CHAPTER 8. INDIANA LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION LAW
IC 27-8-8
Chapter 8. Indiana Life and Health Insurance GuarantyAssociation Law
IC 27-8-8-1
Repealed
(Repealed by P.L.193-2006, SEC.32.)
IC 27-8-8-1.5
Repealed
(Repealed by P.L.193-2006, SEC.32.)
IC 27-8-8-2
Definitions
Sec. 2. (a) The definitions in this section apply throughout thischapter.
(b) "Account" means one (1) of the two (2) accounts createdunder section 3 of this chapter.
(c) "Annuity contract", except as provided in section 2.3(e) of thischapter, includes:
(1) a guaranteed investment contract;
(2) a deposit administration contract;
(3) a structured settlement annuity;
(4) an annuity issued to or in connection with a governmentlottery; and
(5) an immediate or a deferred annuity contract.
(d) "Assessment base year" means, for an impaired insurer orinsolvent insurer, the most recent calendar year for which requiredpremium information is available preceding the calendar year duringwhich the impaired insurer's or insolvent insurer's coverage dateoccurs.
(e) "Association", except when the context otherwise requires,means the Indiana life and health insurance guaranty associationcreated by section 3 of this chapter.
(f) "Benefit plan" means a specific plan, fund, or program that isestablished or maintained by an employer or an employeeorganization, or both, that:
(1) provides retirement income to employees; or
(2) results in a deferral of income by employees for a periodextending to or beyond the termination of employment.
(g) "Board" refers to the board of directors of the associationselected under IC 27-8-8-4.
(h) "Called", when used in the context of assessments, means thatnotice has been issued by the association to member insurersrequiring the member insurers to pay, within a time frame set forthin the notice, an assessment that has been authorized by the board.
(i) "Commissioner" refers to the insurance commissionerappointed under IC 27-1-1-2.
(j) "Contractual obligation" means an enforceable obligationunder a covered policy for which and to the extent that coverage is
provided under section 2.3 of this chapter.
(k) "Coverage date" means, with respect to a member insurer, thedate on which the earlier of the following occurs:
(1) The member insurer becomes an insolvent insurer.
(2) The association determines that the association will providecoverage under section 5(a) of this chapter with respect to themember insurer.
(l) "Covered policy" means a:
(1) nongroup policy or contract;
(2) certificate under a group policy or contract; or
(3) part of a policy, contract, or certificate described insubdivisions (1) and (2);
for which coverage is provided under section 2.3 of this chapter.
(m) "Extracontractual claims" includes claims that relate to badfaith in the payment of claims, punitive or exemplary damages, orattorney's fees and costs.
(n) "Funding agreement" has the meaning set forth inIC 27-1-12.7-1.
(o) "Impaired insurer" means a member insurer that is:
(1) not an insolvent insurer; and
(2) placed under an order of rehabilitation or conservation by acourt with jurisdiction.
(p) "Insolvent insurer" means a member insurer that is placedunder an order of liquidation with a finding of insolvency by a courtwith jurisdiction.
(q) "Member insurer" means any person that holds a certificate ofauthority to transact in Indiana any kind of insurance for whichcoverage is provided under section 2.3 of this chapter. The termincludes an insurer whose certificate of authority to transact suchinsurance in Indiana may have been suspended, revoked, notrenewed, or voluntarily withdrawn but does not include thefollowing:
(1) A for-profit or nonprofit hospital or medical serviceorganization.
(2) A health maintenance organization under IC 27-13.
(3) A fraternal benefit society under IC 27-11.
(4) The Indiana Comprehensive Health Insurance Associationor any other mandatory state pooling plan or arrangement.
(5) An assessment company or another person that operates onan assessment plan (as defined in IC 27-1-2-3(y)).
(6) An interinsurance or reciprocal exchange authorized byIC 27-6-6.
(7) A prepaid limited service health maintenance organizationor a limited service health maintenance organization underIC 27-13-34.
(8) A farm mutual insurance company under IC 27-5.1.
(9) A person operating as a Lloyds under IC 27-7-1.
(10) The political subdivision risk management fund establishedby IC 27-1-29-10 and the political subdivision catastrophicliability fund established by IC 27-1-29.1-7. (11) The small employer health reinsurance board establishedby IC 27-8-15.5-5.
(12) A person similar to any person described in subdivisions(1) through (11).
(r) "Moody's Corporate Bond Yield Average" means:
(1) the monthly average of the composite yield on seasonedcorporate bonds as published by Moody's Investors Service,Inc.; or
(2) if the monthly average described in subdivision (1) is nolonger published, an alternative publication of interest rates oryields determined appropriate by the association.
(s) "Multiple employer welfare arrangement" has the meaning setforth in IC 27-1-34-1.
(t) "Owner" means the person:
(1) identified as the legal owner of a policy or contractaccording to the terms of the policy or contract; or
(2) otherwise vested with legal title to a policy or contractthrough a valid assignment completed in accordance with theterms of the policy or contract and properly recorded as theowner on the books of the insurer.
