - Amends existing law to codify
the Idaho Life and Health Insurance Guaranty Association's current policies
and interpretations regarding coverage and limitations for insolvent
insurers.
02/18 House intro - 1st rdg - to printing
02/21 Rpt prt - to Bus
03/02 Rpt out - rec d/p - to 2nd rdg
03/03 2nd rdg - to 3rd rdg
03/07 3rd rdg - PASSED - 66-0-4
AYES -- Alltus, Barraclough(Barraclough), Bell, Bieter, Black, Boe,
Bruneel, Callister, Campbell, Chase, Cheirrett, Clark, Crow, Cuddy,
Deal, Denney, Ellsworth, Field(13), Field(20), Gagner, Geddes, Gould,
Hadley, Hammond, Hansen(23), Hansen(29), Henbest, Hornbeck, Jaquet,
Jones, Judd, Kellogg, Kendell, Kunz, Lake, Linford, Loertscher,
Mader, McKague, Meyer, Montgomery, Mortensen, Moss, Moyle, Pearce,
Pischner, Pomeroy, Reynolds, Ridinger, Ringo, Robison, Sali,
Schaefer, Sellman, Shepherd, Smith, Smylie, Stevenson, Stoicheff,
Stone, Taylor, Tilman, Trail, Wheeler, Zimmermann, Mr Speaker
NAYS -- None
Absent and excused -- Barrett, Kempton, Marley, Wood
Floor Sponsor - Deal
Title apvd - to Senate
03/08 Senate intro - 1st rdg - to Com/HuRes
03/17 Rpt out - rec d/p - to 2nd rdg
03/20 2nd rdg - to 3rd rdg
04/04 3rd rdg - PASSED - 35-0-0
AYES -- Andreason, Boatright, Bunderson, Burtenshaw, Cameron, Crow,
Danielson, Darrington, Davis, Deide, Dunklin, Frasure, Geddes,
Hawkins, Ingram, Ipsen, Keough, King-Barrutia, Lee, McLaughlin, Noh,
Parry, Richardson, Riggs, Risch, Sandy, Schroeder, Sorensen, Stegner,
Stennett, Thorne, Walton, Wheeler, Whitworth, Williams
NAYS -- None
Absent and excused -- None
Floor Sponsor - Ipsen
Title apvd - to House
04/05 To enrol - rpt enrol - Sp signed - Pres signed
04/06 To Governor
04/14 Governor signed
Session Law Chapter 323
Effective: 07/01/00
H0612
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-fifth Legislature Second Regular Session - 2000
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 612
BY BUSINESS COMMITTEE
1 AN ACT
2 RELATING TO THE IDAHO LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION; AMENDING
3 SECTION 41-4303, IDAHO CODE, TO BROADEN THE APPLICATION OF THE ACT; AMEND-
4 ING SECTION 41-4308, IDAHO CODE, AND TO REVISE THE CONTRACTUAL OBLIGA-
5 TIONS OF THE INSOLVENT INSURER FOR WHICH THE ASSOCIATION BECOMES OR MAY
6 BECOME LIABLE AND TO MAKE TECHNICAL CORRECTIONS.
7 Be It Enacted by the Legislature of the State of Idaho:
8 SECTION 1. That Section 41-4303, Idaho Code, be, and the same is hereby
9 amended to read as follows:
10 41-4303. APPLICATION OF ACT. (1) This act shall apply to direct life
11 insurance policies, disability insurance policies, annuity contracts, and con-
12 tracts supplemental to life and disability insurance policies, annuity con-
13 tracts, and contracts supplemental to life and disability insurance policies
14 and annuity contracts issued by persons licensed to transact insurance in this
15 state at any time. Covered policies shall include annuities owned by a trust
16 for a money purchase pension plan, profit sharing plan, 401(k) thrift plan or
17 any other defined contribution plan, and annuities owned by a custodian of an
18 individual retirement account.
19 (2) This act shall not apply to:
20 (a) That portion or part of a variable life insurance or variable annuity
21 contract not guaranteed by an insurer;
22 (b) That portion or part of any policy or contract under which the risk
23 is borne by the policyholder;
24 (c) Any policy or contract or part thereof assumed by the impaired or
25 insolvent insurer under a contract of reinsurance, other than reinsurance
26 for which assumption certificates have been issued;
27 (d) Any such policy or contract issued by a reciprocal insurer, mutual
28 benefit association, fraternal benefit society, hospital and medical ser-
29 vice corporation, health maintenance organization, or self-funded health
30 care plan; or
31 (e) Any unallocated annuity contract, including an annuity owned by a
32 defined benefit pension plan or trust.
