CHAPTER 7. GENERAL CORPORATE POWERS AND RESPONSIBILITIES OF INSURANCE COMPANIES

IC 27-1-7
    Chapter 7. General Corporate Powers and Responsibilities ofInsurance Companies

IC 27-1-7-1
"Corporation" defined
    Sec. 1. The term "corporation", as used in this chapter andIC 27-1-8, means any company organized or reorganized under theprovisions of this article and any company organized or reorganizedunder the provisions of any statute of this state enacted prior toMarch 8, 1935.
(Formerly: Acts 1935, c.162, s.79.) As amended by P.L.252-1985,SEC.25.

IC 27-1-7-2
Capacity and authority to act; general rights, privileges, andpowers; excluded powers
    Sec. 2. (a) Every corporation has the capacity to act that ispossessed by natural persons, but has the authority to perform onlythose acts that are necessary, convenient, or expedient to accomplishthe purposes for which it is formed and that are not repugnant to law.
    (b) Subject to any limitations or restrictions imposed by law or thearticles of incorporation, each corporation has the following generalrights, privileges, and powers:
        (1) To continue as a corporation, under its corporate name, forthe period set forth in its articles of incorporation.
        (2) To sue and be sued in its corporate name.
        (3) To have a corporate seal and to alter the same at pleasure.
        (4) To acquire, own, hold, lease, mortgage, pledge, convey, orotherwise dispose of property, real and personal, tangible andintangible.
        (5) To acquire, subscribe for, own, hold, vote, mortgage, lend,pledge, convey, or otherwise dispose of, and to guarantee orotherwise deal in and with, shares or other interests in, orobligations of, any entity, including itself, except as otherwiseprohibited or limited by this article.
        (6) To be a promoter, partner, member, associate, or manager ofany partnership, joint venture, trust, or other entity.
        (7) To borrow money, and to issue its notes or debentures toevidence such borrowings, but any debentures so issued shall besubordinate to the rights of policyholders, members, or creditorsof such corporations.
        (8) To conduct business in this state and elsewhere; to have one(1) or more offices out of this state; to acquire, own, hold anduse, and to lease, mortgage, pledge, sell, convey, or otherwisedispose of property, real and personal, tangible and intangible,out of this state.
        (9) To appoint such officers and agents as the business of thecorporation may require, and to define their duties and fix theircompensation.        (10) To lend money, invest and reinvest its funds, and receiveand hold real estate and personal property as security forrepayment, except as otherwise limited in this title.
        (11) To pay pensions and establish and administer pensionplans, pension trusts, profit sharing plans, share bonus plans,share option plans, welfare plans, qualified and nonqualifiedretirement plans, and benefit or incentive plans for any or all ofits current or former directors, officers, employees, and agents.
        (12) To make donations for the public welfare or for charitable,scientific, or education purposes.
        (13) To make bylaws for the government and regulation of itsaffairs.
        (14) To cease doing business and to dissolve and surrender itscorporate franchise and authority and license to transact aninsurance business in this state.
        (15) To do all acts and things necessary, convenient, orexpedient to carry out the purposes for which it is formed.
        (16) To become a member of any federal home loan bank; topurchase stock therein, to borrow money or obtain advancesfrom any such bank and to transfer, assign, and pledge propertyto or with such bank as security for the payment of such loansor advances, to do and perform all acts required of members ofa federal home loan bank, and to possess and exercise all rights,powers, and privileges conferred upon such members under theprovisions of the act of Congress entitled Federal Home LoanBank Act.
    (c) No corporation shall, by any implication or construction, bedeemed to possess the power of carrying on the business of receivingdeposits of money, bullion, or foreign coins, or receiving deposits ofsecurities or other personal property from any person or corporationor acting as a safe deposit company, or of issuing bills, notes, orother evidences of debt for circulation as money.
    (d) A corporation that is a stock company may establish one (1)or more procedures by which it regulates transactions that would,when consummated, result in a change of control of suchcorporation.
    (e) For purposes of this section "control" means:
        (1) for any corporation having one hundred (100) or moreshareholders, the beneficial ownership, or the direct or indirectpower to direct the voting, of no less than ten percent (10%) ofthe voting shares of a corporation's outstanding voting shares;or
        (2) for any corporation having fewer than one hundred (100)shareholders, the beneficial ownership, or the direct or indirectpower to direct the voting, of no less than fifty percent (50%)of the voting shares of the corporation's outstanding votingshares.
    (f) A procedure established under this section may be adopted:
        (1) in a corporation's original articles of incorporation orbylaws;        (2) by amending the articles of incorporation; or
        (3) notwithstanding that a vote of the shareholders wouldotherwise be required by any other provision of this article orthe articles of incorporation for the adoption or implementationof all or any portion of the procedure, by amending the bylaws.
(Formerly: Acts 1935, c.162, s.80; Acts 1939, c.63, s.1; Acts 1973,P.L.271, SEC.1.) As amended by P.L.266-1987, SEC.1.

