§ 10-20-108 — Powers and duties of the association

Colorado § 10-20-108

• Jurisdiction: Colorado
• Title 10: Insurance
• Art.: Life and Health Insurance

Text

(1) If a member insurer is
an impaired 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 and that are approved by the commissioner:

(a) Guarantee, assume, reissue, or reinsure or cause to be guaranteed,
assumed, reissued, or reinsured any or all of the policies or contracts of the
impaired insurer; or

(b) Provide such moneys, pledges, loans, notes, guarantees, or other means
as proper to effectuate paragraph (a) of this subsection (1) and assure payment of
the contractual obligations of the impaired insurer pending action under said
paragraph (a).

(2) If a member insurer is an insolvent insurer, the association shall, in its
discretion, either:

(a) Guarantee, assume, reissue, or reinsure or cause to be guaranteed,
assumed, reissued, or reinsured the covered policies or contracts of the insolvent
insurer and provide such money, pledges, notes, guarantees, or other means as are
reasonably necessary to discharge those duties; or

(b) Assure payment of the contractual obligations of the insolvent insurer to
the residents and provide such moneys, pledges, notes, guarantees, or other means
as are reasonably necessary to discharge those duties; or

(c) Provide benefits and coverages in accordance with the following
provisions:

(I) With respect only to life insurance, health insurance, health benefit plans,
and annuities, assure payment of benefits that would have been payable under the
policies or contracts of the insolvent insurer for claims incurred:

(A) With respect to group policies and contracts, not later than the earlier of
the next renewal date under the 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 the policies or contracts;

(B) With respect to nongroup policies, contracts, and annuities, not later than
the earlier of the next renewal date, if any, under the policies or contracts or one
year, but in no event less than thirty days, after the date on which the association
becomes obligated with respect to the policies or contracts.

(II) Make diligent efforts to provide to all known insureds, enrollees, or
annuitants for nongroup policies and contracts, or to group policy or contract
owners with respect to group policies and contracts, thirty days' notice of the
termination under subsection (2)(c)(I) of this section of the benefits provided.

(III) With respect to nongroup life insurance, health insurance, health benefit
plans, and annuities covered by the association, make available to each known
insured, enrollee, or annuitant, or to the owner if other than the insured, enrollee, or
annuitant, and with respect to an individual formerly insured or enrolled or formerly
an annuitant under a group policy or contract who is not eligible for replacement
group coverage, substitute coverage on an individual basis in accordance with
subsection (2)(c)(IV) of this section, if the insureds, enrollees, or annuitants had a
right under law or the terminated policy, contract, or annuity to convert coverage to
individual coverage or to continue an individual policy, contract, or annuity in force
until a specified age or for a specified time, during which the insurer or health
maintenance organization had no right to unilaterally make changes in any
provisions of the policy, contract, or annuity or had a right only to make changes in
premium by class.

(IV) (A) In providing the substitute coverage required under subsection
(2)(c)(III) of this section, the association may offer either to reissue the terminated
coverage or to issue an alternative policy or contract at actuarially justified rates
approved by the commissioner.

(B) The association shall offer alternative or reissued policies or contracts
without requiring evidence of insurability, and the policies or contracts must not
provide for any waiting period or exclusion that would not have applied under the
terminated policy or contract.

(C) The association may reinsure any alternative or reissued policy or
contract.

(V) (A) Alternative policies or contracts adopted by the association are
subject to the approval of the commissioner. The association may adopt alternative
policies or contracts of various types for future issuance without regard to any
particular impairment or insolvency.

(B) Alternative policies or contracts must contain at least the minimum
statutory provisions required in this state and provide benefits reasonably related
to the premium charged. The association shall set the premium in accordance with
a table of rates that the association adopts. The premium must reflect the amount
of insurance or coverage to be provided and the age and class of risk of each
insured but must not reflect any changes in the health of the insured after the
original policy or contract was last underwritten.

(C) Any alternative policy or contract issued by the association must provide
coverage of a type similar to that of the policy or contract issued by the impaired or
insolvent insurer, as determined by the association.

(VI) If the association elects to reissue terminated coverage at a premium
rate different from that charged under the terminated policy or contract, the
association shall set an actuarially justified premium in accordance with the amount
of insurance or coverage provided and the age and class of risk, subject to approval
by the commissioner.