The term does not include a person with a mere beneficial interest ina policy or contract.
(u) "Person" means an individual, a corporation, a limited liabilitycompany, a partnership, an association, a governmental entity, avoluntary organization, a trust, a trustee, or another business entityor organization.
(v) "Plan sponsor" refers to only one (1) of the following withrespect to a benefit plan:
(1) The employer, in the case of a benefit plan established ormaintained by a single employer.
(2) The holding company or controlling affiliate, in the case ofa benefit plan established or maintained by affiliated companiescomprising a consolidated corporation.
(3) The employee organization, in the case of a benefit planestablished or maintained by an employee organization.
(4) In a case of a benefit plan established or maintained:
(A) by two (2) or more employers;
(B) by two (2) or more employee organizations; or
(C) jointly by one (1) or more employers and one (1) ormore employee organizations;
and that is not of a type described in subdivision (2), theassociation, committee, joint board of trustees, or other similargroup of representatives of the parties that establish or maintainthe benefit plan.
(w) "Premiums" means amounts, deposits, and considerationsreceived on covered policies, less returned premiums, returneddeposits, returned considerations, dividends, and experience credits.The term does not include the following:
(1) Amounts, deposits, and considerations received for policiesor contracts or parts of policies or contracts for which coverage
is not provided under section 2.3(d) of this chapter, as qualifiedby section 2.3(e) of this chapter, except that an assessablepremium must not be reduced on account of the limitations setforth in section 2.3(e)(3), 2.3(e)(15), or 2.3(f)(2) of this chapter.
(2) Premiums in excess of five million dollars ($5,000,000) onan unallocated annuity contract not issued or not connectedwith a governmental benefit plan established under Section 401,403(b), or 457 of the United States Internal Revenue Code.
(x) "Principal place of business" refers to the single state in whichindividuals who establish policy for the direction, control, andcoordination of the operations of an entity as a whole primarilyexercise the direction, control, and coordination, as determined bythe association in the association's reasonable judgment byconsidering the following factors:
(1) The state in which the primary executive and administrativeheadquarters of the entity is located.
(2) The state in which the principal office of the chief executiveofficer of the entity is located.
(3) The state in which the board of directors or similargoverning person of the entity conducts the majority of theboard of directors' or governing person's meetings.
(4) The state in which the executive or management committeeof the board of directors or similar governing person of theentity conducts the majority of the committee's meetings.
(5) The state from which the management of the overalloperations of the entity is directed.
However, in the case of a plan sponsor, if more than fifty percent(50%) of the participants in the plan sponsor's benefit plan areemployed in a single state, that state is considered to be the principalplace of business of the plan sponsor. The principal place of businessof a plan sponsor of a benefit plan described in subsection (v)(4), ifmore than fifty percent (50%) of the participants in the plan sponsor'sbenefit plan are not employed in a single state, is considered to be theprincipal place of business of the association, committee, joint boardof trustees, or other similar group of representatives of the partiesthat establish or maintain the benefit plan and, in the absence of aspecific or clear designation of a principal place of business, isconsidered to be the principal place of business of the employer oremployee organization that has the largest investment in the benefitplan in question on the coverage date.
(y) "Receivership court" refers to the court in an insolventinsurer's or impaired insurer's state that has jurisdiction over theconservation, rehabilitation, or liquidation of the insolvent insurer orimpaired insurer.
(z) "Resident" means a person that resides or has the person'sprincipal place of business in Indiana on the applicable coveragedate.
(aa) "State" includes a state, the District of Columbia, PuertoRico, and a United States possession, territory, or protectorate.
(bb) "Structured settlement annuity" means an annuity purchased
to fund periodic payments for a plaintiff or other claimant in paymentfor or with respect to personal injury suffered by the plaintiff or otherclaimant.
(cc) "Supplemental contract" means a written agreement enteredinto for the distribution of proceeds under a life, health, or annuitypolicy or contract.
(dd) "Unallocated annuity contract" means an annuity contract orgroup annuity certificate:
(1) the owner of which is not a natural person; and
(2) that does not identify at least one (1) specific natural personas an annuitant;
except to the extent of any annuity benefits guaranteed to a naturalperson by an insurer under the contract or certificate. For purposesof this chapter, an unallocated annuity contract shall not beconsidered a group policy or group contract.
As added by Acts 1978, P.L.129, SEC.3. Amended by P.L.8-1993,SEC.431; P.L.251-1995, SEC.20; P.L.129-2003, SEC.13;P.L.193-2006, SEC.9.
IC 27-8-8-2.1
Policy and contract descriptions; plan sponsor
Sec. 2.1. (a) For purposes of this chapter:
(1) a policy or contract issued on a blanket basis is a grouppolicy or group contract;
(2) each individual insured under a policy or contract issued ona blanket basis is a certificate holder under the policy orcontract; and
(3) a policy or contract issued on a franchise plan to membersof a qualified group is a nongroup policy or nongroup contract.