IC 27-1-7-3
Principal office; change of location
    Sec. 3. Each corporation shall maintain an office or place ofbusiness in this state, to be known as the "Principal Office." Thepost-office address of the principal office shall be stated in theoriginal articles of incorporation at the time of incorporating.Thereafter, the location of the principal office, may be changed atany time or from time to time when authorized by the board ofdirectors by:
        (1) filing with the department and secretary of state, on orbefore the day any change is to take effect, a certificate signedby the president or a vice-president and the secretary or anassistant secretary of the corporation, and verified under oath,stating the change to be made and reciting that such change ismade pursuant to authorization by the board of directors; and
        (2) notifying each policyholder of the address and telephonenumber of the new location.
(Formerly: Acts 1935, c.162, s.81.) As amended by P.L.94-1999,SEC.1.

IC 27-1-7-4
Shares of stock; classes; sale for less than par; shareholders'liability; preemptive rights
    Sec. 4. (a) Every stock company organized under this article shallhave the right, when authorized by its articles of incorporation, toissue one (1) or more classes or kinds of shares of capital stock, anyor all of which classes or kinds may consist of shares with par valueor shares without par value, with full, limited, or no voting powersas provided in the articles of incorporation and with suchdesignations, and such relative rights, preferences, qualifications,limitations, or restrictions as shall be stated and expressed in thearticles of incorporation.
    (b) No stock company organized under this article shall issue orsell any of its shares of stock having a par value for less than the parvalue thereof.
    (c) The shareholders of any stock company organized under thisarticle shall be liable for the debts of such stock company only to theextent of any unpaid portion of their subscriptions for shares of suchcompany or any unpaid portion of the consideration for the issuanceto them of shares of such stock company.
    (d) The shareholders of such stock company shall not havepreemptive rights to subscribe to any additional issues of shares of

the capital stock of such company, except to the extent, if any, thatsuch rights shall be fixed and prescribed in the articles ofincorporation, or in a bylaw adopted by the board of directors of suchstock company.
(Formerly: Acts 1935, c.162, s.82; Acts 1969, c.164, s.3.) Asamended by P.L.252-1985, SEC.26.

IC 27-1-7-5
Stock certificate; contents; transferability
    Sec. 5. In the case of a stock company, every shareholder shall beentitled to a certificate, or other evidence of stock ownership, signedby the president or a vice president and by the secretary or anassistant secretary, which shall state the name of the registeredholder, the number of shares represented thereby and the par valueof each share. Where such certificate is also signed by a transferagent or registrar, or both, the signatures of any such president, vicepresident, secretary or assistant secretary may be facsimiled. Theshares represented thereby shall be transferable on the books of thecompany in such manner and under such regulations, not inconsistentwith the laws of this state relating to the transfer of shares of stockin corporations, as may be provided in the by-laws. If such companyis authorized to issue shares of more than one (1) class, everycertificate shall state the kind and class of shares represented thereby,and the relative rights, interests, preferences and restrictions of suchclass, or a summary thereof.
(Formerly: Acts 1935, c.162, s.83; Acts 1963, c.144, s.1.)

IC 27-1-7-6
Bylaws
    Sec. 6. Unless otherwise provided in the articles of incorporation,the power to make, alter, amend or repeal the bylaws of a companyis hereby vested in the board of directors. The bylaws so adoptedmay contain any provision for the regulations and management of theaffairs of the corporation which is not inconsistent with this articleor of any law of this state or with the articles of incorporation andmay include provisions concerning:
        (a) the time and place of holding, and the manner of conductingmeetings of the shareholders, members, or policyholders, andof directors;
        (b) the manner of calling special meetings of shareholders,members, or policyholders and directors;
        (c) the powers, duties, tenure, and qualifications of the officersof the corporation and the time, place, and manner of electingthem;
        (d) the creation and appointment of executive or othercommittees and the number of members thereof and prescribingtheir powers;
        (e) the classification of its risks and of its members, thepayment of dividends and the creation of a surplus fund orfunds, if other than a stock company; and        (f) the form of stock certificates or other evidences of stockownership and the manner of transferring shares of capital stockif a stock company, and the manner of creating and exercisingproxies.
(Formerly: Acts 1935, c.162, s.84.) As amended by P.L.252-1985,SEC.27.

IC 27-1-7-7
Meetings of shareholders, members, or policyholders; location;annual meeting; special meetings; notice; quorum; actions takenwithout meeting
    Sec. 7. (a) All meetings of shareholders, members, orpolicyholders shall be held within this state and at the principaloffice of the corporation, unless otherwise provided in the articles ofincorporation.
    (b) An annual meeting of shareholders, members, or policyholdersshall be held within five (5) months after the close of each fiscal yearof the corporation and at such time within that period as the bylawsmay provide. The failure to hold the annual meeting at the designatedtime shall not work any forfeiture or a dissolution of the corporation.The time and place of such annual meeting of a mutual company maybe stated in the policies thereof or notice of such meeting shall begiven as provided in subsection (d).
    (c) Special meetings of the shareholders, members, orpolicyholders may be called by the president, by the board ofdirectors, by shareholders, members, or policyholders holding notless than one-fourth (1/4) of all of the shares or policies outstandingand entitled by the articles of incorporation to vote on the businessproposed to be transacted thereat, or by such other officers orpersons as the bylaws may provide.
    (d) A written or printed notice stating the place, day, and hour ofthe meeting, and in case of a special meeting, the purpose orpurposes for which the meeting is called, shall be delivered or mailedby the secretary, or by the officers or persons calling the meeting, toeach shareholder, member, or policyholder of record, entitled by thearticles of incorporation and by this article to vote at such meeting,at such address as appears upon the records of the corporation, atleast thirty (30) days before the date of the meeting. Notice of anymeeting of the shareholders, members, or policyholders may bewaived in writing by any shareholder, member, or policyholder if thewaiver sets forth in reasonable detail the purpose or purposes forwhich the meeting is called and the time and place thereof.Attendance at any meeting in person or by proxy shall constitute awaiver of notice of such meeting.
    (e) Unless otherwise provided in the articles of incorporation orby the provisions of this article or the bylaws, at any meeting of theshareholders, members, or policyholders, a majority of the shares ofthe outstanding capital stock entitled by the articles of incorporationto vote at such meeting or in the case of a company other than a stockcompany, not less than ten percent (10%) of the policyholders or