(VII) The obligations of the association, with respect to coverage under any
policy or contract of the impaired or insolvent insurer or under any reissued or
alternative policy or contract, cease on the date the coverage, policy, or contract is
replaced by another similar policy or contract by the policy owner, insured, enrollee,
or association.

(VIII) When proceeding under this subsection (2)(c), 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 section 10-20-104 (2)(b)(III).

(3) and (4) Repealed.

(5) Nonpayment of premiums within thirty-one days after the date required
under the terms of any guaranteed, assumed, alternative, or reissued policy or
contract or substitute coverage terminates the obligations of the association under
the policy, contract, or coverage under this article 20 with respect to the policy,
contract, or coverage, except with respect to any claims incurred or any net cash
surrender value that may be due in accordance with this article 20.

(6) Premiums due for coverage after entry of an order of liquidation of an
insolvent insurer belong to and are payable at the direction of the association, and
the association is liable for unearned premiums due to policy or contract owners
arising after the entry of the order.

(6.5) The protection provided by this article does not apply when 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.

(7) In carrying out its duties under subsection (2) of this section, the
association may, subject to approval by a court of competent jurisdiction:

(a) 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 duties of the association
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;

(b) 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. In addition, in the event of a temporary moratorium or moratorium
charge imposed by the receivership court on payment of cash values or policy loans
or on any other right to withdraw funds held in conjunction with policies or
contracts out of the assets of the impaired or insolvent insurer, the association may
defer its payment of cash values, policy loans, or other rights of the association for
the period of the moratorium or moratorium charge by the receivership court,
except for claims covered by the association to be paid in accordance with a
hardship procedure established by the liquidator or rehabilitator and approved by
the receivership court.

(8) If the association fails to act within a reasonable period of time as
provided in subsection (2) of this section, the commissioner shall have the powers
and duties of the association under this article with respect to insolvent insurers.

(9) There shall be no liability on the part of, and no cause of action shall arise
against, the association, or any transferee from the association in connection with
the transfer by reinsurance or otherwise of all or any part of an impaired or
insolvent insurer's business by reason of any action taken or any failure to take any
action by the impaired or insolvent insurer at any time.

(10) The association may render assistance and advice to the commissioner,
upon the commissioner's request, concerning rehabilitation, payment of claims,
continuance of coverage, or the performance of other contractual obligations of
any impaired or insolvent insurer.

(11) The association has standing to appear or intervene before any court or
agency in this state that has jurisdiction over a member insurer for which the
association is or may become obligated under this article 20, or with jurisdiction
over any person or property against which the association may have rights through
subrogation or otherwise. The association's standing extends to all matters
germane to the powers and duties of the association, including proposals for
reinsuring, reissuing, modifying, or guaranteeing the policies or contracts of the
member insurer and the determination of the policies or contracts and contractual
obligations. The association also has the right to appear or intervene before a court
or agency in another state with jurisdiction over a member insurer for which the
association is or may become obligated or with jurisdiction over any person or
property against whom the association may have rights through subrogation or
otherwise.

(12) (a) Any person receiving benefits under this article 20 is deemed to have
assigned the rights under, and any causes of action against any person for losses
arising under, resulting from, or otherwise relating to, the covered policy or
contract to the association to the extent of the benefits received because of this
article 20, whether the benefits are payments of or on account of contractual
obligations, continuation of coverage, or the provision of substitute or alternative
policies, contracts, or coverage. The association may require any payee, policy or
contract owner, beneficiary, insured, enrollee, or annuitant to assign the person's
rights under, and causes of action against any person for losses arising under,
resulting from, or otherwise relating to, the covered policy or contract to the
association as a condition precedent to the receipt of any right or benefits
conferred by this article 20 upon the person.

(b) The subrogation rights of the association under this subsection (12) have
the same priority against the assets of the impaired or insolvent insurer as the
rights possessed by the person entitled to receive benefits under this article 20.

(c) In addition to subsections (12)(a) and (12)(b) of this section, the association
has all common-law rights of subrogation and any other equitable or legal remedy
that would have been available to the impaired or insolvent insurer, owner,
beneficiary, enrollee, or payee of a policy or contract.

