Committee Substitute
House Bill 2632 History
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COMMITTEE SUBSTITUTE
FOR
H. B. 2632
(By Delegates Phillips, Beane, Michael
and L. White)
(Originating in the House Committee on Banking and Insurance)
[March 24, 1993]
A BILL to amend and reenact article twenty-six-a, chapter
thirty-three of the code of West Virginia, one thousand nine
hundred thirty-one, as amended, relating to the life and
health insurance guaranty association.
Be it enacted by the Legislature of West Virginia:
That article twenty-six-a, chapter thirty-three of the code
of West Virginia, one thousand nine hundred thirty-one, as
amended, be amended and reenacted to read as follows:
ARTICLE 26A. WEST VIRGINIA LIFE AND HEALTH INSURANCE GUARANTY
ASSOCIATION ACT.
§33-26A-1. Short title.
This article shall be known and may be cited as the "West
Virginia Life and Health Insurance Guaranty Association Act."
§33-26A-2. Purpose of article and association of insurers.
(a) The purpose of this article is to protect, subject to
certain limitations, the persons specified in subsection (a) of
section three of this article against failure in the performanceof contractual obligations, under life and health insurance
policies and annuity contracts specified in subsection (b) of
section three of this article, because of the impairment or
insolvency of the member insurer that issued the policies or
contracts.
(b) To provide this protection, an association of insurers
is created to pay benefits and to continue coverages as limited
herein, and members of the association are subject to assessment
to provide funds to carry out the purpose of this article.
§33-26A-3. Scope of article; policies and contracts covered;
exclusions; extent of liability.
(a) This article shall provide coverage for the policies and
contracts specified in subsection (b) of this section:
(1) To persons who, regardless of where they reside, are the
beneficiaries, assignees or payees of the persons covered under
subdivision (2) below:
Provided,
That the provisions of this
subdivision shall not apply to nonresident certificate holders
under group policies or contracts;
(2) To persons who are owners of or certificate holders
under such policies or contracts; or in the case of unallocated
annuity contracts, persons who are contract holders, and who
(A) Are residents of the state; or
(B) Are not residents of this state, but only under all of
the following conditions:
(i) Such insurers which issued these policies or contracts
are domiciled in this state;
(ii) Such insurers never held a license or certificate of
authority in the state in which such person resides;
(iii) Such states have associations similar to the
association created by this article; and
(iv) The persons are not eligible for coverage by such
associations.
(b) Coverage as provided by this article shall be as
follows:
(1) This article shall provide coverage to the persons
specified in subsection (a) of this section for direct, nongroup
life, health, annuity and supplemental policies or contracts, for
certificates under direct group policies and contracts, and for
unallocated annuity contracts, issued by member insurers, except
as limited by this article. 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 agreements, lottery contracts
and any immediate or deferred annuity contracts.
(2) This article shall not provide coverage for:
(A) Any portion of a policy or contract not guaranteed by
the insurer, or under which the risk is borne by the policy or
contract holder;
(B) Any policy or contract of reinsurance, unless 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:
(i) Averaged over the period of four years prior to the date
on which the association becomes obligated with respect to such
policy or contract, exceeds a rate of interest determined bysubtracting two percentage points from Moody's Corporate Bond
Yield Average averaged for that same four-year period or for such
lesser period if the policy or contract was issued less than four
years before the association became obligated; and
(ii) On and after the date on which the association becomes
obligated with respect to such policy or contract, exceeds the
rate of interest determined by subtracting three percentage
points from Moody's Corporate Bond Yield Average as 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 or members 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 similar entity 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 or experience rating credits, or provides
that any fees or allowances be paid to any person, including the
policy or contract holder, 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 thisstate;
(G) Any unallocated annuity contract issued to an employee
benefit plan protected under the federal pension benefit guaranty
corporation; and
(H) Any portion of any unallocated annuity contract which is
not issued to or in connection with a specific employee, union or
association of natural persons benefit plan or a government
lottery.
(c) The benefits for which the association may become liable
shall in no event exceed the lesser of:
(1) The contractual obligations for which the insurer is
liable or would have been liable if it were not an impaired or
insolvent insurer; or
(2)(A) With respect to any one life, regardless of the
number of policies or contracts:
(i) Three hundred thousand dollars in life insurance death
benefits, but no more than one hundred thousand dollars in net
cash surrender and net cash withdrawal values for life insurance;
(ii) One hundred thousand dollars in health insurance
benefits, including any net cash surrender and net cash
withdrawal values;
(iii) One hundred thousand dollars in the present value of
annuity benefits, including net cash surrender and net cash
withdrawal values;
(B) With respect to each individual participating in a
governmental retirement plan established under section 401,
403(b) or 457 of the U.S. Internal Revenue Code covered by an
unallocated annuity contract or the beneficiaries of each suchindividual if deceased, in the aggregate, one hundred fifty
thousand dollars in present value annuity benefits, including net
cash surrender and net cash withdrawal values:
Provided,
That in
no event shall the association be liable to expend more than
three hundred thousand dollars in the aggregate with respect to
any one individual under paragraphs 2(A) and (B) above;
(C) With respect to any one contact holder covered by any
unallocated annuity contract not included in subsection (2)(B) of
this section one million dollars in benefits, irrespective of the
number of contracts held by that contract holder.