members entitled to vote at such meeting, represented in person or byproxy, shall constitute a quorum.
    (f) Unless otherwise provided in the articles of incorporation orbylaws, action to be taken at a meeting of shareholders, members, orpolicyholders may be taken without a meeting if the action is takenby all the shareholders, members, or policyholders entitled to vote onthe action. The action must be evidenced by one (1) or more writtenconsents that:
        (1) describe the action taken;
        (2) are signed by all the shareholders, members, orpolicyholders entitled to vote on the action; and
        (3) are delivered to the corporation for inclusion in the minutesor for filing with the corporate records.
    (g) The record date for determining shareholders, members, orpolicyholders entitled to take action without a meeting is the date thefirst shareholder, member, or policyholder signs the consent undersubsection (f).
    (h) Action taken under subsection (f) is effective when the lastshareholder, member, or policyholder signs the consent, unless theconsent specifies a different prior or subsequent effective date.
    (i) A consent signed under subsection (f) has the effect of ameeting vote and may be described as a meeting vote in anydocument.
(Formerly: Acts 1935, c.162, s.85; Acts 1965, c.6, s.1.) As amendedby P.L.252-1985, SEC.28; P.L.185-1997, SEC.1.

IC 27-1-7-8
Voting rights of shareholders; shares that cannot be voted; votingby particular shareholders; proxy votes
    Sec. 8. (a) Except as otherwise provided in the articles ofincorporation or in this section, every shareholder in a stockinsurance company shall have the right, at every shareholders'meeting, to one (1) vote for each share of stock standing in his nameon the books of the corporation. No share shall be voted at anymeeting:
        (1) which shall have been transferred on the books of thecorporation within such number of days, not exceeding fifty(50), next preceding the date of such meeting as the board ofdirectors shall determine, or, in the absence of suchdetermination, within ten (10) days next preceding the date ofsuch meeting; or
        (2) which belongs to the corporation that issued it.
    (b) Shares standing in the name of a corporation, other than theissuing corporation, may be voted by such officer, agent or proxy asthe board of directors of such corporation may appoint or as theby-laws of such corporation may prescribe.
    (c) Shares held by fiduciaries may be voted by the fiduciaries insuch manner as the instrument or order appointing such fiduciariesmay direct. In the absence of such direction, or the inability of thefiduciaries to act in accordance therewith, the following provisions

shall apply:
        (1) Where shares are held jointly by three (3) or morefiduciaries, such shares shall be voted in accordance with thewill of the majority.
        (2) Where the fiduciaries, or a majority of them, can not agree,or where they are equally divided upon the question of votingsuch shares, any court having general equity jurisdiction may,upon petition filed by any of such fiduciaries, or by any party ininterest, direct the voting of such shares as it may deem to befor the best interest of the beneficiaries, and such shares shallbe voted in accordance with such direction.
    (d) Unless otherwise provided in the agreement of pledge, or inthe by-laws of the corporation, shares that are pledged may be votedby the shareholder pledging such shares until the shares shall havebeen transferred to the pledgee on the books of the corporation, andthereafter such shares may be voted by the pledgee.
    (e) Shares issued and held in the names of two (2) or morepersons shall be voted in accordance with the will of the majority,and if a majority of them can not agree, or if they are equally dividedas to the voting of such shares, the shares shall be divided equallybetween or among such persons for voting purposes.
    (f) A shareholder, including any fiduciary, may vote either inperson or by proxy executed in writing by the shareholder or a dulyauthorized attorney in fact. Unless a longer time is expresslyprovided therein, no proxy shall be valid after eleven (11) monthsfrom the date of its execution.
(Formerly: Acts 1935, c.162, s.86.) As amended by Acts 1981,P.L.234, SEC.1.

IC 27-1-7-9
Voting rights of policyholders and members; proxy votes
    Sec. 9. Except as otherwise provided in the articles ofincorporation every policyholder or member, in all companies otherthan stock companies, shall have the right to one (1) vote at everypolicyholders' or members' meeting, regardless of the number ofpolicies or amount of insurance he may have with such company.
    Any policyholder or member may vote either in person or byproxy executed in writing by the policyholder or by a duly authorizedattorney in fact. Unless a longer time is expressly provided therein,no proxy hereafter given shall be valid after eleven (11) months fromthe date of its execution.
(Formerly: Acts 1935, c.162, s.87.)

