§ 27-8-8-5 — Impaired insurers; insolvent insurers; liens; association powers and duties

Indiana § 27-8-8-5

• Jurisdiction: Indiana
• Title 27: INSURANCE
• Art. 8: LIFE, ACCIDENT, AND HEALTH
• Ch. 8: Indiana Life and Health Insurance Guaranty Association

Text

(a) If a member insurer is an impaired insurer,
the association may, in the association's sole 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:
(1) guarantee, assume, reissue, reinsure, or perform, or cause to
be guaranteed, assumed, reissued, reinsured, or performed, the
contractual obligations of any of the covered policies of the
impaired insurer or otherwise assure the discharge of the
contractual obligations of the covered policies of the impaired
insurer; and
(2) provide money, pledges, loans, notes, guarantees, or use other
means as determined by the association in the association's sole
discretion to be necessary or appropriate to effectuate subdivision
(1).
(b) An obligation undertaken by the association under subsection (a)
with respect to a covered policy of an impaired insurer ceases on the
date the covered policy is replaced by the policy owner, insured, or
association.
(c) If a member insurer is an insolvent insurer, the association shall,
in the association's sole discretion, do one (1) of the following for each
covered policy:
(1) Guarantee, assume, reissue, reinsure, or perform, or cause to
be guaranteed, assumed, reissued, reinsured, or performed, the
contractual obligations of the covered policy or otherwise assure
the discharge of the contractual obligations of the covered policy.
(2) Terminate existing benefits and coverage and provide benefits
and coverages in accordance with the following provisions:
(A) Assure payment of benefits arising under the contractual
obligations, except for terms of conversion and
nonrenewability, for:
(i) with respect to a group covered policy, claims incurred not
later than the earlier of the next renewal date under the
covered policy or forty-five (45) days, but not less than thirty
(30) days, after the coverage date for the insolvent insurer;
and
(ii) with respect to a nongroup covered policy, claims
incurred not later than the earlier of the next renewal date
under the covered policy or one (1) year, but in no event less
than thirty (30) days, after the coverage date for the insolvent
insurer.
(B) Make diligent efforts to provide each:
(i) known insured or annuitant, for a nongroup covered
policy; and
(ii) owner, for a group covered policy;
at least thirty (30) days notice of the termination of the benefits
provided.
(C) Make available substitute coverage, on an individual basis,
to each:
(i) owner of a nongroup covered policy if the owner had a
right to continue the nongroup covered policy in force until
a specified age or for a specified period, during which time
the insurer had no unilateral right to make changes in the
nongroup covered policy's provisions or had only a unilateral
right to make changes in premiums only by class; and
(ii) insured or annuitant under a group covered policy if the
insured or annuitant is not eligible for any replacement group
coverage and had a right, before termination of the group
covered policy, to convert to individual coverage.
(D) In making available any substitute coverage under clause
(C), the association may offer to reissue the terminated
coverage or to issue an alternative policy or contract. If made
available under clause (C), alternative or reissued policies and
contracts must be offered without requiring evidence of
insurability and must not impose any waiting period or
coverage exclusion, other than a waiting period or coverage
exclusion provided for in this chapter, that would not have
applied under the terminated covered policy. The association
may cause any alternative or reissued policy or contract to be
assumed or reinsured.
(E) Use of alternative policies and contracts by the association
is subject to the approval of the commissioner. The association
may adopt alternative policies and contracts of various types for
future issuance without regard to any particular impairment or
insolvency. Alternative policies and contracts must contain at
least the minimum statutory provisions required in Indiana and
provide benefits that are reasonable in relation to the premium
charged. The association shall set the premium in accordance
with a table of rates adopted by the association. The premium
must:
(i) reflect the amount of insurance to be provided and the age
and class of risk of each insured; and
(ii) not reflect changes in the health of the insured after the
terminated covered policy was last underwritten.
Subject to coverage exceptions, exclusions, and limitations
provided for in this chapter, an alternative policy or contract
issued by the association must provide coverage similar, in
material respects, to the coverage under the terminated covered
policy as determined by the association.
(F) If the association elects to reissue terminated coverage at a
premium rate different from the premium rate charged under
the terminated covered policy, the association shall set the
premium in accordance with a table of rates adopted by the
association. The premium:
(i) must reflect the amount of insurance to be provided and
the age and class of risk of each insured; and
(ii) is subject to approval of the commissioner.
(G) The association's obligations with respect to coverage under
a covered policy of an insolvent insurer or under a reissued or
alternative policy or contract ceases on the date the coverage or
covered policy is replaced by another similar policy by the
policy owner, insured, or association.
