Article 30.--LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION
40-3008.Powers and duties of association;limitations of liability ofassociation; mandatory payment of certain claims.(a) If a member insurer is an impaired domestic insurer, the associationmay, in its discretion and subject to any conditions imposed by theassociation that do not impair the contractual obligations of the impairedinsurer, that are approved by the commissioner and that are, except incases of court-ordered conservation or rehabilitation, also approved by theimpaired insurer:
(1) Guarantee, assume or reinsure, or cause to beguaranteed, assumed or reinsured, any or all of the policies or contractsof the impaired insurer;
(2) provide such moneys, pledges, notes, guarantees or other means asare proper to effectuate the provisions of paragraph (1) of this subsectionand assure payment of the contractual obligations of the impaired insurerpending action under paragraph (1); or
(3) lend money to the impaired insurer.
(b) (1) If a member insurer is an impaired insurer, whether domestic,foreign or alien, and the insurer is not paying claims timely, then subjectto the preconditions specified in paragraph (2) of this subsection, theassociation shall, in its discretion, either:(A) Take any of the actionsspecified in subsection (a), subject to the conditions therein; or
(B) provide substitute benefits in lieu of the contractual obligationsof the impaired insurer solely for health claims,periodic annuity benefit payments, death benefits, supplemental benefitsand cash withdrawals for policy or contract owners who petition thereforunder claims of emergency or hardship in accordance with standards proposedby the association and approved by the commissioner.
(2) The association shall be subject to the requirements of paragraph(1) of this subsection only if:(A) The laws of the impaired insurer's state ofdomicile provide that:(i) The delinquency proceeding shall not be dismissed;
(ii) neither the impaired insurer nor its assets shall be returned tothe control of its shareholders or private management; and
(iii) it shall not be permitted to solicit or accept new business orhave any suspended or revoked license restored; anduntil all payments of or on account of the impairedinsurer's contractual obligations by all guaranty associations, along withall expenses thereof and interest on all such payments and expenses, shallhave been repaid to the guaranty associations or a plan of repayment by theimpaired insurer shall have been approved by the guaranty associations; and
(B) (i) with respect to the impaired insurer who is a domesticinsurer, it has been placed under an order of rehabilitation by a court ofcompetent jurisdiction in this state; or
(ii) with respect to the impaired insurer who is a foreign or alieninsurer: (aa) It has been prohibited from soliciting or accepting newbusiness in this state;
(bb) its certificate of authority has been suspended or revoked in thisstate; and
(cc) a petition for rehabilitation or liquidation has been filed in acourt of competent jurisdiction in its state of domicile by thecommissioner of the state.
(c) If a member insurer is an insolvent insurer, the associationshall, in its discretion, either: (1) (A) Guarantee, assume or reinsure,or cause to be guaranteed, assumed or reinsured, the policies or contractsof the insolvent insurer;
(B) assure payment of the contractual obligations of the insolvent insurer;and
(C) provide such moneys, pledges, guarantees or other means as arereasonably necessary to discharge such duties; or
(2) with respect only to life and health policies, provide benefitsand coverages in accordance with subsection (d).