IC 27-1-7-9.5
Shareholders' derivative proceedings; procedure
    Sec. 9.5. (a) As used in this section, "shareholder" includes:
        (1) with respect to a stock company formed under this article,a shareholder or a beneficial owner whose shares are held in avoting trust or held by a nominee on the owner's behalf; and
        (2) with respect to a mutual company formed under this article,

a member or policyholder.
    (b) A person may not commence a proceeding in the right of acorporation unless the person was a shareholder of the corporationwhen the transaction complained of occurred or unless the personbecame a shareholder through transfer by operation of law from onewho was a shareholder at that time. The derivative proceeding maynot be maintained if it appears that the person commencing theproceeding does not fairly and adequately represent the interests ofthe shareholders in enforcing the right of the corporation.
    (c) A complaint in a proceeding brought in the right of acorporation must be verified and allege with particularity the demandmade, if any, to obtain action by the board of directors, and eitherthat the demand was refused or ignored or why the shareholder didnot make the demand. Whether or not a demand for action was made,if the corporation commences an investigation of the charges madein the demand or complaint (including an investigation commencedunder subsection (e)), the court may stay any proceeding until theinvestigation is completed.
    (d) A proceeding commenced under this section may not bediscontinued or settled without the court's approval. If the courtdetermines that a proposed discontinuance or settlement willsubstantially affect the interest of the corporation's shareholders ora class of shareholders, the court shall direct that notice be given theshareholders affected. On termination of the proceeding, the courtmay require the plaintiff to pay any defendant's reasonable expenses(including attorney's fees) incurred in defending the proceeding if itfinds that the proceeding was commenced without reasonable cause.
    (e) Unless prohibited by the articles of incorporation, the board ofdirectors may establish a committee consisting of three (3) or moredisinterested directors or other disinterested persons to determine:
        (1) whether the corporation has a legal or equitable right orremedy; and
        (2) whether it is in the best interests of the corporation to pursuethat right or remedy, if any, or to dismiss a proceeding thatseeks to assert that right or remedy on behalf of the corporation.
    (f) In making a determination under subsection (e), the committeeis not subject to the direction or control of or termination by theboard. A vacancy on the committee may be filled by the majority ofthe remaining members by selection of another disinterested directoror other disinterested person.
    (g) If the committee determines that pursuit of a right or remedythrough a derivative proceeding or otherwise is not in the bestinterests of the corporation, the merits of that determination shall bepresumed to be conclusive against any shareholder making a demandor bringing a derivative proceeding with respect to such right orremedy, unless such shareholder can demonstrate that:
        (1) the committee was not disinterested, as described insubsection (h); or
        (2) the committee's determination was not made after aninvestigation conducted in good faith.    (h) For purposes of this section, a director or other person isdisinterested if the director or other person:
        (1) has not been made a party to a derivative proceeding seekingto assert the right or remedy in question, or has been made aparty but only on the basis of a frivolous or insubstantial claimor for the sole purpose of seeking to disqualify the director orother person from serving on the committee;
        (2) is able under the circumstances to render a determination inthe best interests of the corporation; and
        (3) is not an officer, employee, or agent of the corporation or ofa related corporation. However, an officer, employee, or agentof the corporation or a related corporation who meets thestandards of subdivisions (1) through (2) shall be considereddisinterested in any case in which the right or remedy underscrutiny is not assertable against a director or officer of thecorporation or the related corporation.
As added by P.L.266-1987, SEC.2.

IC 27-1-7-10
Board of directors; general provisions; management of business;executive committee; removal of directors
    Sec. 10. (a) The business of every corporation shall be managedby a board of directors, composed of not less than five (5) nor morethan the maximum number fixed in the articles of incorporation. Theexact number of directors to serve for each year shall be determinedfrom time to time, in such manner as the bylaws prescribe.
    (b) The first board of directors shall be elected by theincorporators and shall hold office until the first annual meeting ofthe shareholders, members or policyholders. At the first annualmeeting of the shareholders, members or policyholders, and at eachannual meeting thereafter, directors shall be elected by theshareholders, members or policyholders for the term or termshereinafter prescribed.
    (c) The articles of incorporation or the bylaws may provide thatthe directors may be divided into two (2) or more classes whoseterms of office expire at different times, but no term shall continuelonger than six (6) years. In the absence of such provision, eachdirector, except members of the first board of directors, shall beelected for a term of one (1) year and shall hold office until thedirector's successor is elected and has qualified.
    (d) Any vacancy which may occur in the membership of the boardof directors, caused by an increase in the number of directors orotherwise (except death, resignation, or disqualification), shall befilled by a majority vote of the remaining members of the board, untilthe next annual meeting of the shareholders, members orpolicyholders. A vacancy in the membership in the board of directorscaused by death, resignation or disqualification of a member shall befilled by a majority vote of the remaining membership of the boardfor the unexpired term of the directorship.
    (e) A majority of the whole board of directors is necessary to