(d) The liability of the association is strictly limited by
the express terms of the covered policies and contracts and by
the provisions of this article and shall not in any event include
any amount in excess of the applicable limits of coverage
provided by the contracts or policies as limited by this article.
The association is not liable for any extra contractual damages,
claims, fees of any kind whatsoever, including interest, except
as specifically provided by the terms of the policies or
contracts as limited by this article.
§33-26A-4. Construction of article.
This article shall be liberally construed to effect the
purpose under section two of this article which shall constitute
an aid and guide to interpretation.
§33-26A-5. Definitions.
As used in this article:
(1) "Account" means either of the two accounts created under
section six of this article.
(2) "Association" means the West Virginia life and healthinsurance guaranty association created under section six of this
article.
(3) "Commissioner" means the commissioner of insurance of
this state.
(4) "Contractual obligation" means any obligation under a
policy or contract or certificate under a group policy or
contract, or portion thereof for which coverage is provided under
section three of this article.
(5) "Covered policy" means any policy or contract within the
scope of this article under section three of this article.
(6) "Impaired insurer" means a member insurer which, after
the effective date of this article, is not an insolvent insurer,
and (1) is deemed by the commissioner to be potentially unable to
fulfill its contractual obligations or (2) is placed under an
order of rehabilitation or conservation by a court of competent
jurisdiction.
(7) "Insolvent insurer" means a member insurer which, after
the effective date of this article, is placed under an order of
liquidation by a court of competent jurisdiction with a finding
of insolvency.
(8) "Member insurer" means any insurer licensed or which
holds a certificate of authority to transact in this state any
kind of insurance for which coverage is provided under section
three of this article, and includes any insurer whose license or
certificate of authority in this state may have been suspended,
revoked, not renewed or voluntarily withdrawn, and includes
nonprofit service corporations as defined in article twenty-four
of this chapter and health care corporations as defined inarticle twenty-five of this chapter:
Provided,
That the term
"member insurer" does not include:
(A) A health maintenance organization;
(B) A fraternal benefit society;
(C) A mandatory state polling plan;
(D) A mutual assessment company or any entity that operates
on an assessment basis;
(E) An insurance exchange; or
(F) Any entity similar to any of the above.
(9) "Moody's Corporate Bond Yield Average" means the monthly
average corporates as published by Moody's Investors Service,
Inc., or any successor thereto.
(10) "Person" means any individual, corporation,
partnership, association or voluntary organization.
(11) "Premiums" means amounts received on covered policies
or contracts less premiums, considerations and deposits returned
thereon, and less dividends and experience credits thereon.
"Premiums" does not include any amounts received for any policies
or contracts or for the portions of any policies or contracts for
which coverage is not provided under subsection (b) of section
three of this article, except that assessible premium shall not
be reduced on account of paragraph (C), subdivision (2),
subsection (b) of section three of this article relating to
interest limitations and subdivision (2), subsection (c) of
section three of this article relating to limitations with
respect to any one individual, any one participant and any one
contract holder:
Provided,
That "premiums" shall not include any
premiums in excess of one million dollars on any unallocatedannuity contract not issued under a government retirement plan
established under section 401, 403(b) or 457 of the United States
Internal Revenue Code.
(12) "Resident" means any person who resides in this state
at the time a member insurer is determined to be an impaired or
insolvent insurer and to whom a contractual obligation is owed.
A person may be a resident of only one state, which in the case
of a person other than a natural person shall be its principal
place of business.
(13) "Health insurance" means accident and sickness
insurance as defined in subsection (b), section ten, article one
of this chapter.
(14) "Supplemental contract" means any agreement entered
into for the distribution of policy or contract proceeds.
(15) "Unallocated annuity contract" means any annuity
contract or group annuity certificate which is not issued to and
owned by an individual, except to the extent of any annuity
benefits guaranteed to an individual by an insurer under such
contract or certificate.
§33-26A-6. Creation of association; required accounts;
supervision of commissioner; meetings and records.
(a) There is created a nonprofit legal entity to be known as
the West Virginia life and health insurance guaranty association.
All member insurers shall be and remain members of the
association as a condition of their authority to transact
insurance in this state. The association shall perform its
functions under the plan of operation established and approved
under section ten of this article and shall exercise its powersthrough a board of directors established under section seven of
this article. For purposes of administration and assessment, the
association shall maintain the following two accounts:
(1) The life insurance and annuity account which includes
the following subaccounts:
(A) Life insurance account;
(B) Annuity account; and
(C) Unallocated annuity account which shall include
contracts qualified under section 403(b) of the United States
Internal Revenue Code.
(2) The health insurance account.
(b) The association shall come under the immediate
supervision of the commissioner and shall be subject to the
applicable provisions of the insurance laws of this state.
Meetings or records of the association may be opened to the
public upon majority vote of the board of directors of the
association.
§33-26A-7. Board of directors; members; vacancies; voting
rights; appointment and reimbursement.
(a) The board of directors of the association shall consist
of not less than five nor more than nine member insurers serving
terms as established in the plan of operation. The members of
the board shall be selected by member insurers subject to the
approval of the commissioner. 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.