(d) When proceeding under subsection (b)(1)(B) or (c)(2), theassociation shall, with respect only to life and health insurance policies:(1) Assure payment of benefits for premiums identical to the premiums andbenefits, except for terms of conversion and renewability, that would havebeen payable under the policies of the insolvent insurer, for claimsincurred: (A) With respect to group policies, not later than the earlier ofthe next renewal date under such policies or contracts or 45 days, but inno event less than 30 days, after the date on which the association becomesobligated with respect to such policies;
(B) with respect to individual policies, not later than the earlier ofthe next renewal date, if any, under such policies or one year, but in noevent less than 30 days, from the date on which the association becomesobligated with respect to such policies;
(2) make diligent efforts to provide all known insureds or grouppolicyholders with respect to group policies 30 days' notice of thetermination of the benefits provided; and
(3) with respect to individual policies, make available to each knowninsured, or owner if other than the insured, and with respect to anindividual formerly insured under a group policy who is not eligible forreplacement group coverage, make available substitute coverage on anindividual basis in accordance with the provisions of paragraph (4) of thissubsection, if the insureds had a right under law or the terminated policyto convert coverage to individual coverage or to continue an individualpolicy in force until a specified age or for a specified time, during whichthe insurer had no right unilaterally to make changes in any provision ofthe policy or had a right only to make changes in premium by class;
(4) (A) in providing the substitute coverage required under paragraph(3) of this subsection, the association may offer either to reissue theterminated coverage or to issue an alternative policy;
(B) alternative or reissued policies shall be offered withoutrequiring evidence of insurability, and shall not provide for any waitingperiod or exclusion that would not have applied under the terminated policy;and
(C) the association may reinsure any alternative or reissued policy;
(5) (A) alternative policies adopted by the association shall besubject to the approval of the commissioner. The association may adoptalternative policies of various types for future issuance without regard toany particular impairment or insolvency;
(B) alternative policies shall contain at least the minimum statutoryprovisions required in this state and provide benefits that shall not beunreasonable in relation to the premiums charged. The association shall setthe premiums in accordance with a table of rates which it shall adopt. Thepremiums shall reflect the amount of insurance to be provided and the ageand class of risk of each insured, but shall not reflect any changes in thehealth of the insured after the original policy was last underwritten;
(C) any alternative policy issued by the association shall providecoverage of a type similar to that of the policy issued by the impaired orinsolvent insurer, as determined by the association;
(6) if the association elects to reissue the insured's terminatedcoverage at a premium rate different from that charged under the terminatedpolicy, the premium shall be set by the association in accordance with theamount of insurance provided and the age and class of risk, subject toapproval by the commissioner and by a court of competent jurisdiction;
(7) the association's obligations with respect to coverage under anypolicy of the impaired or insolvent insurer or under any reissued oralternative policy shall cease on the date such coverage or policy isreplaced by another similar policy by the policyholder, the insured or the association.
(e) When proceeding under subsection (b)(1)(B) or (c) with respect toany policy or contract carrying guaranteed minimum interest rates, theassociation shall assure the payment or crediting of a rate of interestconsistent with subsection (n)(3).
(f) Nonpayment of premiums within 31 days after the date requiredunder the terms of any guaranteed, assumed, alternative or reissued policyor contract or substitute coverage shall terminate the association'sobligations under such policy or coverage under this act with respect tosuch policy or coverage, except with respect to any claims incurred or anynet cash surrender value which may be due in accordance with the provisions of this act.
(g) Premiums due after entry of an order of liquidation of aninsolvent insurer shall belong to and be payable at the direction of theassociation, and the association shall be liable for unearned premiums dueto policy or contract owners arising after the entry of such order.
(h) The protection provided by this act shall not apply where anyguaranty protection is provided to residents of this state by the laws ofthe domiciliary state or jurisdiction of the impaired or insolvent insurerother than this state.
(i) In carrying out its duties under subsections (b) and (c), theassociation may, subject to approval by the court: (1) Impose permanentpolicy or contract liens in connection with any guarantee, assumption orreinsurance agreement, if the association finds that the amounts which canbe assessed under this act are less than the amounts needed to assure fulland prompt performance of the association's duties under this act, or thatthe economic or financial conditions as they affect member insurers aresufficiently adverse to render the imposition of such permanent policy orcontract liens to be in the public interest; and
(2) impose temporary moratoriums or liens on payments of cash valuesand policy loans, or any other right to withdraw funds held in conjunctionwith policies or contracts, in addition to any contractual provisions fordeferral of cash or policy loan value.
(j) If the association fails to act within a reasonable period of timeas provided in subsections (b)(1)(B), (c) and (d) of this section, thecommissioner shall have the powers and duties of the association under thisact with respect to impaired or insolvent insurers.
(k) The association may render assistance and advice to thecommissioner, upon request, concerning rehabilitation, payment ofclaims, continuance of coverage or the performance of othercontractual obligations of any impaired or insolvent insurer.