(b) For purposes of this chapter, a benefit plan may have only one(1) plan sponsor.
As added by P.L.193-2006, SEC.10.
IC 27-8-8-2.3
Coverage provided; exclusions; limitations
Sec. 2.3. (a) Except as otherwise excluded or limited by thischapter, this chapter provides coverage for policies and contractsspecified in subsection (d) as follows:
(1) To a person, other than a certificate holder under a grouppolicy or a group contract, that, regardless of where the personresides, is the beneficiary, nonowner assignee, or payee of aperson covered under subdivision (2).
(2) To a person that is a certificate holder under a group policyor group contract, and to a person that is the owner of anongroup policy or nongroup contract that is not an unallocatedannuity contract or a structured settlement annuity, and that:
(A) is a resident; or
(B) is not a resident if all the following conditions aresatisfied:
(i) The member insurer that issued the policy or contract
is domiciled in Indiana.
(ii) The state in which the person resides has anassociation similar to the association.
(iii) The nonresident is not eligible for coverage by theother association referred to in item (ii) solely because themember insurer was not licensed in the state of residenceat the time specified in the guaranty association law of thestate of residence.
(3) For an unallocated annuity contract, subdivisions (1) and (2)do not apply, and this chapter provides coverage to thefollowing:
(A) A person that is the owner of the unallocated annuitycontract, if the contract was issued to or in connection witha benefit plan whose plan sponsor is a resident or, if the plansponsor is not a resident, if all the following conditions aresatisfied:
(i) The member insurer that issued the unallocated annuitycontract is domiciled in Indiana.
(ii) The state in which the plan sponsor resides has anassociation similar to the association.
(iii) The other association referred to in item (ii) does notprovide coverage of the unallocated annuity contractsolely because the member insurer was not licensed in thestate of residence at the time specified in the guarantyassociation law of the state of residence.
(B) A person that is the owner of an unallocated annuitycontract issued to or in connection with a governmentlottery, if the owner is a resident or, if the owner is not aresident, if all the following conditions are satisfied:
(i) The member insurer that issued the unallocated annuitycontract is domiciled in Indiana.
(ii) The state in which the owner resides has an associationsimilar to the association.
(iii) The other association referred to in item (ii) does notprovide coverage of the unallocated annuity contractsolely because the member insurer was not licensed in thestate of residence at the time specified in the guarantyassociation law of the state of residence.
(4) For a structured settlement annuity, subdivisions (1) and (2)do not apply, and this chapter provides coverage to a person thatis a payee under the structured settlement annuity (orbeneficiary of a payee if the payee is deceased), if the payee:
(A) is a resident, regardless of where the contract ownerresides; or
(B) is not a resident if all the following conditions aresatisfied:
(i) The member insurer that issued the structuredsettlement annuity is domiciled in Indiana.
(ii) The state in which the payee resides has an associationsimilar to the association. (iii) Neither the payee nor the beneficiary of the payee (ifthe payee is deceased) is eligible for coverage by the otherassociation referred to in item (ii) solely because themember insurer was not licensed in the state of residenceat the time specified in the guaranty association law of thestate of residence.
(b) This chapter does not provide coverage to a person that is:
(1) a payee or beneficiary of a contract owner that is a resident,if the payee or beneficiary is afforded any coverage by theassociation of another state; or
(2) otherwise covered under subsection(a)(3), if any coverageis provided to the person by the association of another state.
(c) To avoid duplicate coverage, if a person that would otherwisereceive coverage under this chapter is provided coverage under thelaws of another state, the person is not eligible for coverage underthis chapter. In determining the application of this subsection whena person may be covered by the association of more than one (1)state as an owner, a payee, a beneficiary, or an assignee, this chaptermust be construed in conjunction with the laws of the other state toresult in coverage by only one (1) association.
(d) Except as otherwise excluded or limited by this chapter, thischapter provides coverage to the persons specified in subsection (a)for:
(1) direct nongroup life, health, or annuity policies andcontracts and supplemental contracts to direct nongroup life,health, or annuity policies and contracts;
(2) certificates under direct group life, health, and annuitypolicies and contracts; and
(3) unallocated annuity contracts;
issued by member insurers.
(e) This chapter does not provide coverage for or with respect tothe following:
(1) A part of a certificate, policy, or contract:
(A) not guaranteed by the insurer; or
(B) under which the risk is borne by the payee, certificateholder, or the policy or contract owner.
(2) A reinsurance policy or contract, unless and to the extentthat assumption certificates have been issued under thereinsurance policy or contract.