(H) Subject to subsection (u), when proceeding under this
subdivision with respect to a covered policy carrying
guaranteed minimum interest rates, the association shall assure
the payment or crediting of a rate of interest consistent with
section 2.3(e)(3) of this chapter.
(3) Take any combination of the actions set forth in subdivisions
(1) and (2).
(d) The association may provide money, pledges, loans, notes, or
guarantees, or use other means that the association, in the association's
sole discretion, determines are necessary or appropriate to discharge
the association's duties under subsection (c).
(e) Failure to pay premiums within thirty-one (31) days after the
date that payment is due under the terms of a guaranteed, assumed,
alternative, or reissued policy or contract or substitute coverage
terminates the association's obligations under this chapter with respect
to the policy, contract, or coverage, except with respect to claims
incurred or net cash surrender value due under this chapter.
(f) Premiums due for coverage after the coverage date for an
impaired insurer or insolvent insurer belong to and are payable at the
direction of the association, and the association is liable for unearned
premiums payable to policy or contract owners with respect to
premiums received by the association.
(g) The protection provided by this chapter does not apply where
any guaranty protection is provided to residents of this state by the laws
of the domiciliary state of the impaired insurer or insolvent insurer if
the domiciliary state is a state other than Indiana.
(h) In carrying out its duties under subsection (c), the association
may, subject to approval by a court in Indiana, impose:
(1) permanent policy or contract liens, if the association finds
that:
(A) the amounts that can be assessed under this chapter are less
than the amounts needed to assure full and prompt performance
of the association's duties under this chapter; or
(B) economic or financial conditions, as they affect member
insurers, are sufficiently adverse so as to render the imposition
of the permanent policy or contract liens to be in the public
interest; and
(2) temporary moratoriums or liens on payments of cash values
and policy loans or any other right to withdraw funds held in
conjunction with a covered policy, 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 payments of cash values
or policy loans or any other right to withdraw funds held in conjunction
with a covered policy out of the assets of the impaired insurer or
insolvent insurer, the association may defer the payment of cash values,
policy loans, or other rights by the association for the period of the
moratorium or moratorium charge imposed 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.
(i) A deposit in Indiana, held by law or required by the
commissioner for the benefit of creditors, including policy owners, that
is not turned over to the domiciliary receiver before or promptly after
the coverage date for an impaired insurer or insolvent insurer under IC 27-9-4-3 must be promptly paid to the association. The association:
(1) may retain a part of an amount paid to the association under
this subsection equal to the percentage determined by dividing the
aggregate amount of policy owners' claims related to the
impairment or insolvency for which the association provides
statutory benefits by the aggregate amount of all policy owners'
claims in Indiana related to the impairment or insolvency; and
(2) shall remit to the domiciliary receiver the difference between
the amount paid to the association and the amount retained by the
association under this subsection.
An amount retained by the association under this subsection must be
treated as a distribution of estate assets under IC 27-9-3-32 or similar
provision of the state of domicile of the impaired insurer or insolvent
insurer.
(j) If the association fails to act within a reasonable period of time
as provided in subsection (c) with respect to an insolvent insurer, the
commissioner has the powers and duties of the association under this
chapter with respect to the insolvent insurer.
(k) The association may, upon the commissioner's request, assist
and advise the commissioner concerning rehabilitation, payment of
claims, continuance of coverage, or the performance of other
contractual obligations of an impaired insurer or insolvent insurer.
(l) The association has standing and the right to appear or intervene
before a court or an agency in Indiana or elsewhere with jurisdiction
over an impaired insurer or insolvent insurer for which the association
is or may become obligated under this chapter or with jurisdiction over
a person or property against which the association may have rights
through subrogation or otherwise. Standing extends to all matters
germane to the rights, powers, and duties of the association, including
proposals for reinsuring, modifying, or guaranteeing the policies or
contracts of the impaired insurer or insolvent insurer and the
determination of the policies or contracts and contractual obligations.
(m) A person receiving benefits under this chapter is considered to
have assigned:
(1) the person's rights under; and
(2) any cause of action against another person for losses arising
under, resulting from, or otherwise relating to;
the covered policy to the association to the extent of the benefits
received because of this chapter, whether the benefits are payments of
or on account of contractual obligations or continuation of coverage or
provision of substitute or alternative coverage. The association may
require an assignment to it of those rights and causes of action by a
payee, policy or contract owner, certificate holder, beneficiary, insured,
or annuitant as a condition precedent to the receipt of any right or
benefits conferred by this chapter on the person.
(n) The subrogation rights of the association under subsections (m)
and (o) have the same priority against the assets of the impaired insurer
or insolvent insurer as those possessed by the person entitled to receive
benefits under this chapter.