(l) The association shall have standing to appear before any courtin this state with jurisdiction over an impaired or insolvent insurerconcerning which the association is or may become obligated under this act.Suchstanding shall extend to all matters germane to the powers and duties ofthe association, including, but not limited to, proposals for reinsuringor guaranteeing the covered policies of the impaired insurer and thedetermination of the covered policies or contracts and contractual obligations.The association shall also have the right to appear or intervene before acourt in another state with jurisdiction over an impaired or insolventinsurer for which the association is or may become obligated or withjurisdiction over a third party against whom the association may haverights through subrogation of the insurer's policyholders.
(m) (1) Any person receiving benefits under this act shall bedeemed to have assigned the rights under any cause of actionrelating to the covered policy or contract to theassociation to the extent of the benefits received because of this act,whether thebenefits are payments of or on account of contractual obligations,continuation of coverage or provision of substitute or alternativecoverages. The association may require an assignment toit of such rights and cause of action by any payee, policy or contractowner, beneficiary,insured or annuitant as a condition precedent to the receipt of any rightor benefits conferred by this act upon such person.
(2) The subrogation rights of the association under this subsectionshall have the same priority against the assets of the impaired or insolvent insureras that possessed by the person entitled to receive benefits under thisact.
(3) In addition to paragraphs (1) and (2), the association shall haveall common-law rights of subrogation and any other equitable or legalremedy which would have been available to the impaired or insolvent insureror holder of a policy or contract with respect to such policy or contracts.
(n) The contractual obligations of the impaired or insolventinsurer for whichthe association becomes, or may become, liable shall be as great as but nogreater than the contractual obligations of the impaired or insolvent insurerwouldhave been in the absence of an impairment or insolvency unless such obligationsarereduced as permitted by subsection (e) but the association shall not providecoverage for:(1) Any portion of a policy or contract not guaranteed by the insurer, orunder which the risk is borne by the policy or contract holder;
(2) any policy or contract of reinsurance, unless assumptioncertificates have been issued;
(3) any portion of a policy or contract to the extent that the rate ofinterest on which it is based: (A) Averaged over the period of four yearsprior to the date on which the association becomes obligated with respectto such policy or contract, exceeds a rate of interest determined bysubtracting two percentage points from Moody's corporate bond yield averageaveraged for that same four-year period or for such lesser period if thepolicy or contract was issued less than four years before the associationbecame obligated; and
(B) on and after the date on which the association becomes obligatedwith respect to such policy or contract, exceeds the rate of interestdetermined by subtracting three percentage points from Moody's corporatebond yield average as most recently available;
(4) any plan or program of an employer, association or similar entityto provide life, health or annuity benefits to its employees or members tothe extent that such plan or program is self-funded or uninsured, includingbut not limited, to benefits payable by an employer, association or similarentity under: (A) A multiple employer welfare arrangement as defined insection 514 of the employee retirement income security act of 1974, as amended;
(B) a minimum premium group insurance plan;
(C) a stop-loss group insurance plan; or
(D) an administrative services only contract;
(5) any portion of a policy or contract to the extent that it providesdividends or experience rating credits, or provides that any fees orallowances be paid to any person, including the policy or contract holder,in connection with the service to or administration of such policy or contract;
(6) any policy or contract issued in this state by a member insurer ata time when it was not licensed or did not have a certificate of authorityto issue such policy or contract in this state;
(7) any unallocated annuity contract, except as provided in subsection (b)of K.S.A. 40-3003 and amendments thereto; and
(8) a policy or contract providing any hospital, medical, prescription drugor other health care benefits pursuant to part C or part D of subchapter XVIII,chapter 7 of title 42 of the United States code (commonly known as medicarepartC & D) or any regulations issued pursuant thereto.