(b) To select the initial board of directors, and initiallyorganize the association, the commissioner shall give notice to
all member insurers of the time and place of the organizational
meeting. In determining voting rights at the organizational
meeting each member insurer shall be entitled to one vote in
person or by proxy. If the board of directors is not selected
within sixty days after notice of the organizational meeting, the
commissioner may appoint the initial members.
(c) In approving selections or in appointing members to the
board, the commissioner shall consider, among other things,
whether all member insurers are fairly represented.
(d) Members of the board may be reimbursed from the assets
of the association for expenses incurred by them as members of
the board of directors but members of the board shall not
otherwise be compensated by the association for their services.
§33-26A-8. Powers and duties of association.
(a) If a member insurer is an impaired domestic insurer,
the association may, in its discretion, and subject to any
conditions imposed by the association that do not impair the
contractual obligations of the impaired insurer, that are
approved by the commissioner, and that are, except in cases of
court-ordered conservation or rehabilitation, also approved by
the impaired insurer:
(1) Guarantee, assume, or reinsure, or cause to be
guaranteed, assumed or reinsured, any or all the covered policies
or contracts of the impaired insurer;
(2) Provide such moneys, pledges, notes, guarantees or
other means as are proper to effectuate subdivision (1) of this
subsection and assure payment of the contractual obligations ofthe impaired insurer pending action under said subdivision (1);
or
(3) Loan money to the impaired insurer.
(b)(1) If a member insurer is an impaired insurer, whether
domestic, foreign or alien, and the insurer is not paying claims
timely, then subject to the preconditions specified in
subdivision (2) of this subsection, the association shall, in its
discretion, either:
(A) Take any of the actions specified in subsection (a) of
this section, subject to the conditions therein; or
(B) Provide substitute benefits in lieu of the contractual
obligations of the impaired insurer solely for health claims,
periodic annuity benefit payments, death benefits, supplemental
benefits, and cash withdrawals for policy or contract owners who
petition therefor under claims of emergency or hardship in
accordance with standards proposed by the association and
approved by the commissioner.
(2) The association shall be subject to the requirements of
subdivision (1) of this subsection only if:
(A) The laws of the impaired insurer's state of domicile
provide that until all payments of or on account of the impaired
insurer's contractual obligations by all guaranty associations,
along with all expenses thereof and interest on all payments and
expenses, shall have been repaid to the guaranty associations or
a plan of repayment by the impaired insurer shall have been
approved by the guaranty associations:
(i) The delinquency proceeding shall not be dismissed;
(ii) Neither the impaired insurer nor its assets shall bereturn to the control of its shareholders or private management;
(iii) It shall not be permitted to solicit or accept new
business or have any suspended or revoked license restored; and
(B)(i) If the impaired insurer is a domestic insurer, it has
been placed under an order of rehabilitation by a court of
competent jurisdiction in this state; or
(ii) The impaired insurer is a foreign or alien insurer;
(I) It has been prohibited from soliciting or accepting new
business in this state;
(II) Its certificate of authority has been suspended or
revoked in this state; and
(III) A petition for rehabilitation or liquidation has been
filed in a court of competent jurisdiction in its state of
domicile by the commissioner of the state.
(c) If a member insurer is an insolvent insurer, the
association shall, in its discretion, either:
(1) (A) Guarantee, assume or reinsure, or cause to be
guaranteed, assumed or reinsured, the policies or contracts of
the insolvent insurer; or
(B) Assure payment of the contractual obligations of the
insolvent insurer; and
(C) Provide moneys, pledges, guarantees, or other means as
are reasonably necessary to discharge such duties; or
(2) With respect only to life and health insurance policies,
provide benefits and coverages in accordance with subsection (d)
of this section
(d) When proceeding under (b)(1)(B) or (c)(2) of this
section, the association shall, with respect to only life andhealth insurance policies:
(1) Assure payment of benefits for premiums identical to the
premiums and benefits, except for terms of conversion and
renewability, that would have been payable under the policies of
the insolvent insurer, for claims incurred:
(A) With respect to group policies, not later than the
earlier of the next renewal date under such policies or contracts
or forty-five days, but in no event less than thirty days, after
the date on which the association becomes obligated with respect
to such policies;
(B) With respect to individual policies, not later than the
earlier of the next renewal date, if any, under these polices or
one year, but in no event less than thirty days, from the date on
which the association becomes obligated with respect to such
policies;
(2) Make diligent efforts to provide all known insureds or
group policyholders with respect to group policies thirty days'
notice of the termination of the benefits provided; and
(3) With respect to individual polices, make available to
each known insured, or owner if other than the insured, and with
respect to an individual formerly insured under a group policy
who is not eligible for replacement group coverage, make
available substitute coverage on an individual basis in
accordance with the provisions of subdivision (4) of this
subsection, if the insureds had a right under law or the
terminated policy to convert coverage to individual coverage or
to continue an individual policy in force until a specified age
or for a specified time, during which the insurer had no rightunilaterally to make changes in any provision of the policy or
had a right only to make changes in premium by class.