constitute a quorum for the transaction of any business except thefilling of vacancies, and the act of a majority of the board of directorspresent at any meeting at which a quorum is present is the act of theboard of directors, unless a greater number is required by this article,or by the articles of incorporation or the bylaws.
    (f) The board of directors may, by a resolution adopted by amajority of the whole board, pursuant to a provision of the bylaws,designate two (2) or more of their number to constitute an executivecommittee, which, to the extent provided in that resolution or in thebylaws, has all of the authority of the board of directors in themanagement of the corporation, during the interval between themeetings of the board, but the designation of the committee and thedelegation to the committee of such authority does not operate torelieve the board of directors or any member of the board of directorsof any responsibility imposed upon it or the member by this article.The minutes of each meeting of the executive committee shall beread at the next succeeding meeting of the board of directors.
    (g) Meetings of the board of directors may be held at such time atthe principal office of the corporation or at such other place as maybe unanimously designated by the board of directors, and upon thenotice provided in the bylaws. Unless otherwise provided by thearticles of incorporation or bylaws, a member of the board ofdirectors or of a committee designated by the board may participatein a meeting of the board or committee by means of a conferencetelephone or similar communications equipment by which all personsparticipating in the meeting can communicate with each other, andparticipation by these means constitutes presence in person at themeeting.
    (h) Unless otherwise provided in the articles of incorporation orbylaws, an action required or permitted to be taken at a meeting ofthe board of directors or of a committee of the board may be takenwithout a meeting if:
        (1) before the action is taken, a written consent to the action issigned by all members of the board or of the committee; and
        (2) the written consent is filed with the minutes of theproceedings of the board or the committee.
    (i) Every director, when elected, shall take and subscribe an oaththat he will, insofar as the duty devolves upon him, faithfully,honestly and diligently administer the affairs of such corporation,and that he will not knowingly violate or willingly permit to beviolated any of the provisions of law applicable to any suchcorporation.
    (j) A director may be removed in any manner provided by thearticles of incorporation. Unless the articles of incorporation provideotherwise, a director may be removed, with or without cause, by amajority vote of:
        (1) the shareholders of a stock company;
        (2) the members or policyholders of a mutual companyqualified to elect directors; or
        (3) the directors.    (k) A director may be removed under this subsection:
        (1) only at a meeting called for the purpose of removing thedirector; and
        (2) the meeting notice must state that the purpose, or one (1) ofthe purposes, of the meeting is removal of the director.
(Formerly: Acts 1935, c.162, s.88; Acts 1969, c.164, s.4; Acts 1971,P.L.1, SEC.7.) As amended by Acts 1982, P.L.161, SEC.1;P.L.266-1987, SEC.3.

IC 27-1-7-11
Citizenship and residence qualifications of directors
    Sec. 11. A majority of directors must, during their entire terms ofservice, be citizens of the United States or Canada. At least one (1)of the directors must reside in Indiana.
(Formerly: Acts 1935, c.162, s.89; Acts 1941, c.127, s.1; Acts 1947,c.18, s.1; Acts 1969, c.164, s.5.) As amended by P.L.245-1989,SEC.1.

IC 27-1-7-12
Directors; attendance record and report; record ofcommunications; annual examination and report of condition
    Sec. 12. In addition to such other duties as may be imposed uponthe directors by any other provisions of this article, such directorsshall keep a record of the attendance of directors at meetings of theboard, and shall make a report showing the names of the directors,the number of meetings of the board, regular and special, the numberof meetings attended, and the number of meetings from which eachdirector was absent, which report shall be read at and incorporatedin the minutes of the annual meeting of the shareholders, members,or policyholders. Such directors, at such times as they are meeting asa board of directors, shall also require the secretary of such board, orsome other duly designated agent, to make such communicationsfrom the department as the department designates a matter of recordin the minutes of the meetings of such board of directors. The boardof directors, a committee therefrom, or the auditor, actuary, orcomptroller of such corporation shall examine the corporation onceeach year and submit a complete statement of the condition of suchcorporation to the department. Such report of examination, if madeby other than the board of directors or a committee thereof, shall beapproved by the board of directors before the same is submitted tothe department.
(Formerly: Acts 1935, c.162, s.90.) As amended by P.L.252-1985,SEC.29.