(o) The benefits for which the association may become liable shall inno event exceed the lesser of: (1) The contractual obligations for whichthe insurer is liable or would have been liable if it were not an impairedor insolvent insurer; or
(2) with respect to any one life, regardless of the number of policiesor contracts: (A) $300,000 in lifeinsurance death benefits, but not more than $100,000 in net cash surrender andnet cashwithdrawal values for life insurance;
(B) $100,000 in health insurancebenefits,including any net cash surrender and net cash withdrawal values; or
(C) $250,000 in the present value ofannuitybenefits, including net cash surrender and net cash withdrawal values;
(D) In no event shall the association be liable to expend more than $300,000in the aggregate with respect to any one life asprovided inparagraph (A), (B) or (C) of this subsection.
(E) The guaranty association's limits of liability with respect to theobligations of any impaired or insolvent insurer shall be the limits ofliability in effect under this act on the date the guaranty association becameliable for that impaired or insolvent insurer.
The provisions of subsection (o) shall not apply to annuity contractsfor future economic loss procured pursuant to a judgment or settlementagreement in amedical malpractice liability action.
(p) The association may:(1) Enter into such contracts as are necessary or proper to carryout the provisions and purposes of this act;
(2) sue or be sued, including taking any legal actions necessary orproper to recover any unpaid assessments underK.S.A. 40-3009 and amendments thereto, and to settle claims orpotential claims against it;
(3) borrow money to effect the purposes of this act. Any notes orother evidence of indebtedness of the association not in default shallbe legal investments for domestic insurers and may be carried asadmitted assets;
(4) employ or retain such persons as are necessary to handle thefinancial transactions of the association, and to perform such otherfunctions as become necessary or proper under this act;
(5) take such legal action as may be necessary to avoid payment of improper claims; or
(6) exercise, for the purposes of this act and to the extentapproved by the commissioner, the powers of a domestic life or healthinsurer, but in no case may the association issue insurance policies orannuity contracts other than those issued to performits obligations under this act.
(q) The association may join an organization of one or more other stateassociations of similar purposes to further the purposes and administerthe powers and duties of the association.
(r) The association shall pay any and all persons who, as a provider, mayhave claims as a result of a member insurer being found insolvent between March1, 1999 and June 1, 1999.
Article 30.--LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION
40-3008.Powers and duties of association;limitations of liability ofassociation; mandatory payment of certain claims.(a) If a member insurer is an impaired domestic insurer, the associationmay, in its discretion and subject to any conditions imposed by theassociation that do not impair the contractual obligations of the impairedinsurer, that are approved by the commissioner and that are, except incases of court-ordered conservation or rehabilitation, also approved by theimpaired insurer:
(1) Guarantee, assume or reinsure, or cause to beguaranteed, assumed or reinsured, any or all of the policies or contractsof the impaired insurer;
(2) provide such moneys, pledges, notes, guarantees or other means asare proper to effectuate the provisions of paragraph (1) of this subsectionand assure payment of the contractual obligations of the impaired insurerpending action under paragraph (1); or
(3) lend money to the impaired insurer.
(b) (1) If a member insurer is an impaired insurer, whether domestic,foreign or alien, and the insurer is not paying claims timely, then subjectto the preconditions specified in paragraph (2) of this subsection, theassociation shall, in its discretion, either:(A) Take any of the actionsspecified in subsection (a), subject to the conditions therein; or
(B) provide substitute benefits in lieu of the contractual obligationsof the impaired insurer solely for health claims,periodic annuity benefit payments, death benefits, supplemental benefitsand cash withdrawals for policy or contract owners who petition thereforunder claims of emergency or hardship in accordance with standards proposedby the association and approved by the commissioner.
(2) The association shall be subject to the requirements of paragraph(1) of this subsection only if:(A) The laws of the impaired insurer's state ofdomicile provide that:(i) The delinquency proceeding shall not be dismissed;
(ii) neither the impaired insurer nor its assets shall be returned tothe control of its shareholders or private management; and
(iii) it shall not be permitted to solicit or accept new business orhave any suspended or revoked license restored; anduntil all payments of or on account of the impairedinsurer's contractual obligations by all guaranty associations, along withall expenses thereof and interest on all such payments and expenses, shallhave been repaid to the guaranty associations or a plan of repayment by theimpaired insurer shall have been approved by the guaranty associations; and
(B) (i) with respect to the impaired insurer who is a domesticinsurer, it has been placed under an order of rehabilitation by a court ofcompetent jurisdiction in this state; or
(ii) with respect to the impaired insurer who is a foreign or alieninsurer: (aa) It has been prohibited from soliciting or accepting newbusiness in this state;
(bb) its certificate of authority has been suspended or revoked in thisstate; and
(cc) a petition for rehabilitation or liquidation has been filed in acourt of competent jurisdiction in its state of domicile by thecommissioner of the state.