(4)(A) In providing the substitute coverage required under
subdivision (3) of this subsection, the association may offer
either to reissue the terminated coverage or to issue an
alternative policy.
(B) Alternative or reissued policies shall be offered
without requiring evidence of insurability, and shall not provide
for any waiting period or exclusion that would not have applied
under the terminated policy.
(C) The association may reinsure any alternative or reissued
policy.
(5)(A) Alternative policies adopted by the association shall
be subject to the approval of the commissioner. The association
may adopt alternative policies of various types for future
issuance without regard to any particular impairment or
insolvency.
(B) Alternative policies shall contain at least the minimum
statutory provisions required in this state and provide benefits
that shall not be unreasonable in relation to the premium
charged. The association shall set the premium in accordance
with a table of rates which it shall adopt. The premium shall
reflect the amount of insurance to be provided and the age and
class of risk of each insured, but shall not reflect any changes
in the health of the insured after the original policy was last
underwritten.
(C) Any alternative policy issued by the association shall
provide coverage of a type similar to that of the policy issuedby the impaired or insolvent insurer, as determined by the
association.
(6) If the association elects to reissue terminated coverage
at a premium rate different from that charged under the
terminated policy, the premium shall be set by the association in
accordance with the amount of insurance provided and the age and
class of risk, subject to approval of the commissioner or by a
court of competent jurisdiction.
(7) The association's obligations with respect to coverage
under any policy of the impaired or insolvent insurer or under
any reissued or alternative policy shall cease on the date that
the coverage or policy is replaced by another similar policy by
the policyholder, the insured or the association.
(e) When proceeding under subsections (b)(1)(B) or (C) of
this section with respect to any policy or contract carrying
guaranteed minimum interest rates, the association shall assure
the payment or crediting of a rate of interest consistent with
subsection (b)(2)(C) of section three of this article.
(f) Nonpayment of premium within thirty-one days after the
date required under the terms of any guaranteed, assumed,
alternative or reissued policy or contract or substitute coverage
shall terminate the association's obligations under such policy
or coverage under this article with respect to such policy or
coverage, except with respect to any claims incurred or any net
cash surrender value which may be due in accordance with the
provisions of this article.
(g) Premiums due for coverage after entry of an order of
liquidation of an insolvent insurer shall belong to and bepayable at the direction of the association, and the association
shall be liable for unearned premiums due to policy or contract
owners arising after the entry of the order.
(h) The protection provided by this article shall not apply
where any guaranty protection is provided to residents of this
state by the laws of the domiciliary state or jurisdiction of the
impaired or insolvent insurer other than this state.
(i) In carrying out its duties under subsections (b) and (c)
of this section, the association may, subject to approval by the
court:
(1) Impose permanent policy or contract liens in connection
with any guarantee, assumption or reinsurance agreement, if the
association finds that the amounts which can be assessed under
this article are less than the amounts needed to assure full and
prompt performance of the association's duties under this
article, or that the economic or financial conditions as they
affect member insurers are sufficiently adverse to render the
imposition of such permanent policy or contract liens, to be in
the public interest;
(2) Impose temporary moratoriums or liens on payments of
cash values and policy loans, or any other right to withdraw
funds held in conjunction with policies or contracts, in addition
to any contractual provisions for deferral of cash or policy loan
value.
(j) If the association fails to act within a reasonable
period of time as provided in subsections (b)(1)(B), (c) and (d)
of this section, the commissioner shall have the powers and
duties of the association under this article with respect toimpaired or insolvent insurers.
(k) The association may render assistance and advice to the
commissioner, upon his request, concerning rehabilitation,
payment of claims, continuance of coverage, or the performance of
other contractual obligations of any impaired or insolvent
insurer.
(l) The association shall have standing to appear before any
court in this state with jurisdiction over an impaired or
insolvent insurer concerning which the association is or may
become obligated under this article. Standing shall extend to
all matters germane to the powers and duties of the association,
including, but not limited to, proposals for reinsuring,
modifying, or guaranteeing the policies or contracts of the
impaired or insolvent insurer and the determination of the
policies or contracts and contractual obligations. The
association shall also have the right to appear or intervene
before a court in another state with jurisdiction over an
impaired or insolvent insurer for which the association is or may
become obligated or with jurisdiction over a third party against
whom the association may have rights through subrogation of the
insurer's policyholders.
(m)(1) Any person receiving benefits under this article
shall be deemed to have assigned the rights under, and any causes
of action relating to, the covered policy or contract to the
association to the extent of the benefits received because of
this article, whether the benefits are payments of or on account
of contractual obligations, continuation of coverage or provision
of substitute or alternative coverages. The association mayrequire an assignment to it of such rights and cause of action by
any payee, policy or contract owner, beneficiary, insured or
annuitant as a condition precedent to the receipt of any right or
benefits conferred by this article upon such person.
(2) The subrogation rights of the association under this
subsection shall have the same priority against the assets of the
impaired or insolvent insurer as that possessed by the person
entitled to receive benefits under this article.
(3) In addition to subdivisions (1) and (2) above, the
association shall have all common law rights of subrogation and
any other equitable or legal remedy which would have been
available to the impaired or insolvent insurer or holder of a
policy or contract with respect to such policy or contracts.