(3) A part of a certificate, policy, or contract to the extent thatthe certificate's, policy's, or contract's interest rate, creditingrate, or similar factor employed in calculating returns orchanges in values, whether expressly stated in the certificate,policy, or contract or determined by use of an index or otherexternal referent stated in the certificate, policy, or contract,either:
(A) when averaged over a period of four (4) yearsimmediately before the applicable coverage date, exceedsthe rate of interest determined by subtracting two (2)percentage points from Moody's Corporate Bond Yield
Average averaged for the same four (4) year period or for alesser period if the certificate, policy, or contract was issuedless than four (4) years before the applicable coverage date;or
(B) in effect under the certificate, policy, or contract on andafter the applicable coverage date, exceeds the rate ofinterest determined by subtracting three (3) percentagepoints from Moody's Corporate Bond Yield Average as mostrecently available on the applicable coverage date.
(4) The obligations of a plan or program of an employer, anassociation, or another person to provide life, health, or annuitybenefits to the employer's, association's, or other person'semployees, members, or others, including obligations arisingunder and benefits payable by the employer, association, orother person under a multiple employer welfare arrangement.
(5) A minimum premium group insurance plan.
(6) A stop-loss or excess loss insurance policy or contractproviding for the indemnification of or payment to a policyowner, a contract owner, a plan, or another person obligated topay life, health, or annuity benefits or to provide services inconnection with a benefit plan or another plan, fund, or programfor the provision of employee welfare or pension benefits.
(7) An administrative services only contract.
(8) A part of a certificate, policy, or contract to the extent thatthe certificate, policy, or contract provides for:
(A) dividends or experience rating credits;
(B) voting rights; or
(C) payment of fees or allowances to a person, including thecertificate holder or policy or contract owner, in connectionwith service with respect to or administration of thecertificate, policy, or contract.
(9) A certificate, policy, or contract issued in Indiana by amember insurer when the member insurer did not have acertificate of authority to issue the certificate, policy, orcontract in Indiana.
(10) An unallocated annuity contract issued to or in connectionwith a benefit plan protected by the federal Pension BenefitGuaranty Corporation, regardless of whether the federalPension Benefit Guaranty Corporation has yet been required tomake payments with respect to the benefit plan.
(11) An unallocated annuity contract or part of an unallocatedannuity contract that is not issued to or in connection with abenefit plan or a government lottery.
(12) A certificate, policy, or contract or part of a certificate,policy, or contract with respect to which the Class Bassessments contemplated by section 6 of this chapter may notbe made or collected under federal or state law.
(13) An obligation or claim that does not arise under the expresswritten terms of the policy or contract issued by the memberinsurer to the contract owner or policy owner, including any of
the following obligations and claims:
(A) Obligations and claims based on marketing materials.
(B) Obligations and claims based on side letters, riders, orother documents issued by the member insurer withoutmeeting applicable policy form filing or approvalrequirements.
(C) Obligations and claims based on actual or allegedmisrepresentations.
(D) Obligations and claims that are extracontractual claims.
(E) Obligations and claims for penalties or consequential,incidental, punitive, or exemplary damages.
(14) An obligation to provide a book value accounting guarantyfor defined contribution benefit plan participants by referenceto a portfolio of assets that is owned by the:
(A) benefit plan; or
(B) benefit plan's trustee;
that is not an affiliate of the member insurer.
(15) A part of a certificate, policy, or contract to the extent the:
(A) certificate, policy, or contract provides for thecertificate's, policy's, or contract's interest rate, creditingrate, or similar factor employed in calculating returns orchanges in values, to be determined by use of an index orother external referent stated in the certificate, policy, orcontract; and
(B) returns or changes in value have not been credited to thecertificate, policy, or contract, or as to which the certificateholder's or policy or contract owner's rights are subject toforfeiture, as of the applicable coverage date.
If a certificate's, policy's, or contract's returns or changes invalues are credited to the certificate, policy, or contract lessfrequently than annually, for purposes of determining thereturns and values that have been credited and are not subjectto forfeiture under this subdivision, the returns and changes invalue determined by using the procedures defined in thecertificate, policy, or contract must be considered credited as ifthe contractual date of crediting returns or changes in valueswere the applicable coverage date, and those credited returns orchanges in value are not subject to forfeiture under thissubdivision, but will be subject to any other applicablelimitations under this chapter.
(16) A funding agreement.
(17) An annuity not subject to regulation as described inIC 27-1-12.4.
(f) The benefits that the association is obligated to cover do notexceed the lesser of the following:
(1) The contractual obligations for which the member insurer isliable or would have been liable if the member insurer were notan impaired insurer or insolvent insurer.
(2) The applicable limitations as follows:
(A) With respect to certificates, policies, and contracts not
subject to clause (B), (C), (E), or (F), with respect to one (1)life, regardless of the number of policies or contracts, thefollowing limitations:
(i) Three hundred thousand dollars ($300,000) in lifeinsurance death benefits, but not more than one hundredthousand dollars ($100,000) in net cash surrender and netcash withdrawal values.
(ii) Three hundred thousand dollars ($300,000) in healthinsurance benefits, but not more than one hundredthousand dollars ($100,000) in net cash surrender and netcash withdrawal values.
(iii) One hundred thousand dollars ($100,000) in thepresent value of annuity benefits, including net cashsurrender and net cash withdrawal values.