(c) If a member insurer is an insolvent insurer, the associationshall, in its discretion, either: (1) (A) Guarantee, assume or reinsure,or cause to be guaranteed, assumed or reinsured, the policies or contractsof the insolvent insurer;
(B) assure payment of the contractual obligations of the insolvent insurer;and
(C) provide such moneys, pledges, guarantees or other means as arereasonably necessary to discharge such duties; or
(2) with respect only to life and health policies, provide benefitsand coverages in accordance with subsection (d).
(d) When proceeding under subsection (b)(1)(B) or (c)(2), theassociation shall, with respect only to life and health insurance policies:(1) Assure payment of benefits for premiums identical to the premiums andbenefits, except for terms of conversion and renewability, that would havebeen payable under the policies of the insolvent insurer, for claimsincurred: (A) With respect to group policies, not later than the earlier ofthe next renewal date under such policies or contracts or 45 days, but inno event less than 30 days, after the date on which the association becomesobligated with respect to such policies;
(B) with respect to individual policies, not later than the earlier ofthe next renewal date, if any, under such policies or one year, but in noevent less than 30 days, from the date on which the association becomesobligated with respect to such policies;
(2) make diligent efforts to provide all known insureds or grouppolicyholders with respect to group policies 30 days' notice of thetermination of the benefits provided; and
(3) with respect to individual policies, make available to each knowninsured, or owner if other than the insured, and with respect to anindividual formerly insured under a group policy who is not eligible forreplacement group coverage, make available substitute coverage on anindividual basis in accordance with the provisions of paragraph (4) of thissubsection, if the insureds had a right under law or the terminated policyto convert coverage to individual coverage or to continue an individualpolicy in force until a specified age or for a specified time, during whichthe insurer had no right unilaterally to make changes in any provision ofthe policy or had a right only to make changes in premium by class;
(4) (A) in providing the substitute coverage required under paragraph(3) of this subsection, the association may offer either to reissue theterminated coverage or to issue an alternative policy;
(B) alternative or reissued policies shall be offered withoutrequiring evidence of insurability, and shall not provide for any waitingperiod or exclusion that would not have applied under the terminated policy;and
(C) the association may reinsure any alternative or reissued policy;
(5) (A) alternative policies adopted by the association shall besubject to the approval of the commissioner. The association may adoptalternative policies of various types for future issuance without regard toany particular impairment or insolvency;
(B) alternative policies shall contain at least the minimum statutoryprovisions required in this state and provide benefits that shall not beunreasonable in relation to the premiums charged. The association shall setthe premiums in accordance with a table of rates which it shall adopt. Thepremiums shall reflect the amount of insurance to be provided and the ageand class of risk of each insured, but shall not reflect any changes in thehealth of the insured after the original policy was last underwritten;
(C) any alternative policy issued by the association shall providecoverage of a type similar to that of the policy issued by the impaired orinsolvent insurer, as determined by the association;
(6) if the association elects to reissue the insured's terminatedcoverage at a premium rate different from that charged under the terminatedpolicy, the premium shall be set by the association in accordance with theamount of insurance provided and the age and class of risk, subject toapproval by the commissioner and by a court of competent jurisdiction;
(7) the association's obligations with respect to coverage under anypolicy of the impaired or insolvent insurer or under any reissued oralternative policy shall cease on the date such coverage or policy isreplaced by another similar policy by the policyholder, the insured or the association.
(e) When proceeding under subsection (b)(1)(B) or (c) with respect toany policy or contract carrying guaranteed minimum interest rates, theassociation shall assure the payment or crediting of a rate of interestconsistent with subsection (n)(3).