(o) In addition to the rights conferred by subsections (m) and (n),
the association has all common law rights of subrogation and any other
equitable or legal remedy with respect to a covered policy that would
have been available to the:
(1) impaired insurer or insolvent insurer;
(2) owner, beneficiary, enrollee, health care provider, or payee of
a policy or contract with respect to the policy or contract,
including, in the case of a structured settlement annuity, rights of
the owner, beneficiary, or payee of the annuity, to the extent of
benefits received under this chapter, against a person:
(A) who is originally or by succession responsible for the losses
arising from the personal injury relating to the annuity or
payment for the annuity; and
(B) whose responsibility is not solely because of the person
serving as an assignee in respect of a qualified assignment
under Section 130 of the Internal Revenue Code; and
(3) certificate holder, or the beneficiary or payee of the certificate
holder, with respect to a certificate.
(p) If subsection (m), (n), or (o) is invalid or ineffective with respect
to a person or claim, the amount payable by the association with
respect to the related covered policies must be reduced by the amount
realized by another person with respect to the person or claim that is
attributable to the covered policies.
(q) If the association provides benefits with respect to a covered
policy and a person recovers amounts to which the association has
rights as described in subsection (m), (n), or (o), the person shall pay
to the association the part of the recovery attributable to the covered
policies.
(r) The association may do the following:
(1) Enter into contracts necessary or appropriate to carry out the
provisions and purposes of this chapter.
(2) Sue or, subject to section 14 of this chapter, be sued, including
taking legal actions necessary or appropriate to recover unpaid
assessments under section 6 of this chapter and to resolve claims
or potential claims against or on behalf of the association.
(3) Borrow money to effect the purposes of this chapter and issue
notes or other evidences of indebtedness of the association with
respect to borrowings. Notes or other evidences of indebtedness
described in this subdivision that are not in default are legal
investments for domestic member insurers and may be carried as
admitted assets.
(4) Employ or retain persons necessary or appropriate to handle
the financial transactions of the association and to perform other
functions necessary or appropriate under this chapter.
(5) Take legal action necessary or appropriate to avoid or recover
payment of improper claims.
(6) Exercise, for the purposes of this chapter and to the extent
approved by the commissioner, the powers of a domestic life or
health insurer. However, in no case may the association issue
policies or contracts other than those issued to perform the
association's obligations under this chapter.
(7) Request information from a person seeking coverage from the
association to aid the association in determining and discharging
the association's obligations under this chapter with respect to the
person. The person shall promptly comply with the request.
(8) Settle claims and potential claims by or against the
association.
(9) Exercise all rights, privileges, and powers granted to the
association by any other laws of Indiana or another jurisdiction.
(10) In accordance with the terms of the policy or contract, file for
an actuarially justified rate or premium increase for a covered
policy.
(11) Take other necessary or appropriate action to discharge the
association's duties and obligations under this chapter or to
exercise the association's rights and powers under this chapter.
(s) The association may belong to one (1) or more organizations of
one (1) or more other state associations of similar purpose to further the
purpose and administer the powers and duties of the association.
(t) The association has discretion and may exercise reasonable
business judgment to determine the means by which the association is
to discharge, in an economical and efficient manner, the association's
obligations under this chapter.
(u) In discharging the association's obligations and exercising the
association's rights and powers under subsections (a) and (c), the
association may, subject to approval of the receivership court, provide
substitute coverage for a covered policy that provides for the covered
policy's interest rate, crediting rate, or similar factor employed in
calculating returns or changes in value to be determined by use of an
index or other external referent stated in the covered policy by issuing
an alternative policy or contract in accordance with the following
provisions:
(1) Instead of the index or other external referent stated in the
covered policy, the alternative policy or contract may provide for:
(A) a fixed interest rate;
(B) payment of dividends with minimum guarantees; or
(C) a different method for calculating returns or changes in
value.
(2) A:
(A) requirement for evidence of insurability; or
(B) waiting period or an exclusion, other than a waiting period
or an exclusion provided for in this chapter;
that would not have applied under the covered policy may not be
imposed.
(3) The alternative policy or contract must provide coverage
similar, in material respects, to the coverage under the covered
policy, after taking into account the exceptions, exclusions, and
limitations provided for in this chapter, as determined by the
association.
As added by Acts 1978, P.L.129, SEC.3. Amended by
P.L.166-1986, SEC.1; P.L.130-1994, SEC.44; P.L.116-1994, SEC.62;
P.L.251-1995, SEC.21; P.L.193-2006, SEC.14; P.L.208-2018,
SEC.17.