(B) With respect to unallocated annuity contracts issued toor in connection with a governmental benefit planestablished under Section 401, 403(b), or 457 of the UnitedStates Internal Revenue Code, one hundred thousand dollars($100,000) in the present value of annuity benefits,including net cash surrender and net cash withdrawal values,per participant.
(C) With respect to structured settlement annuities, onehundred thousand dollars ($100,000) in the present value ofannuity benefits, including net cash surrender and net cashwithdrawal values, per payee.
(D) In addition to the foregoing limitations, the associationis not obligated to cover more than:
(i) an aggregate of three hundred thousand dollars($300,000) in benefits with respect to any one (1) personunder clauses (A), (B), and (C); or
(ii) with respect to one (1) owner of multiple nongrouppolicies of life insurance, whether the policy owner is anindividual, a firm, a corporation, or another person, andwhether the persons insured are officers, managers,employees, or other persons, five million dollars($5,000,000) in benefits, including net cash surrender andnet cash withdrawal values, regardless of the number ofpolicies and contracts held by the owner.
(E) With respect to unallocated annuity contracts issued toor in connection with a government lottery, five milliondollars ($5,000,000) in benefits per contract owner,regardless of the number of contracts held by the contractowner.
(F) With respect to unallocated annuity contracts:
(i) issued to or in connection with a benefit plan; and
(ii) not subject to clause (B);
five million dollars ($5,000,000) in benefits per plansponsor, regardless of the number of unallocated annuitycontracts entitled to coverage under this chapter.
(g) The limitations set forth in subsection (f) are limitations on the
benefits for which the association is obligated before taking intoaccount the:
(1) association's subrogation and assignment rights; or
(2) extent to which the benefits could be provided out of theassets of the impaired insurer or insolvent insurer attributableto covered policies.
The costs of discharging the association's obligations under thischapter may be met by the use of assets attributable to coveredpolicies or reimbursed to the association under the association'ssubrogation and assignment rights.
(h) In discharging the association's obligations to providecoverage under this chapter, the association is not required to:
(1) guarantee, assume, reinsure, or perform;
(2) cause to be guaranteed, assumed, reinsured, or performed;or
(3) otherwise assure the discharge of;
the obligations of the insolvent insurer or impaired insurer under acovered policy that do not materially affect the economic values oreconomic benefits of the covered policy.
As added by P.L.193-2006, SEC.11.
IC 27-8-8-3
Creation of association; membership; accounts; supervision
Sec. 3. (a) There is created a nonprofit legal entity referred to asthe Indiana Life and Health Insurance Guaranty Association. Amember insurer shall be and remain a member of the association asa condition of the member insurer's authority to transact insurance inIndiana. The association shall perform its functions under the plan ofoperation established and approved under section 7 of this chapter.The association shall exercise its powers through a board of directorsestablished under section 4 of this chapter. For purposes ofadministration and assessment the association shall maintain thefollowing two (2) accounts:
(1) The health insurance account.
(2) The life insurance and annuity account, which includes thefollowing subaccounts:
(A) The life insurance subaccount.
(B) The annuity subaccount, which includes annuitycontracts issued to or in connection with a governmentalbenefit plan established under Section 401, 403(b), or 457 ofthe United States Internal Revenue Code, but otherwiseexcludes unallocated annuities.
(C) The unallocated annuity subaccount, which excludesannuity contracts issued to or in connection with agovernmental benefit plan established under Section 401,403(b), or 457 of the United States Internal Revenue Code.
(b) The association is under the immediate supervision of thecommissioner and subject to the applicable provisions of theinsurance laws of Indiana.
As added by Acts 1978, P.L.129, SEC.3. Amended by P.L.130-1994,
SEC.43; P.L.116-1994, SEC.61; P.L.193-2006, SEC.12.
IC 27-8-8-4
Board of directors
Sec. 4. (a) The board of directors of the association shall consistof not less than five (5) nor more than nine (9) member insurersserving terms established in the plan of operation. The members ofthe board shall be selected by member insurers subject to theapproval of the commissioner.
(b) Vacancies on the board shall be filled for the remaining periodof the term by a majority vote of the remaining board members,subject to the approval of the commissioner.
(c) To select the initial board and initially organize theassociation, the commissioner shall give notice to all memberinsurers of the time and place of the organizational meeting. At theorganizational meeting, each member insurer is entitled to one (1)vote in person or by proxy. If the board is not selected within sixty(60) days after notice of the organizational meeting, thecommissioner may appoint the initial members of the board.
(d) In approving selections to the board, the commissioner shallconsider whether all member insurers are fairly represented.
(e) Members of the board may be reimbursed from the assets ofthe association for expenses incurred by the members as members ofthe board. The association shall not otherwise compensate membersof the board for the members' services on the board.
As added by Acts 1978, P.L.129, SEC.3. Amended by P.L.193-2006,SEC.13.