(f) Nonpayment of premiums within 31 days after the date requiredunder the terms of any guaranteed, assumed, alternative or reissued policyor contract or substitute coverage shall terminate the association'sobligations under such policy or coverage under this act with respect tosuch policy or coverage, except with respect to any claims incurred or anynet cash surrender value which may be due in accordance with the provisions of this act.
(g) Premiums due after entry of an order of liquidation of aninsolvent insurer shall belong to and be payable at the direction of theassociation, and the association shall be liable for unearned premiums dueto policy or contract owners arising after the entry of such order.
(h) The protection provided by this act shall not apply where anyguaranty protection is provided to residents of this state by the laws ofthe domiciliary state or jurisdiction of the impaired or insolvent insurerother than this state.
(i) In carrying out its duties under subsections (b) and (c), theassociation may, subject to approval by the court: (1) Impose permanentpolicy or contract liens in connection with any guarantee, assumption orreinsurance agreement, if the association finds that the amounts which canbe assessed under this act are less than the amounts needed to assure fulland prompt performance of the association's duties under this act, or thatthe economic or financial conditions as they affect member insurers aresufficiently adverse to render the imposition of such permanent policy orcontract liens to be in the public interest; and
(2) impose temporary moratoriums or liens on payments of cash valuesand policy loans, or any other right to withdraw funds held in conjunctionwith policies or contracts, in addition to any contractual provisions fordeferral of cash or policy loan value.
(j) If the association fails to act within a reasonable period of timeas provided in subsections (b)(1)(B), (c) and (d) of this section, thecommissioner shall have the powers and duties of the association under thisact with respect to impaired or insolvent insurers.
(k) The association may render assistance and advice to thecommissioner, upon request, concerning rehabilitation, payment ofclaims, continuance of coverage or the performance of othercontractual obligations of any impaired or insolvent insurer.
(l) The association shall have standing to appear before any courtin this state with jurisdiction over an impaired or insolvent insurerconcerning which the association is or may become obligated under this act.Suchstanding shall extend to all matters germane to the powers and duties ofthe association, including, but not limited to, proposals for reinsuringor guaranteeing the covered policies of the impaired insurer and thedetermination of the covered policies or contracts and contractual obligations.The association shall also have the right to appear or intervene before acourt in another state with jurisdiction over an impaired or insolventinsurer for which the association is or may become obligated or withjurisdiction over a third party against whom the association may haverights through subrogation of the insurer's policyholders.
(m) (1) Any person receiving benefits under this act shall bedeemed to have assigned the rights under any cause of actionrelating to the covered policy or contract to theassociation to the extent of the benefits received because of this act,whether thebenefits are payments of or on account of contractual obligations,continuation of coverage or provision of substitute or alternativecoverages. The association may require an assignment toit of such rights and cause of action by any payee, policy or contractowner, beneficiary,insured or annuitant as a condition precedent to the receipt of any rightor benefits conferred by this act upon such person.
(2) The subrogation rights of the association under this subsectionshall have the same priority against the assets of the impaired or insolvent insureras that possessed by the person entitled to receive benefits under thisact.
(3) In addition to paragraphs (1) and (2), the association shall haveall common-law rights of subrogation and any other equitable or legalremedy which would have been available to the impaired or insolvent insureror holder of a policy or contract with respect to such policy or contracts.