33 SECTION 2. That Section 41-4308, Idaho Code, be, and the same is hereby
34 amended to read as follows:
35 41-4308. POWERS AND DUTIES OF THE ASSOCIATION. In addition to the powers
36 and duties enumerated in other sections of this act:
37 (1) If a domestic insurer is an impaired insurer, the association may,
38 subject to any conditions imposed by the association, other than those which
39 impair the contractual obligations of the impaired insurer, and approved by
40 the impaired insurer and the director:
41 (a) Guarantee or reinsure, or cause to be guaranteed, assumed, or rein-
2
1 sured, any or all of the covered policies of residents of the impaired
2 insurers;
3 (b) Provide such monies moneys, pledges, notes, guarantees, or other
4 means as are proper to effectuate and assure payment of the contractual
5 obligations to residents of the impaired insurer pending action under sub-
6 section paragraph (a) above of this section;
7 (c) Loan money to the impaired insurer.
8 (d) This chapter shall provide coverage for the policies and contracts
9 specified in subsection (1) of this section, for persons who are not resi-
10 dents, but only under the following conditions:
11 (i) The insurers which issued such policies or contracts are domi-
12 ciled in this state; and
13 (ii) The director has determined that by statute, similar protection
14 is not available for such nonresidents as that provided in this chap-
15 ter for residents of this state.
16 (2) If a domestic insurer is an insolvent insurer, the association shall,
17 subject to the approval of the director:
18 (a) Guarantee, assume, or reinsure, or cause to be guaranteed, assumed,
19 or reinsured the covered policies of residents of the insolvent insurer;
20 (b) Assume payment of the contractual obligations to residents of the
21 insolvent insurer; and,
22 (c) Provide such monies moneys, pledges, notes, guarantees, or other
23 means as are reasonably necessary to discharge such duties.
24 (d) This chapter shall provide coverage for the policies and contracts
25 specified in subsection (2) of this section, for persons who are not resi-
26 dents, but only under the following conditions:
27 (i) The insurers which issued such policies or contracts are domi-
28 ciled in this state; and
29 (ii) The director has determined that by statute, similar protection
30 is not available for such nonresidents as that provided by this chap-
31 ter for residents of this state.
32 (3) If a foreign or alien insurer is an insolvent insurer, the associa-
33 tion shall, subject to the approval of the director:
34 (a) Guarantee, assume, or reinsure, or cause to be guaranteed, assumed,
35 or reinsured the covered policies of residents;
36 (b) Assure payment of the contractual obligations of the insolvent
37 insurer to residents; and
38 (c) Provide such monies moneys, pledges, notes, guarantees, or other
39 means as are reasonably necessary to discharge such duties.
40 Provided, however, that this subsection shall not apply where the director has
41 determined that the foreign or alien insurer's domiciliary jurisdiction or
42 state of entry provides, by statute, protection substantially similar to that
43 provided by this act for residents of this state.
44 (4) (a) In carrying out its duties under subsections (2) and (3) of this
45 section, permanent policy liens, or contract liens may be imposed in con-
46 nection with any guarantee, assumption or reinsurance agreement, if the
47 court:
48 (i) Finds that the amounts which can be assessed under this act are
49 less than the amounts needed to assure full and prompt performance of
50 the insolvent insurer's contractual obligations, or that the economic
51 or financial conditions as they affect member insurers are suffi-
52 ciently adverse to render the imposition of policy or contract liens,
53 to be in the public interest; and
54 (ii) Approves the specific policy liens or contract liens to be
55 used.
3
1 (b) Before being obligated under subsections (2) and (3) of this section,
2 the association may request that there be imposed temporary moratoriums or
3 liens on payments of cash values and policy loans in addition to any con-
4 tractual provisions for deferral of cash or policy loan values and such
5 temporary moratoriums and liens may be imposed if they are approved by the
6 court.
7 (5) If the association fails to act within a reasonable period of time as
8 provided in subsections (2) and (3) of this section, the director shall have
9 the powers and duties of the association under this act with respect to insol-
10 vent insurers.
11 (6) The association may render assistance and advice to the director upon
12 his request, concerning rehabilitation, payment of claims, continuance of cov-
13 erage, or the performance of other contractual obligations of any impaired or
14 insolvent insurer.