IC 27-8-8-5
Impaired insurers; insolvent insurers; liens; association powersand duties
Sec. 5. (a) If a member insurer is an impaired insurer, theassociation may, in the association's sole discretion and subject toany conditions imposed by the association that do not impair thecontractual obligations of the impaired insurer and that are approvedby the commissioner:
(1) guarantee, assume, reinsure, or perform, or cause to beguaranteed, assumed, reinsured, or performed, the contractualobligations of any of the covered policies of the impairedinsurer or otherwise assure the discharge of the contractualobligations of the covered policies of the impaired insurer; and
(2) provide money, pledges, loans, notes, guarantees, or useother means as determined by the association in theassociation's sole discretion to be necessary or appropriate toeffectuate subdivision (1).
(b) An obligation undertaken by the association under subsection(a) with respect to a covered policy of an impaired insurer ceases onthe 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 followingfor each covered policy:
(1) Guarantee, assume, reinsure, or perform, or cause to beguaranteed, assumed, reinsured, or performed, the contractualobligations of the covered policy or otherwise assure thedischarge of the contractual obligations of the covered policy.
(2) Terminate existing benefits and coverage and providebenefits and coverages in accordance with the followingprovisions:
(A) For premiums identical to the premiums that would havebeen payable under the covered policy, assure payment ofbenefits arising under the contractual obligations, except forterms of conversion and nonrenewability, for:
(i) with respect to a group covered policy, claims incurrednot later than the earlier of the next renewal date under thecovered policy or forty-five (45) days, but not less thanthirty (30) days, after the coverage date for the insolventinsurer; and
(ii) with respect to a nongroup covered policy, claimsincurred not later than the earlier of the next renewal dateunder the covered policy or one (1) year, but in no eventless than thirty (30) days, after the coverage date for theinsolvent insurer.
(B) Make diligent efforts to provide each:
(i) known insured or annuitant, for a nongroup coveredpolicy; and
(ii) owner, for a group covered policy;
at least thirty (30) days notice of the termination of thebenefits provided.
(C) Make available substitute coverage, on an individualbasis, to each:
(i) owner of a nongroup covered policy if the owner had aright to continue the nongroup covered policy in forceuntil a specified age or for a specified period, duringwhich time the insurer had no unilateral right to makechanges in the nongroup covered policy's provisions orhad only a unilateral right to make changes in premiumsonly by class; and
(ii) insured or annuitant under a group covered policy ifthe insured or annuitant is not eligible for any replacementgroup coverage and had a right, before termination of thegroup covered policy, to convert to individual coverage.
(D) In making available any substitute coverage under clause(C), the association may offer to reissue the terminatedcoverage or to issue an alternative policy or contract. If madeavailable under clause (C), alternative or reissued policiesand contracts must be offered without requiring evidence ofinsurability and must not impose any waiting period orcoverage exclusion, other than a waiting period or coverageexclusion provided for in this chapter, that would not have
applied under the terminated covered policy. The associationmay cause any alternative or reissued policy or contract to beassumed or reinsured.
(E) Use of alternative policies and contracts by theassociation is subject to the approval of the domiciliaryinsurance regulatory authority and the receivership court.The association may adopt alternative policies and contractsof various types for future issuance without regard to anyparticular impairment or insolvency. Alternative policies andcontracts must contain at least the minimum statutoryprovisions required in Indiana and provide benefits that arereasonable in relation to the premium charged. Theassociation shall set the premium in accordance with a tableof rates adopted by the association. The premium must:
(i) reflect the amount of insurance to be provided and theage and class of risk of each insured; and
(ii) not reflect changes in the health of the insured after theterminated covered policy was last underwritten.
Subject to coverage exceptions, exclusions, and limitationsprovided for in this chapter, an alternative policy or contractissued by the association must provide coverage similar, inmaterial respects, to the coverage under the terminatedcovered policy as determined by the association.
(F) If the association elects to reissue terminated coverage ata premium rate different from the premium rate chargedunder the terminated covered policy, the association shall setthe premium in accordance with a table of rates adopted bythe association. The premium:
(i) must reflect the amount of insurance to be provided andthe age and class of risk of each insured; and
(ii) is subject to approval of the domiciliary insuranceregulatory authority and the receivership court.
(G) The association's obligations with respect to coverageunder a covered policy of an insolvent insurer or under areissued or alternative policy or contract ceases on the datethe coverage or covered policy is replaced by another similarpolicy by the policy owner, insured, or association.
(H) Subject to subsection (u), when proceeding under thissubdivision with respect to a covered policy carryingguaranteed minimum interest rates, the association shallassure the payment or crediting of a rate of interestconsistent with section 2.3(e)(3) of this chapter.
(3) Take any combination of the actions set forth insubdivisions (1) and (2).
(d) The association may provide money, pledges, loans, notes, orguarantees, or use other means that the association, in theassociation's sole discretion, determines are necessary or appropriateto discharge the association's duties under subsection (c).