(n) The contractual obligations of the impaired or insolventinsurer for whichthe association becomes, or may become, liable shall be as great as but nogreater than the contractual obligations of the impaired or insolvent insurerwouldhave been in the absence of an impairment or insolvency unless such obligationsarereduced as permitted by subsection (e) but the association shall not providecoverage for:(1) Any portion of a policy or contract not guaranteed by the insurer, orunder which the risk is borne by the policy or contract holder;
(2) any policy or contract of reinsurance, unless assumptioncertificates have been issued;
(3) any portion of a policy or contract to the extent that the rate ofinterest on which it is based: (A) Averaged over the period of four yearsprior to the date on which the association becomes obligated with respectto such policy or contract, exceeds a rate of interest determined bysubtracting two percentage points from Moody's corporate bond yield averageaveraged for that same four-year period or for such lesser period if thepolicy or contract was issued less than four years before the associationbecame obligated; and
(B) on and after the date on which the association becomes obligatedwith respect to such policy or contract, exceeds the rate of interestdetermined by subtracting three percentage points from Moody's corporatebond yield average as most recently available;
(4) any plan or program of an employer, association or similar entityto provide life, health or annuity benefits to its employees or members tothe extent that such plan or program is self-funded or uninsured, includingbut not limited, to benefits payable by an employer, association or similarentity under: (A) A multiple employer welfare arrangement as defined insection 514 of the employee retirement income security act of 1974, as amended;
(B) a minimum premium group insurance plan;
(C) a stop-loss group insurance plan; or
(D) an administrative services only contract;
(5) any portion of a policy or contract to the extent that it providesdividends or experience rating credits, or provides that any fees orallowances be paid to any person, including the policy or contract holder,in connection with the service to or administration of such policy or contract;
(6) any policy or contract issued in this state by a member insurer ata time when it was not licensed or did not have a certificate of authorityto issue such policy or contract in this state;
(7) any unallocated annuity contract, except as provided in subsection (b)of K.S.A. 40-3003 and amendments thereto; and
(8) a policy or contract providing any hospital, medical, prescription drugor other health care benefits pursuant to part C or part D of subchapter XVIII,chapter 7 of title 42 of the United States code (commonly known as medicarepartC & D) or any regulations issued pursuant thereto.
(o) The benefits for which the association may become liable shall inno event exceed the lesser of: (1) The contractual obligations for whichthe insurer is liable or would have been liable if it were not an impairedor insolvent insurer; or
(2) with respect to any one life, regardless of the number of policiesor contracts: (A) $300,000 in lifeinsurance death benefits, but not more than $100,000 in net cash surrender andnet cashwithdrawal values for life insurance;
(B) $100,000 in health insurancebenefits,including any net cash surrender and net cash withdrawal values; or
(C) $250,000 in the present value ofannuitybenefits, including net cash surrender and net cash withdrawal values;
(D) In no event shall the association be liable to expend more than $300,000in the aggregate with respect to any one life asprovided inparagraph (A), (B) or (C) of this subsection.
(E) The guaranty association's limits of liability with respect to theobligations of any impaired or insolvent insurer shall be the limits ofliability in effect under this act on the date the guaranty association becameliable for that impaired or insolvent insurer.
The provisions of subsection (o) shall not apply to annuity contractsfor future economic loss procured pursuant to a judgment or settlementagreement in amedical malpractice liability action.
(p) The association may:(1) Enter into such contracts as are necessary or proper to carryout the provisions and purposes of this act;
(2) sue or be sued, including taking any legal actions necessary orproper to recover any unpaid assessments underK.S.A. 40-3009 and amendments thereto, and to settle claims orpotential claims against it;
(3) borrow money to effect the purposes of this act. Any notes orother evidence of indebtedness of the association not in default shallbe legal investments for domestic insurers and may be carried asadmitted assets;
(4) employ or retain such persons as are necessary to handle thefinancial transactions of the association, and to perform such otherfunctions as become necessary or proper under this act;
(5) take such legal action as may be necessary to avoid payment of improper claims; or
(6) exercise, for the purposes of this act and to the extentapproved by the commissioner, the powers of a domestic life or healthinsurer, but in no case may the association issue insurance policies orannuity contracts other than those issued to performits obligations under this act.
(q) The association may join an organization of one or more other stateassociations of similar purposes to further the purposes and administerthe powers and duties of the association.
(r) The association shall pay any and all persons who, as a provider, mayhave claims as a result of a member insurer being found insolvent between March1, 1999 and June 1, 1999.