(d) If any provision of subsection (12)(a), (12)(b), or (12)(c) of this section is
invalid or ineffective with respect to any person or claim for any reason, the amount
payable by the association with respect to the related covered obligations is
reduced by the amount realized by any other person with respect to the person or
claim that is attributable to the policies or contracts or portions of the policies or
contracts covered by the association.

(e) If the association has provided benefits with respect to a covered
obligation and a person recovers amounts as to which the association has rights as
described in subsections (12)(a) to (12)(d) of this section, the person shall pay to the
association the portion of the recovery attributable to the policies or contracts, or
portions of policies or contracts, covered by the association.

(13) The association may:

(a) Enter into such contracts as are necessary or proper to carry out the
provisions and purposes of this article;

(b) Sue or be sued, including taking any legal actions necessary or proper to
recover any unpaid assessments pursuant to section 10-20-109 and to settle claims
or potential claims against it;

(c) Borrow money to effect the purposes of this article 20, and any notes or
other evidence of indebtedness of the association not in default are legal
investments for domestic member insurers and may be carried as admitted assets;

(d) 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;

(e) Take such legal action as necessary to avoid payment of improper claims
or recover payment of improper claims;

(f) Exercise, for the purposes of this article 20 and to the extent approved by
the commissioner, the powers of a domestic life insurer, health insurer, or health
maintenance organization, but the association shall not issue policies or contracts
other than those issued to perform its obligations under this article 20;

(g) Negotiate and contract with any liquidator or ancillary receiver to carry
out the powers and duties of the association;

(g.5) Request information from persons seeking coverage from the
association in order to aid the association in determining its obligations under this
article with respect to the person; and a person receiving such request shall
promptly comply;

(g.7) Take other necessary or appropriate action to exercise its powers and
discharge its duties and obligations under this article;

(h) With respect to covered policies for which the association becomes
obligated after an entry of an order of liquidation, elect to succeed to the rights of
an insolvent insurer arising after the date of the order of liquidation under any
contract of reinsurance to which the insolvent insurer was a party, to the extent
that such contract provides coverage for losses occurring after the date of the
order of liquidation. As a condition to making this election, the association shall pay
unpaid premiums due with respect to policies covered by the association for
coverage relating to periods both before and after the date of the order of
liquidation.

(i) File for an actuarially justified rate or premium increase for any policy or
contract that it guarantees, assumes, reinsures, reissues, or otherwise provides
coverage under this section in accordance with the terms and conditions of the
policy or contract and in accordance with other applicable provisions of state law.

(14) The association may join an organization of one or more other state
associations of similar purposes to further the purposes and to administer the
powers and duties of the association.

(15) Every insured or claimant seeking the protection of this article shall
cooperate with the association to the same extent the person or entity would have
been required to cooperate with the impaired or insolvent insurer. The association
has no cause of action against the insured of the impaired or insolvent insurer for
any sums the association has paid out except those causes of action the impaired or
insolvent insurer would have had if the sums had been paid by the impaired or
insolvent insurer. If an impaired or insolvent insurer operates on a plan with
assessment liability, payments of claims by the association do not reduce the
liability of the insured to the receiver, liquidator, rehabilitator, conservator, or
statutory successor for unpaid assessments.

(16) The receiver, liquidator, rehabilitator, conservator, or statutory
successor of an impaired or insolvent insurer is bound by settlements of covered
claims by the association or a similar organization in another state. The association
has a claim against the estate of the impaired or insolvent insurer to the extent of
claims and expenses paid by the association in connection with the duties of the
association as to the impaired or insolvent insurer. The court having jurisdiction
shall grant these settled claims in the priority to which the claimant would have
been entitled in the absence of this article against the assets of the impaired or
insolvent insurer. The expenses, including legal fees of the association or similar
organization in handling claims, shall be given the same priority as the expenses of
the liquidator, rehabilitator, or conservator.

(17) The association shall periodically file with the liquidator, rehabilitator, or
conservator of the impaired or insolvent insurer statements of the covered claims
and associated expenses paid by the association and estimates of anticipated
claims against the association. This periodic filing preserves the rights of the
association for claims against the assets of the impaired or insolvent insurer.

(18) The association shall investigate claims brought against it and adjust,
compromise, settle, and pay covered claims to the extent of the obligation of the
association and deny all other claims.