(e) Failure to pay premiums within thirty-one (31) days after thedate that payment is due under the terms of a guaranteed, assumed,
alternative, or reissued policy or contract or substitute coverageterminates the association's obligations under this chapter withrespect to the policy, contract, or coverage, except with respect toclaims incurred or net cash surrender value due under this chapter.
(f) Premiums due for coverage after the coverage date for animpaired insurer or insolvent insurer belong to and are payable at thedirection of the association, and the association is liable for unearnedpremiums payable to policy or contract owners with respect topremiums received by the association.
(g) The protection provided by this chapter does not apply whereany guaranty protection is provided to residents of this state by thelaws of the domiciliary state of the impaired insurer or insolventinsurer if the domiciliary state is a state other than Indiana.
(h) In carrying out its duties under subsection (c), the associationmay, subject to approval by a court in Indiana, impose:
(1) permanent policy or contract liens, if the association findsthat:
(A) the amounts that can be assessed under this chapter areless than the amounts needed to assure full and promptperformance of the association's duties under this chapter; or
(B) economic or financial conditions, as they affect memberinsurers, are sufficiently adverse so as to render theimposition of the permanent policy or contract liens to be inthe public interest; and
(2) temporary moratoriums or liens on payments of cash valuesand policy loans or any other right to withdraw funds held inconjunction with a covered policy, in addition to anycontractual provisions for deferral of cash or policy loan value.
In addition, in the event of a temporary moratorium or moratoriumcharge imposed by the receivership court on payments of cash valuesor policy loans or any other right to withdraw funds held inconjunction with a covered policy out of the assets of the impairedinsurer or insolvent insurer, the association may defer the paymentof cash values, policy loans, or other rights by the association for theperiod of the moratorium or moratorium charge imposed by thereceivership court, except for claims covered by the association to bepaid in accordance with a hardship procedure established by theliquidator or rehabilitator and approved by the receivership court.
(i) A deposit in Indiana, held by law or required by thecommissioner for the benefit of creditors, including policy owners,that is not turned over to the domiciliary receiver before or promptlyafter the coverage date for an impaired insurer or insolvent insurerunder IC 27-9-4-3 must be promptly paid to the association. Theassociation:
(1) may retain a part of an amount paid to the association underthis subsection equal to the percentage determined by dividingthe aggregate amount of policy owners' claims related to theimpairment or insolvency for which the association providesstatutory 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 differencebetween the amount paid to the association and the amountretained by the association under this subsection.
An amount retained by the association under this subsection must betreated as a distribution of estate assets under IC 27-9-3-32 or similarprovision of the state of domicile of the impaired insurer or insolventinsurer.
(j) If the association fails to act within a reasonable period of timeas provided in subsection (c) with respect to an insolvent insurer, thecommissioner has the powers and duties of the association under thischapter with respect to the insolvent insurer.
(k) The association may, upon the commissioner's request, assistand advise the commissioner concerning rehabilitation, payment ofclaims, continuance of coverage, or the performance of othercontractual obligations of an impaired insurer or insolvent insurer.
(l) The association has standing and the right to appear orintervene before a court or an agency in Indiana or elsewhere withjurisdiction over an impaired insurer or insolvent insurer for whichthe association is or may become obligated under this chapter or withjurisdiction over a person or property against which the associationmay have rights through subrogation or otherwise. Standing extendsto all matters germane to the rights, powers, and duties of theassociation, including proposals for reinsuring, modifying, orguaranteeing the policies or contracts of the impaired insurer orinsolvent insurer and the determination of the policies or contractsand contractual obligations.
(m) A person receiving benefits under this chapter is consideredto have assigned:
(1) the person's rights under; and
(2) any cause of action against another person for losses arisingunder, resulting from, or otherwise relating to;
the covered policy to the association to the extent of the benefitsreceived because of this chapter, whether the benefits are paymentsof or on account of contractual obligations or continuation ofcoverage or provision of substitute or alternative coverage. Theassociation may require an assignment to it of those rights and causesof action by a payee, policy or contract owner, certificate holder,beneficiary, insured, or annuitant as a condition precedent to thereceipt of any right or benefits conferred by this chapter on theperson.
(n) The subrogation rights of the association under subsections(m) and (o) have the same priority against the assets of the impairedinsurer or insolvent insurer as those possessed by the person entitledto 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 anyother equitable or legal remedy with respect to a covered policy thatwould have been available to the:
(1) impaired insurer or insolvent insurer;
(2) owner, beneficiary, or payee of a policy or contract with
respect to the policy or contract, including, in the case of astructured settlement annuity, rights of the owner, beneficiary,or payee of the annuity, to the extent of benefits received underthis chapter, against a person:
(A) who is originally or by succession responsible for thelosses arising from the personal injury relating to the annuityor payment for the annuity; and
(B) whose responsibility is not solely because of the personserving as an assignee in respect of a qualified assignmentunder Section 130 of the Internal Revenue Code; and
(3) certificate holder, or the beneficiary or payee of thecertificate holder, with respect to a certificate.