IC 27-1-7-12.5
Directors; good faith discharge of duties; liability; conflict ofinterest; authorization of unlawful payments to shareholders
    Sec. 12.5. (a) A director shall, based on facts then known to thedirector, discharge the duties as a director, including the director'sduties as a member of a committee:        (1) in good faith;
        (2) with the care an ordinarily prudent person in a like positionwould exercise under similar circumstances; and
        (3) in a manner the director reasonably believes to be in the bestinterests of the corporation.
    (b) In discharging the director's duties, a director is entitled to relyon information, opinions, reports, or statements, including financialstatements and other financial data, if prepared or presented by:
        (1) one (1) or more officers or employees of the corporationwhom the director reasonably believes to be reliable andcompetent in the matters presented;
        (2) legal counsel, public accountants, or other persons as tomatters the director reasonably believes are within the person'sprofessional or expert competence; or
        (3) a committee of the board of directors of which the directoris not a member if the director reasonably believes thecommittee merits confidence.
    (c) A director is not acting in good faith if the director hasknowledge concerning the matter in question that makes relianceotherwise permitted by subsection (b) unwarranted.
    (d) A director may, in considering the best interests of acorporation, consider the effects of any action on shareholders,members, policyholders, agents, employees, suppliers, and customersof the corporation, and the communities in which offices or otherfacilities of the corporation are located, and any other factors thedirector considers pertinent.
    (e) A director is not liable for any action taken as a director, orany failure to take any action, unless:
        (1) the director has breached or failed to perform the duties ofthe director's office under subsections (a) through (d); and
        (2) the breach or failure to perform constitutes willfulmisconduct or recklessness.
    (f) A conflict of interest transaction is a transaction with thecorporation in which a director of the corporation has a direct orindirect interest. A conflict of interest transaction is not voidable bythe corporation solely because of the director's interest in thetransaction if any one (1) of the following is true:
        (1) The material facts of the transaction and the director'sinterest were disclosed or known to the board of directors or acommittee of the board of directors and the board of directorsor committee authorized, approved, or ratified the transaction.
        (2) The material facts of the transaction and the director'sinterest were disclosed or known to the shareholders entitled tovote and they authorized, approved, or ratified the transaction.
        (3) The transaction was fair to the corporation.
    (g) For purposes of subsection (f), a director of the corporationhas an indirect interest in a transaction if:
        (1) another entity in which the director has a material financialinterest or in which the director is a general partner is a party tothe transaction; or        (2) another entity of which the director is a director, officer, ortrustee is a party to the transaction and the transaction is, or isrequired to be, considered by the board of directors of thecorporation.
    (h) For purposes of subsection (f)(1), a conflict of interesttransaction is authorized, approved, or ratified if it receives theaffirmative vote of a majority of the directors on the board ofdirectors (or on the committee) who have no direct or indirectinterest in the transaction, but a transaction may not be authorized,approved, or ratified under this section by a single director. If amajority of the directors who have no direct or indirect interest in thetransaction vote to authorize, approve, or ratify the transaction, aquorum is present for the purpose of taking action under this section.The presence of, or a vote cast by, a director with a direct or indirectinterest in the transaction does not affect the validity of any actiontaken under subsection (f)(1) if the transaction is otherwiseauthorized, approved, or ratified as provided in subsection (f)(1).
    (i) For purposes of subsection (f)(2), shares owned by or votedunder the control of a director who has a direct or indirect interest inthe transaction, and shares owned by or voted under the control of anentity described in subsection (g), may be counted in a vote ofshareholders to determine whether to authorize, approve, or ratify aconflict of interest transaction.
    (j) Subject to subsection (e), a director who votes for or assents toa payment in the form of a dividend or otherwise to the corporation'sshareholders made in violation of this article or the articles ofincorporation is personally liable to the corporation for the amountof the payment that exceeds what could have been paid withoutviolating this article or the articles of incorporation.
    (k) A director held liable for an unlawful payment undersubsection (j) is entitled to contribution:
        (1) from every other director who voted for or assented to thedistribution, subject to subsection (e); and
        (2) from each shareholder for the amount the shareholderaccepted.
    (l) The purchase and holding of a contract of insurance or annuityor a certificate in a group policy by a director does not constitute aconflict of interest.
As added by P.L.266-1987, SEC.4.

IC 27-1-7-13
Officers; secretary; duties; resignation; removal; contract rights
    Sec. 13. (a) A corporation has the officers described in its bylaws.However, a corporation must have at least one (1) officer.
    (b) An officer of a corporation may appoint one (1) or moreofficers or assistant officers if authorized to do so by the bylaws orthe board of directors.
    (c) The bylaws or the board of directors must delegate to one (1)of the officers responsibility for preparing minutes of the directors'and shareholders' meetings and for authenticating records of the

corporation, and that officer is the secretary for purposes of thisarticle. The same individual may simultaneously hold more than one(1) office in the corporation.
    (d) Each officer of a corporation has the authority and shallperform the duties set forth in the bylaws, to the extent consistentwith the bylaws or, the duties prescribed by the board of directors orby direction of an officer authorized by the board of directors toprescribe the duties of other officers.
    (e) An officer of a corporation may resign at any time bydelivering notice to the board of directors, its chairman, the secretaryof the corporation or, if the articles of incorporation or bylaws soprovide, to another designated officer. A resignation is effectivewhen the notice is delivered unless the notice specifies a later date.If a resignation is made effective at a later date and the corporationaccepts the future effective date, its board of directors may fill thepending vacancy before the effective date if the board of directorsprovides that the successor does not take office until the effectivedate.
    (f) The board of directors of a corporation may remove an officerof the corporation at any time with or without cause. An officer whoappoints another officer or assistant officer may remove theappointed officer or assistant officer at any time with or withoutcause.
    (g) The election or appointment of an officer of a corporationdoes not itself create contract rights.
    (h) The removal of an officer of a corporation does not affect theofficer's contract rights, if any, with the corporation. An officer'sresignation does not affect the corporation's contract rights, if any,with the officer.
(Formerly: Acts 1935, c.162, s.91.) As amended by P.L.266-1987,SEC.5.