(n) The association may:
(1) Enter into such contracts as are necessary or proper to
carry out the provisions and purposes of this article;
(2) Sue or be sued, including taking any legal actions
necessary or proper to recover any unpaid assessments under
section nine of this article and to settle claims or potential
claims against it;
(3) Borrow money to effect the purpose of this article; any
notes or other evidence of indebtedness of the association not in
default shall be legal investments for domestic insurers and may
be carried as admitted assets;
(4) Employ or retain such persons as are necessary to handle
the financial transactions of the association, and to perform
such other functions as become necessary or proper under this
article;
(5) Take such legal action as may be necessary to avoid
payment of improper claims;
(6) Exercise, for the purposes of this article and to the
extent approved by the commissioner, the powers of a domestic
life or health insurer, but in no case may the association issue
insurance policies or annuity contracts other than those issued
to perform its obligations under this article.
(o) The association may join an organization of one or more
other state associations of similar purposes, to further the
purposes and administer the powers and duties of the association.
§33-26A-9. Assessments.
(a) For the purpose of providing the funds necessary to
carry out the powers and duties of the association, the board of
directors shall assess the member insurers, separately for each
account, at such time and for such amounts as the board finds
necessary. Assessments shall be due not less than thirty days
after prior written notice to the member insurers and shall
accrue interest at ten percent per annum on and after the due
date.
(b) There shall be two assessments, as follows:
(1) Class A assessments shall be made for the purpose of
meeting administrative and legal costs and other expenses and
examinations conducted under the authority of subsection (e) of
section twelve, of this article. Class A assessments may be made
whether or not related to a particular impaired or insolvent
insurer.
(2) Class B assessments shall be made to the extent
necessary to carry out the powers and duties of the associationunder section eight with regard to an impaired or insolvent
insurer.
(c)(1) The amount of any Class A assessment shall be
determined by the board and may be made on a pro rata or non-pro
rata basis. If pro rata, the board may provide that it be
credited against future Class B assessments. A non-pro rata
assessment shall not exceed one hundred and fifty dollars per
member insurer in any one calendar year. The amount of any Class
B assessment shall be allocated for assessment purposes among the
accounts pursuant to an allocation formula which may be based on
the premiums or reserves of the impaired or insolvent insurer or
any other standard deemed by the board in its sole discretion as
being fair and reasonable under the circumstances.
(2) Class B assessments against member insurers for each
account and subaccount shall be in the proportion that the
premiums received on business in this state by each assessed
member insurer on policies or contracts covered by each account
for the three most recent calendar years for which information is
available preceding the year in which the insurer became impaired
or insolvent, as the case may be, bears to such premiums received
on business in this state for such calendar years by all assessed
member insurers.
(3) Assessments for funds to meet the requirements of the
association with respect to an impaired or insolvent insurer
shall not be made until necessary to implement the purposes of
this article. Classification of assessments under subsection (b)
of this section and computation of assessments under this
subsection shall be made with reasonable degree of accuracy,recognizing that exact determinations may not always be possible.
(d) The association may abate or defer, in whole or in part,
the assessment of a member insurer if, in the opinion of the
board, payment of the assessment would endanger the ability of
the member insurer to fulfill its contractual obligations. In
the event an assessment against a member insurer is abated, or
deferred, in whole or in part, the amount by which such
assessment is abated or deferred may be assessed against the
other member insurers in a manner consistent with the basis for
assessments set forth in this section.
(e)(1) The total of all assessments upon a member insurer
for the life and annuity account and for each subaccount
thereunder shall not in any one calendar year exceed two percent
and for the health account shall not in any one calendar year
exceed two percent of such insurer's average premiums received in
this state on the policies and contracts covered by the account
during the three calendar years preceding the year in which the
insurer became an impaired or insolvent insurer. If the maximum
assessment, together with the other assets of the association in
any account, does not provide in any one year in either account
an amount sufficient to carry out the responsibilities of the
association, the necessary additional funds shall be assessed as
soon thereafter as permitted by this article.
(2) The board may provide in the plan of operation a method
of allocating funds among claims, whether relating to one or more
impaired or insolvent insurers, when the maximum assessment will
be insufficient to cover anticipated claims.
(3) If a one percent assessment for any subaccount of thelife and annuity account in any one year does not provide an
amount sufficient to carry out the responsibilities of the
association, then pursuant to subdivision (2), subsection (c) of
this section, the board shall assess all subaccounts of the life
and annuity account for the necessary additional amount, subject
to the maximum stated in subdivision (1), subsection (e) of this
section.
(f) The board may, by an equitable method as established in
the plan of operation, refund to member insurers, in proportion
to the contribution of each insurer to that account, the amount
by which the assets of the account exceed the amount the board
finds is necessary to carry out during the coming year the
obligations of the association with regard to that account,
including assets accruing from assignment, subrogation, net
realized gains and income from investments. A reasonable amount
may be retained in any account to provide funds for the
continuing expenses of the association and for future losses.
(g) It shall be proper for any member insurer, in
determining its premium rates and policy owner dividends as to
any kind of insurance within the scope of this article, to
consider the amount reasonably necessary to meet its assessment
obligations under this article.