(p) If subsection (m), (n), or (o) is invalid or ineffective withrespect to a person or claim, the amount payable by the associationwith respect to the related covered policies must be reduced by theamount realized by another person with respect to the person orclaim that is attributable to the covered policies.
(q) If the association provides benefits with respect to a coveredpolicy and a person recovers amounts to which the association hasrights as described in subsection (m), (n), or (o), the person shall payto the association the part of the recovery attributable to the coveredpolicies.
(r) The association may do the following:
(1) Enter into contracts necessary or appropriate to carry out theprovisions and purposes of this chapter.
(2) Sue or, subject to section 14 of this chapter, be sued,including taking legal actions necessary or appropriate torecover unpaid assessments under section 6 of this chapter andto resolve claims or potential claims against or on behalf of theassociation.
(3) Borrow money to effect the purposes of this chapter andissue notes or other evidences of indebtedness of the associationwith respect to borrowings. Notes or other evidences ofindebtedness described in this subdivision that are not in defaultare legal investments for domestic insurers and may be carriedas admitted assets.
(4) Employ or retain persons necessary or appropriate to handlethe financial transactions of the association and to performother functions necessary or appropriate under this chapter.
(5) Take legal action necessary or appropriate to avoid orrecover payment of improper claims.
(6) Exercise, for the purposes of this chapter and to the extentapproved by the commissioner, the powers of a domestic life orhealth insurer. However, in no case may the association issueinsurance policies or annuity contracts other than those issuedto perform the association's obligations under this chapter.
(7) Request information from a person seeking coverage fromthe association to aid the association in determining anddischarging the association's obligations under this chapter withrespect to the person. The person shall promptly comply with
the request.
(8) Settle claims and potential claims by or against theassociation.
(9) Exercise all rights, privileges, and powers granted to theassociation by any other laws of Indiana or another jurisdiction.
(10) Take other necessary or appropriate action to discharge theassociation's duties and obligations under this chapter or toexercise the association's rights and powers under this chapter.
(s) The association may belong to one (1) or more organizationsof one (1) or more other state associations of similar purpose tofurther the purpose and administer the powers and duties of theassociation.
(t) The association has discretion and may exercise reasonablebusiness judgment to determine the means by which the associationis to discharge, in an economical and efficient manner, theassociation's obligations under this chapter.
(u) In discharging the association's obligations and exercising theassociation's rights and powers under subsections (a) and (c), theassociation may, subject to approval of the receivership court,provide substitute coverage for a covered policy that provides for thecovered policy's interest rate, crediting rate, or similar factoremployed in calculating returns or changes in value to be determinedby use of an index or other external referent stated in the coveredpolicy by issuing an alternative policy or contract in accordance withthe following provisions:
(1) Instead of the index or other external referent stated in thecovered policy, the alternative policy or contract may providefor:
(A) a fixed interest rate;
(B) payment of dividends with minimum guarantees; or
(C) a different method for calculating returns or changes invalue.
(2) A:
(A) requirement for evidence of insurability; or
(B) waiting period or an exclusion, other than a waitingperiod or an exclusion provided for in this chapter;
that would not have applied under the covered policy may notbe imposed.
(3) The alternative policy or contract must provide coveragesimilar, in material respects, to the coverage under the coveredpolicy, after taking into account the exceptions, exclusions, andlimitations provided for in this chapter, as determined by theassociation.
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.
IC 27-8-8-5.2
Association election to succeed to rights and duties of impaired orinsolvent insurer; reinsurance Sec. 5.2. (a) At any time within one (1) year after the coveragedate for an impaired insurer or insolvent insurer, the association mayelect, subject to subdivisions (1) through (4), to succeed to the rightsand obligations of the impaired insurer or insolvent insurer thataccrue on or after the coverage date and that relate to coveredpolicies under one (1) or more indemnity reinsurance agreementsentered into by the impaired insurer or insolvent insurer as a cedinginsurer. However, the association may not exercise an election withrespect to a reinsurance agreement if the receiver, rehabilitator, orliquidator of the impaired insurer or insolvent insurer has previouslyand expressly disaffirmed the reinsurance agreement. The election bythe association must be effected by a notice to the receiver,rehabilitator, or liquidator and to the affected reinsurers specifyingthe reinsurance agreement concerning which the association hasmade the foregoing election. If the association makes an election, thefollowing apply with respect to the agreements selected by theassociation:
(1) The association is responsible for:
(A) all unpaid premiums due under the agreements forperiods before and after the coverage date; and
(B) the performance of all other obligations of the impairedinsurer or insolvent insurer to be performed after thecoverage date;
that relate to covered policies. The association may chargecovered policies that are only partially covered by theassociation, through reasonable allocation methods, the costsfor reinsurance in excess of the obligations of the association.
(2) The association is entitled to any amount payable by thereinsurer under the selected agreements:
(A) with respect to losses or events that occur during periodsafter the coverage date; and
&