(19) A person who has a claim against a member insurer pursuant to a
provision of a policy or contract, other than a policy or contract of an impaired or
insolvent insurer, that also is a contractual obligation under this article 20, must
first exhaust the person's right under that policy or contract. The amount of an
approved claim under this article 20 must be reduced by the policy or contract
limits of, or amount paid under, that policy or contract, whichever amount is greater.
If a claimant exhausts all rights under a policy or contract, other than a policy or
contract of an impaired or insolvent insurer, the member insurer issuing that policy
or contract is not entitled to sue or continue a suit against the insured of the
impaired or insolvent insurer to recover an amount paid to the claimant under the
policy or contract; except that a person having a contractual obligation, as defined
by this article 20, under a life insurance policy or an annuity contract issued by an
impaired or insolvent insurer is not required to exhaust other coverage for that
claim, and the amount of an approved claim under a life insurance policy or annuity
contract issued by an impaired or insolvent insurer may not be reduced because of
that duplicate coverage.

(20) Where the association has arranged or offered to provide the benefits of
this article to a covered person under a plan or arrangement that fulfills the
association's obligations under this article, the person shall not be entitled to
benefits from the association in addition to or other than those provided under the
plan or arrangement.

(21) Venue in a suit against the association arising under this article shall be
in the city and county of Denver. The association shall not be required to give an
appeal bond in an appeal that relates to a cause of action arising under this article.

(22) In carrying out its duties in connection with guaranteeing, assuming,
reissuing, or reinsuring policies or contracts under this section, the association may
issue substitute coverage at actuarially justified rates for a policy or contract that
provides for the calculation of returns or changes in value or benefits by the use of
an interest rate, crediting rate, or similar factor determined by use of an index or
other external reference, by issuing an alternative policy or contract in accordance
with the following provisions:

(a) In lieu of the index or other external reference provided for in the original
policy or contract, the alternative policy or contract provides for a fixed interest
rate, payment of dividends with minimum guarantees, or a different method for
calculating interest or changes in value;

(b) There is no requirement for the evidence of insurability, a waiting period,
or any other exclusion that would not have applied under the replaced policy or
contact;

(c) The alternative policy or contract is substantially similar to the replaced
policy or contract in all other material terms.

(23) The board has discretion and may exercise reasonable business
judgment to determine the means by which the association is to provide the
benefits of this article in an economical and efficient manner.

(24) In carrying out its duties in connection with guaranteeing, assuming,
reissuing, or reinsuring policies or contracts under subsection (1) or (2) of this
section, the association may issue substitute coverage for a policy or contract that
provides an interest rate, crediting rate, or similar factor, determined by use of an
index or other external reference stated in the policy or contract, employed in
calculating returns or changes in value by issuing an alternative policy or contract
in accordance with the following provisions:

(a) In lieu of the index or other external reference provided for in the original
policy or contract, the alternative policy or contract provides for a fixed interest
rate, payment of dividends with minimum guarantees, or a different method for
calculating interest or changes in value;

(b) There is no requirement for evidence of insurability, waiting period, or
other exclusion that would not have applied under the replaced policy or contract;
and

(c) The alternative policy or contract is substantially similar to the replaced
policy or contract in all other material terms.

Legislative History

Source: L. 91: Entire article added, p. 1262, � 1, effective July 1. L. 94: IP(3)(a) and (4) amended, p. 1650, � 93, effective May 31. L. 2000: (10), (11), (12)(a), and (12)(c) amended and (13)(g.5), (13)(g.7), (20), (21), and (22) added, p. 1020, �� 3, 4, effective July 1. L. 2002: (13)(h) amended, p. 122, � 1, effective March 26. L. 2013: (1), (2), IP(7), (7)(b), (8), (9), (10), (12)(b), (12)(c), (13)(e), (15), (16), (17), and (19) amended, (3) and (4) repealed, and (6.5), (12)(d), (12)(e), (23), and (24) added, (SB 13-032), ch. 34, p. 87, � 4, effective March 15. L. 2023: (1)(a), (2)(a), (2)(c), (5), (6), (11), (12), (13)(c), (13)(f), (19), IP(22), and IP(24) amended and (13)(i) added, (HB 23-1303), ch. 195, p. 984, � 8, effective May 15.