(h) The association shall issue to each insurer paying an
assessment under this article, other than Class A assessment, a
certificate of contribution, in a form prescribed by the
commissioner, for the amount of the assessment so paid. All
outstanding certificates shall be of equal dignity and priority
without reference to amounts or dates of issue. A certificate ofcontribution may be shown by the insurer in its financial
statement as an asset in such form and for such amount, if any,
and period of time as the commissioner my approve.
§33-26A-10. Plan of operation.
(a) The association shall submit to the commissioner a plan
of operation and any amendments thereto necessary or suitable to
assure the fair, reasonable and equitable administration of the
association. The plan of operation and any amendments thereto
shall become effective upon the commissioner's written approval
or unless he has not disapproved of the same within thirty days.
(b) If the association fails to submit a suitable plan of
operation within one hundred eighty days following the effective
date of this article or if at any time thereafter the association
fails to submit suitable amendments to the plan, the commissioner
shall, after notice and hearing, adopt and promulgate such
reasonable rules as are necessary or advisable to effectuate the
provisions of this article. Such rules shall continue in force
until modified by the commissioner or superseded by a plan
submitted by the association and approved by the commissioner.
(c) All member insurers shall comply with the plan of
operation.
(d) The plan of operation shall, in addition to requirements
enumerated elsewhere in this article:
(1) Establish procedures for handling the assets of the
association;
(2) Establish the amount and method of reimbursing members
of the board of directors under section seven of this article;
(3) Establish regular places and times for meetingsincluding telephone conference calls of the board of directors;
(4) Establish procedures for records to be kept of all
financial transactions of the association, its agents, and the
board of directors;
(5) Establish the procedures whereby selections for the
board of directors will be made and submitted to the
commissioner;
(6) Establish any additional procedures for assessments
under section nine of this article; and
(7) Contain additional provisions necessary or proper for
the execution of the powers and duties of the association.
(e) The plan of operation may provide that any or all powers
and duties of the association, except those under subdivision
(3), subsection (m), section eight, and section nine of this
article, are delegated to a corporation, association, or other
organization which performs or will perform functions similar to
those of this association, or its equivalent, in two or more
states. Such a corporation, association or organization shall be
reimbursed for any payments made on behalf of the association and
shall be paid for its performance of any function of the
association. A delegation under this subsection shall take
effect only with the approval of both the board of directors and
the commissioner, and may be made only to a corporation,
association or organization which extends protection not
substantially less favorable and effective than that provided by
this article.
§33-26A-11. Duties and powers of commissioner of insurance.
In addition to the duties and powers enumerated elsewhere inthis article:
(a) The commissioner shall:
(1) Upon request of the board of directors, provide the
association with a statement of the premiums in this and any
other appropriate states for each member insurer;
(2) When an impairment is declared and the amount of the
impairment is determined, serve a demand upon the impaired
insurer to make good the impairment within a reasonable time.
Notice to the impaired insurer shall constitute notice to its
shareholders, if any; the failure of the insurer to promptly
comply with the demand shall not excuse the association from the
performance of its powers and duties under this article; and
(3) In any liquidation or rehabilitation proceeding
involving a domestic insurer, be appointed as the liquidator or
rehabilitator.
(b) The commissioner may suspend or revoke, after notice and
hearing, the certificate of authority to transact insurance in
this state of any member insurer which fails to pay an assessment
when due or fails to comply with the plan of operation. As an
alternative, the commissioner may levy a forfeiture on any member
insurer which fails to pay an assessment when due. The
forfeiture shall not exceed five percent of the unpaid assessment
per month, but no forfeiture shall be less than one hundred
dollars per month.
(c) Any action of the board of directors or the association
may be appealed to the commissioner by any member insurer if such
appeal is taken within sixty days of the final action being
appealed. If a member company is appealing an assessment, theamount assessed shall be paid to the association and available to
meet association obligations during the pendency of an appeal.
If the appeal on the assessment is upheld, the amount paid in
error or excess shall be returned to the member company. Any
final action or order of the commissioner shall be subject to
judicial review in a court of competent jurisdiction.
(d) The liquidator, rehabilitator or conservator of any
impaired insurer may notify all interested persons of the effect
of this article.
§33-26A-12. Prevention of insolvencies; duties of commissioner;
coordination with board of directors; duties of the
board of directors; requested examinations;
procedures and reports.
To aid in the detection and prevention of insurer
insolvencies or impairments:
(a) It shall be the duty of the commissioner:
(1) To notify the commissioners of all the other states,
territories of the United States and the District of Columbia
when he takes any of the following actions against a member
insurer;
(A) Revocation of license;
(B) Suspension of license; or
(C) Makes any formal order that such company restrict its
premium writing, obtain additional contributions to surplus,
withdraw from the state, reinsure all or any part of its
business, or increase capital, surplus or any other account for
the security of policyholders or creditors:
Provided,
That such
notice shall be mailed to all commissioners within thirty daysfollowing the action taken or the date on which the action
occurs.
(2) To report to the board of directors when he or she has
taken any of the actions set forth in subdivision (1) of
subsection (a) of this section or has received a report from any
other commissioner indicating that any such action has been taken
in another state. Such report to the board of directors shall
contain all significant details of the action taken or the report
received from another commissioner.
