2000 Legislation
Print Friendly

HOUSE BILL NO. 612 – Life/hlth insurance guaranty assn

HOUSE BILL NO. 612

View Daily Data Tracking History

View Bill Text

View Statement of Purpose / Fiscal Impact



Text to be added within a bill has been marked with Bold and
Underline. Text to be removed has been marked with
Strikethrough and Italic. How these codes are actually displayed will
vary based on the browser software you are using.

This sentence is marked with bold and underline to show added text.

This sentence is marked with strikethrough and italic, indicating
text to be removed.

Daily Data Tracking History



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

Bill Text


 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 / Fiscal Impact


     
                           
                 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