IC 27-1-7-14
Bonding officers having access to money or securities; blanketbond
    Sec. 14. All officers and home office employees of everycorporation having control of or access to moneys or securities ofsuch corporation in the regular discharge of their duties, shall, beforeentering upon the performance of their duties, execute theirindividual bonds with adequate surety payable to the corporation toindemnify the corporation for any pecuniary loss it shall sustain ofmoney or other personal property by any act or acts of fraud,dishonesty, forgery, theft, embezzlement, wrongful abstraction, orwillful misapplication. The amount and form of such bonds and thesufficiency of the sureties thereon shall be approved by the board ofdirectors of the corporation and by the department and shall be filedwith the department within such time as it may prescribe. In lieu ofindividual bonds, a blanket bond covering all such officers andemployees may be used, subject to the same approval as individualbonds. No officer or director of the corporation shall sign the bond

of any other person as surety thereon required by this article. If anybonds required by this section are signed by individuals as sureties,the bonds must contain separate affidavits as to the net worth of eachsurety.
(Formerly: Acts 1935, c.162, s.92.) As amended by P.L.252-1985,SEC.30.

IC 27-1-7-15
Loans to or borrowing by directors or officers; offense; exceptions
    Sec. 15. A board of directors, director, or officer of any insurancecompany doing business in this state who lends any of its money orother property, to any director or officer of the insurance companycommits a Class B misdemeanor. A director or officer who borrowsfrom the insurance company any money or other property commitsa Class B misdemeanor. However, this section does not apply to:
        (1) the continuation to maturity of any loan that did not violatethis section when it was made; or
        (2) a loan made by a life insurance company to any director orofficer of the company in an amount not greater than the netcash surrender value of, and secured by, a policy with thecompany held by the borrower; or
        (3) a loan made by any insurance company to an officer, otherthan a director, secured by a first mortgage loan upon asingle-family dwelling, condominium unit or cooperativeapartment unit, which is the borrower's personal residenceacquired on account of the officer's relocation or initialemployment.
(Formerly: Acts 1935, c.162, s.93.) As amended by Acts 1978, P.L.2,SEC.2707; Acts 1981, P.L.235, SEC.1.

IC 27-1-7-16
Books and records to be kept at principal office
    Sec. 16. Every corporation shall keep correct and complete booksof account and minutes of the proceedings of its shareholders,members or policyholders, directors, executive and/or financecommittees, and it shall likewise keep, at its principal office, anoriginal or a duplicate stock transfer book and/or records giving thenames and addresses of all shareholders, members or policyholders,and if a stock company the number of shares held by each.
(Formerly: Acts 1935, c.162, s.94.)

IC 27-1-7-17
Restrictions on dividend payments
    Sec. 17. No domestic company shall make any payments in formof dividends or otherwise to its shareholders, for or on account ofany interest in or relation to the company as shareholders, unless itpossesses assets in the amount of such payment, in excess of itsliabilities, including its capital stock: Provided, That in no instanceshall such dividend reduce the surplus below an amount equal to fiftyper cent (50%) of the capital stock of such company; and no

domestic company shall make any payments to its members orpolicyholders for or on account of any interest in or relation to thecompany as members or policyholders, except for matured claims orother policy obligations and in the purchase of surrender values,unless it possesses assets in the amount of such payments in excessof its liabilities.
(Formerly: Acts 1935, c.162, s.95.)

IC 27-1-7-18
Repealed
    (Repealed by P.L.260-1983, SEC.8.)

IC 27-1-7-19
Mutual or stock companies; borrowing for surplus funds
    Sec. 19. (a) A mutual or stock company organized under thisarticle may borrow or assume a liability for the repayment of a sumof money to provide itself with surplus funds with the prior approvalof the department. The rate of interest on any loan or advance maynot exceed the following:
        (1) The corporate base rate in effect on the first business day ofthe month in which the loan document is executed, as reportedby the bank or branch with the greatest amount of assets inIndiana, plus three percent (3%) per annum.
        (2) A variable rate determined by a formula that:
            (A) is specified in the loan document;
            (B) is based on objective data or information that isreasonably related to commercial lending rates;
            (C) provides an initial rate that is not more than thecorporate base rate in effect on the first business day of themonth in which the loan document is executed, as reportedby the bank or branch with the greatest amount of assets inIndiana, plus two percent (2%) per annum; and
            (D) is approved by the department as reasonable andappropriate in relation to the company's financial condition.
The company shall elect and state in the written agreement whetherthe interest rate is to be fixed or floating for the term of theagreement. The agreement shall be submitted to and approved by thedepartment before the agreement's execution.
    (b) The loan or advance, with interest at a rate not exceeding themaximum rate of interest as defined in subsection (a), shall be repaidonly out of the surplus of the company. Repayment of principal orpayment of interest may be made only when approved by thedepartment whenever in its judgment the financial condition of thecompany shall warrant. However, the department may not withholdapproval if:
        (1) the company has and submits to the department satisfactoryevidence that a surplus that is equal to or greater than thesurplus existing immediately after the issuance of the loan oradvance will exist after the repayment; and
        (2) the surplus that will exist immediately after repayment of

principal or payment of interest is:
            (A) reasonable in relation to the company's outstandingliabilities; and
            (B) adequate to the company's financial needs;
        in light of the factors set forth in IC 27-1-23-4(f).
    (c) A loan or advance made under this section, or interest accruingon the loan or advance, may not form a part of the legal liabilities ofthe company until authorized for payment by the department.However, until a loan or an advance is repaid, all statementspublished by the company or filed with the department must showthe amount of the loan or advance then remaining unpaid, includingany accrued and unpaid interest charges.
(Formerly: Acts 1935, c.162, s.97.) As amended by P.L.138-1984,SEC.1; P.L.253-1985, SEC.1; P.L.184-1996, SEC.1; P.L.111-2000,SEC.1.