(3) To report to the board of directors when he or she has
reasonable cause to believe from any examination, whether
completed or in process, of any member company that the company
may be an impaired or insolvent insurer.
(4) To furnish to the board of directors the national
association of insurance commissioners (NAIC) insurance
regulatory information system (IRIS) ratios and listings of
companies not included in the ratios developed by the national
association of insurance commissioners, and the board may use the
information contained therein in carrying out its duties and
responsibilities under this section. The report and the
information contained therein shall be kept confidential by the
board of directors until it is made public by the commissioner or
other lawful authority.
(b) The commissioner may seek the advice and recommendations
of the board of directors concerning any matter affecting his or
her duties and responsibilities regarding the financial condition
of member insurers and companies seeking admission to transact
insurance business in this state.
(c) The board of directors may, upon majority vote, make
reports and recommendations to the commissioner upon any matter
germane to the solvency, liquidation, rehabilitation or
conservation of any member insurer or germane to the solvency of
any company seeking to do an insurance business in this state.
The reports and recommendations shall not be considered public
documents.
(d) It shall be the duty of the board of directors, upon
majority vote, to notify the commissioner of any information
indicating any member insurer may be an impaired or insolvent
insurer.
(e) The board of directors may, upon majority vote, request
that the commissioner order an examination of any member insurer
which the board in good faith believes may be an impaired or
insolvent insurer. Within thirty days of the receipt of a
request, the commissioner shall begin an examination. The
examination may be conducted as a national association of
insurance commissioner's examination or may be conducted by
persons that the commissioner designates. The cost of such
examination shall be paid by the association and the examination
report shall be treated as are other examination reports. In no
event shall the examination report be released to the board of
directors prior to its release to the public, but this shall not
preclude the commissioner from complying with subsection (a) of
this section. The commissioner shall notify the board of
directors when the examination is completed. The request for an
examination shall be kept on file by the commissioner, but it
shall not be open to public inspection prior to the release ofthe examination report to the public.
(f) The board of directors may, upon majority vote, make
recommendations to the commissioner for the detection and
prevention of insurer insolvencies.
(g) The board of directors shall, at the conclusion of any
insurer insolvency in which the association was obligated to pay
covered claims, prepare a report to the commissioner containing
such information as it may have in its possession bearing on the
history and causes of such insolvency. The board shall cooperate
with the boards of directors of guaranty associations in other
states in preparing a report on the history and causes of
insolvency of a particular insurer, and may adopt by reference
any report prepared by such other associations.
§33-26A-13. Appointment of special deputy.
The association may recommend a natural person to serve as
a special deputy to act for the commissioner and under his or her
supervision in the liquidation, rehabilitation or conservation of
any member insurer.
§33-26A-14. Miscellaneous provisions.
(a) Nothing in this article shall 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.
(b) Records shall be kept of all negotiations and meetings
in which the association or its representatives are involved to
discuss the activities of the association in carrying out its
powers and duties under section eight of this article. Records
of such negotiations or meetings shall be made public only uponthe termination of a liquidation, rehabilitation or conservation
proceeding involving the impaired or insolvent insurer, upon the
termination of the impairment or insolvency of the insurer, or
upon the order of a court of competent jurisdiction. Nothing in
this subsection shall limit the duty of the association to render
a report of its activities under section fifteen of this article.
(c) For the purpose of carrying out its obligations under
this article, the association shall be deemed to be a creditor of
the impaired or insolent insurer to the extent of assets
attributable to covered policies reduced by any amounts to which
the association is entitled as assignee or subrogee pursuant to
subsection (m), section eight of this article. All assets of the
impaired or insolvent insurer attributable to covered policies
shall be used to continue all covered policies and pay all
contractual obligations of the impaired or insolvent insurer as
required by this article. Assets attributable to covered
policies, as used in this subsection, are that proportion of the
assets which the reserves that should have been established for
the policies bear to the reserves that should have been
established for all policies of insurance written by the impaired
or insolvent insurer.
(d)(1) Prior to the termination of any liquidation,
rehabilitation or conservation proceeding, the court may take
into consideration the contributions of the respective parties,
including the association, the shareholders and policy owners of
the insolvent insurer, and any other party with a bona fide
interest, in making an equitable distribution of the ownership
rights of such insolvent insurer. In making such adetermination, consideration shall be given to the welfare of the
policyholders of the continuing or successor insurer.
(2) No distribution to stockholders, if any, of an impaired
or insolvent insurer shall be made until and unless the total
amount of valid claims of the association with interest thereon
for funds expended in carrying out its powers and duties under
section eight of this article with respect to the insurer have
been fully recovered by the association.
(e)(1) If an order for liquidation or rehabilitation of an
insurer domiciled in this state has been entered, the receiver
appointed under such order shall have a right to recover on
behalf of the insurer, from any affiliate that controlled it, the
amount of distributions other than stock dividends paid by the
insurer on its capital stock made at any time during the five
years preceding the petition for liquidation or rehabilitation
subject to the limitations of this subsection.