15 (7) The association shall have standing to appear before any court in
16 this state with jurisdiction over an impaired or insolvent insurer concerning
17 which the association is or may become obligated under this act. Such standing
18 shall extend to all matters germane to the powers and duties of the associa-
19 tion, including, but not limited to, proposals for reinsuring or guaranteeing
20 the covered policies of the impaired or insolvent insurer and the determina-
21 tion of the covered policies and contractual obligations.
22 (8) (a) Any person receiving benefits under this act shall be deemed to
23 have assigned the rights under the covered policy to the association to
24 the extent of the benefits received because of this act whether the bene-
25 fits are payments of contractual obligations or continuation of coverage.
26 The association may require an assignment to it of such rights by any
27 payee, policy or contract owner, beneficiary, insured or annuitant as a
28 condition precedent to the receipt of any rights or benefits conferred by
29 this act upon such person. The association shall be subrogated to these
30 rights against the assets of any insolvent insurer.
31 (b) The subrogation rights of the association under this subsection shall
32 have the same priority against the assets of the insolvent insurer as that
33 possessed by the person entitled to receive benefits under this act.
34 (9) The contractual obligations of the insolvent insurer for which the
35 association becomes or may become liable shall be as great as but no greater
36 than the lesser of:
37 (a) Tthe contractual obligations of for which the insolvent insurer would
38 have been liable in the absence of an insolvency; or
39 (b) Uunless such obligations are reduced as permitted by subsection (4)
40 of this section, but the aggregate liability of the association shall not
41 exceed the following per policy:
42 (i) Oone hundred thousand dollars ($100,000) in net cash surrender
43 in net cash withdrawal values for life insurance, or three hundred
44 thousand dollars ($300,000) in life insurance death benefits;
45 (ii) Three hundred thousand dollars ($300,000) in disability insur-
46 ance claims or benefit payments, or one hundred thousand dollars
47 ($100,000) in net cash surrender and net cash withdrawal values for
48 disability benefits;
49 (iii) Three hundred thousand dollars ($300,000) of annuity benefit
50 payments for annuities for which periodic annuity benefits, for a
51 period of not less than the annuitant's lifetime or for a period cer-
52 tain of not less than ten (10) years, have begun to be paid on or
53 before the date of the impairment or insolvency, or one hundred thou-
54 sand dollars ($100,000) in annuity net cash surrender or net cash
55 withdrawal values; or
4
1 (iv) Where no coverage limit has been specified for a covered policy
2 or benefit, the coverage limit shall be three hundred thousand dol-
3 lars ($300,000).
4 (c) In no event shall the association be liable to expend more than three
5 hundred thousand dollars ($300,000) in the aggregate for all benefits,
6 including cash values, with respect to any one (1) life.
7 (10) The association may:
8 (a) Enter into such contracts as are necessary or proper to carry out the
9 provisions and purposes of this act;
10 (b) Sue or be sued, including taking any legal actions necessary or
11 proper for recovery of any unpaid assessments under section 41-4309, Idaho
12 Code;
13 (c) Borrow money to effect the purposes of this act. Any notes or other
14 evidence of indebtedness of the association not in default shall be legal
15 investments for domestic insurers and may be carried as admitted assets;
16 (d) Employ or retain such persons as are necessary to handle the finan-
17 cial transactions of the association and to perform such other functions
18 as become necessary or proper under this act;
19 (e) Negotiate and contract with any liquidator, rehabilitator, conserva-
20 tor, or ancillary receiver to carry out the powers and duties of the asso-
21 ciation;
22 (f) Take such legal action as may be necessary to avoid payment of
23 improper claims;
24 (g) Exercise, for the purposes of this act and to the extent approved by
25 the director, the powers of a domestic life or health insurer, but in no
26 case may the association issue insurance policies or annuity contracts
27 other than those issued to perform the contractual obligations of the
28 impaired or insolvent insurer.
STATEMENT OF PURPOSE
RS 09885
Since the Idaho life and health insurance guaranty association act became law in
1977, issues regarding coverage of certain insurance products, and the limitations
on such coverage have arisen. This legislation is intended to codify the
association's current policies and interpretations regarding coverage and
limitations.
FISCAL NOTE
No fiscal impact.
Contact: William J. Batt, Idaho Life and Health Insurance
Guaranty Association.
Telephone: 208-331-1000
STATEMENT OF PURPOSE/FISCAL NOTE H 612