IC 27-1-7-20
Authority of corporations, boards, and associations to insure withmutual insurance company
    Sec. 20. Any public or private corporation, board or associationin this state or elsewhere may make applications, enter intoagreements for, and hold policies in, any mutual insurance company.Any officer, stockholder, trustee or legal representative of any suchcompany, board, association, or estate may be recognized as actingfor or on its behalf for the purposes of such membership, but shallnot be personally liable upon such contract of insurance by reason ofacting in such representative capacity.
(Formerly: Acts 1935, c.162, s.97a.)

IC 27-1-7-21
Mutual companies; statement of maximum premium in policy;limitation of liability for single risk; reinsurance requirements
    Sec. 21. (a) The maximum premium shall be expressed in thepolicy of a mutual company and shall be solely a cash premiumwithout contingent premium but no such company other than a lifeinsurance company shall issue any policy providing limits of liabilityfor any one (1) risk under any one (1) line of insurance in an amountexceeding five percent (5%) of its surplus, including contingentreserves, if any, until and unless it either possesses a surplus,including contingent reserves, if any, of at least four hundredthousand dollars ($400,000), or has reinsured in a reinsurer (orreinsurers) admitted to do business in this state and authorized tomake such kind or kinds of reinsurance in this state all of suchliability in excess of such amount or such greater amount as thecommissioner may authorize and such reinsurance contract orcontracts shall have been submitted to and approved by thecommissioner. Such reinsurance contract or contracts shall be in suchform as to enable the insured under such policy or the holder of ajudgment against the insured for which such company is liable undersuch policy to maintain an action on such reinsurance contract or

contracts against such reinsured company jointly with the reinsurerand, upon recovering judgment, to have recovery against suchreinsurer or reinsurers for payment to the extent to which it or theymay be liable under such reinsurance contract (or contracts) and indischarge thereof. In no event shall the unreinsured liability assumedunder this section on any one (1) risk exceed the amount otherwiseauthorized by this article to be written upon any one (1) risk.
    (b) Any determination of permissible limits of liability andamount of surplus pursuant to the provisions of subsection (a) shallbe made as of December 31 immediately preceding except that in thecase of a newly formed company such determination shall be madeas of the date it receives the certificate of the department authorizingit to commence business.
    (c) Any reinsurance contract submitted to and approved by thecommissioner in accordance with the requirements of this sectionshall continue in full force and effect until notice of its terminationor amendment has been filed with the commissioner, and in the caseof an amendment has been approved by him.
    (d) Subsection (a) shall apply only to companies organized underthis article after July 26, 1967, except that any company in existenceon July 26, 1967, under any of the insurance statutes of this state andto which subsection (a) would otherwise apply may, by appropriateaction of its policyholders and board of directors, elect to complywith subsection (a).
    (e) This section shall not affect nor invalidate any policy of anymutual insurance company in existence on July 26, 1967, issuedpursuant to Acts 1935, c.162, s.98. Any such policy issued on or afterJuly 26, 1967, by a mutual insurance company in existence on July26, 1967, and the rights and obligations thereunder shall continue tobe subject to the provisions of Acts 1935, c.162, s.98 until suchcompany has exercised the right of election provided in this sectionand has complied with the provisions of this section.
(Formerly: Acts 1935, c.162, s.98; Acts 1967, c.233, s.1.) Asamended by P.L.252-1985, SEC.31.

IC 27-1-7-22
Vouchers for disbursements
    Sec. 22. No domestic insurance corporation shall make anydisbursement of one hundred dollars ($100) or more unless the samebe evidenced by a voucher signed by or on behalf of the person, firm,limited liability company, or corporation receiving the money andcorrectly describing the consideration for the payment, and if thesame be for services and disbursements, setting forth the servicesrendered and an itemized statement of the disbursements made, andif it be in connection with any matter pending before any legislativeor public body or before any department or officer of anygovernment, correctly describing in addition the nature of the matterand of the interest of such corporation therein, or, if such a vouchercan not be obtained by an affidavit stating the reasons therefor andsetting forth the particulars above mentioned.(Formerly: Acts 1935, c.162, s.99.) As amended by P.L.8-1993,SEC.411.

IC 27-1-7-23
Annual or other required statements; material false statement
    Sec. 23. A director, officer, agent, or employee of any companywho knowingly subscribes, makes, or concurs in making orpublishing any annual or other statement required by law, containingany material statement which is false, commits a Class Amisdemeanor.
(Formerly: Acts 1935, c.162, s.100.) As amended by Acts 1978,P.L.2, SEC.2708.