(2) Distribution shall not be recoverable if the insurer
shows that when paid the distribution was lawful and reasonable,
and that the insurer did not know and could not reasonably have
known that the distribution might adversely affect the ability of
the insurer to fulfill its contractual obligations.
(3) Any person who, as an affiliate, controlled the insurer
at the time the distributions were paid shall be liable up to the
amount of distributions he or she received. Any person who, as
an affiliate, controlled the insurer at the time the
distributions were declared, shall be liable up to the amount of
distributions he or she would have received if they had been paid
immediately. If two or more persons are liable with respect tothe same distributions, they shall be jointly and severally
liable.
(4) The maximum amount recoverable under this subsection
shall be the amount required in excess of all other available
assets of the impaired or insolvent insurer to pay the
contractual obligations of the impaired or insolvent insurer.
(5) If any person under subdivision (3) is insolvent, all
its affiliates that controlled it at the time the distribution
was paid shall be jointly and severally liable for any resulting
deficiency in the amount recovered from the insolvent affiliate.
§33-26A-15. Examination of association; annual report.
The association shall be subject to examination and
regulation by the commissioner. The board of directors shall
submit to the commissioner, not later than the first day of May
of each year, a financial report for the preceding calendar year
in a form approved by the commissioner and a report of its
activities during the preceding calendar year.
§33-26A-16. Tax exemptions.
The association shall be exempt from payment of all fees and
all taxes levied by this state or any of its subdivisions, except
taxes levied on real property.
§33-26A-17. Immunity.
There shall be no liability on the part of and no cause of
action of any nature shall arise against any member insurer or
its agents or employees, the association or its agents or
employees, members of the board of directors, or the commissioner
or his or her representatives, for any action or omission by them
in the performance of their powers and duties under this article. Such immunity shall extend to the participation in any
organization of one or more other state associations of similar
purposes and to any such organization and its agents or
employees.
§33-26A-18. Stay of court proceedings; reopening default
judgments.
All proceedings in which the impaired or insolvent insurer
is a party in any court in this state shall be stayed sixty days
from the date an order of liquidation, rehabilitation or
conservation is final to permit proper legal action by the
association on any matters germane to its powers or duties. As
to a judgment under any decision, order, verdict or finding based
on default the association may apply to have the judgment set
aside by the same court that made the judgment and shall be
permitted to defend against the suit on the merits.
§33-26A-19. Prohibited advertisement of insurance guaranty
association act in insurance sales; notice to
policyholders.
(a) A person, including any insurer, agent or affiliate of
an insurer shall not make, publish, disseminate, circulate or
place before the public, or cause directly or indirectly, to be
made, published, disseminated, circulated or placed before the
public, in any newspaper, magazine or other publication, or in
the form of a notice, circular, pamphlet, letter or poster, or
over any radio station or television station, or in any other
way, any advertisement, announcement or statement, written or
oral, which uses the existence of the insurance guaranty
association of this state for the purpose of sales, solicitationor inducement to purchase any form of insurance covered by the
West Virginia life and health insurance guaranty association act:
Provided,
That this section shall not apply to the association or
any other entity which does not sell or solicit insurance.
(b) Within one hundred eighty days of the effective date of
this section, the association shall prepare a summary document
describing the general purposes and current limitations of the
act and complying with subsection (c) of this section. This
document should be submitted to the commissioner for approval.
Sixty days after receiving such approval, no insurer may deliver
a policy or contract described in subdivision (1) of subsection
(b) of section three of this article to a policy or contract
holder unless the document is delivered to the policy or contract
holder prior to or at the time of delivery of the policy or
contract except if subsection (d) of this section applies. The
document should also be available upon request by a policyholder.
The distribution, delivery, or contents or interpretation of this
document shall not mean that either the policy or the contract of
the holder thereof would be covered in the event of the
impairment or insolvency of a member insurer. The description
document shall be revised by the association as amendments to the
act may require. Failure to receive this document does not give
the policyholder, contract holder, certificate holder or insured
any greater rights than those stated in this article.
(c) The document prepared under subsection (b) of this
section shall contain a clear and conspicuous disclaimer on its
face. The commissioner shall promulgate a rule establishing the
form and content of the disclaimer. The disclaimer shall:
(1) State the name and address of the association and
insurance department;
(2) Prominently warn the policy or contract holder that the
association may not cover the policy or, if coverage is
available, it will be subject to substantial limitations and
exclusions and conditioned on continued residence in the state;
(3) State that the insurer and its agents are prohibited by
law from using the existence of the association for the purpose
of sales, solicitation or inducement to purchase any form of
insurance;
(4) Emphasize that the policy or contract holder should not
rely on coverage under the association when selecting an insurer;
(5) Provide other information as directed by the
commissioner.
(d) An insurer or agent may not deliver a policy or contract
described in subdivision (1) of subsection (b) of section three
of this article and excluded under paragraph (A), subdivision
(2), subsection (b) of section three of this article from
coverage under this article unless the insurer or agent, prior to
or at the time of delivery, gives the policy or contract holder
a separate written notice which clearly and conspicuously
discloses that the policy or contract is not covered by the
association. The commissioner shall by rule specify the form and
content of the notice, which rules shall be promulgated on or
before the second day of August, one thousand nine hundred
ninety-three.