Article 30.--LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION
40-3008.Powers and duties of association;limitations of liability ofassociation; mandatory payment of certain claims.(a) If a member insurer is an impaired domestic insurer, the associationmay, in its discretion and subject to any conditions imposed by theassociation that do not impair the contractual obligations of the impairedinsurer, that are approved by the commissioner and that are, except incases of court-ordered conservation or rehabilitation, also approved by theimpaired insurer:
(1) Guarantee, assume or reinsure, or cause to beguaranteed, assumed or reinsured, any or all of the policies or contractsof the impaired insurer;
(2) provide such moneys, pledges, notes, guarantees or other means asare proper to effectuate the provisions of paragraph (1) of this subsectionand assure payment of the contractual obligations of the impaired insurerpending action under paragraph (1); or
(3) lend money to the impaired insurer.
(b) (1) If a member insurer is an impaired insurer, whether domestic,foreign or alien, and the insurer is not paying claims timely, then subjectto the preconditions specified in paragraph (2) of this subsection, theassociation shall, in its discretion, either:(A) Take any of the actionsspecified in subsection (a), subject to the conditions therein; or
(B) provide substitute benefits in lieu of the contractual obligationsof the impaired insurer solely for health claims,periodic annuity benefit payments, death benefits, supplemental benefitsand cash withdrawals for policy or contract owners who petition thereforunder claims of emergency or hardship in accordance with standards proposedby the association and approved by the commissioner.
(2) The association shall be subject to the requirements of paragraph(1) of this subsection only if:(A) The laws of the impaired insurer's state ofdomicile provide that:(i) The delinquency proceeding shall not be dismissed;
(ii) neither the impaired insurer nor its assets shall be returned tothe control of its shareholders or private management; and
(iii) it shall not be permitted to solicit or accept new business orhave any suspended or revoked license restored; anduntil all payments of or on account of the impairedinsurer's contractual obligations by all guaranty associations, along withall expenses thereof and interest on all such payments and expenses, shallhave been repaid to the guaranty associations or a plan of repayment by theimpaired insurer shall have been approved by the guaranty associations; and
(B) (i) with respect to the impaired insurer who is a domesticinsurer, it has been placed under an order of rehabilitation by a court ofcompetent jurisdiction in this state; or
(ii) with respect to the impaired insurer who is a foreign or alieninsurer: (aa) It has been prohibited from soliciting or accepting newbusiness in this state;
(bb) its certificate of authority has been suspended or revoked in thisstate; and
(cc) a petition for rehabilitation or liquidation has been filed in acourt of competent jurisdiction in its state of domicile by thecommissioner of the state.
(c) If a member insurer is an insolvent insurer, the associationshall, in its discretion, either: (1) (A) Guarantee, assume or reinsure,or cause to be guaranteed, assumed or reinsured, the policies or contractsof the insolvent insurer;
(B) assure payment of the contractual obligations of the insolvent insurer;and
(C) provide such moneys, pledges, guarantees or other means as arereasonably necessary to discharge such duties; or
(2) with respect only to life and health policies, provide benefitsand coverages in accordance with subsection (d).
(d) When proceeding under subsection (b)(1)(B) or (c)(2), theassociation shall, with respect only to life and health insurance policies:(1) Assure payment of benefits for premiums identical to the premiums andbenefits, except for terms of conversion and renewability, that would havebeen payable under the policies of the insolvent insurer, for claimsincurred: (A) With respect to group policies, not later than the earlier ofthe next renewal date under such policies or contracts or 45 days, but inno event less than 30 days, after the date on which the association becomesobligated with respect to such policies;
(B) with respect to individual policies, not later than the earlier ofthe next renewal date, if any, under such policies or one year, but in noevent less than 30 days, from the date on which the association becomesobligated with respect to such policies;
(2) make diligent efforts to provide all known insureds or grouppolicyholders with respect to group policies 30 days' notice of thetermination of the benefits provided; and
(3) with respect to individual policies, make available to each knowninsured, or owner if other than the insured, and with respect to anindividual formerly insured under a group policy who is not eligible forreplacement group coverage, make available substitute coverage on anindividual basis in accordance with the provisions of paragraph (4) of thissubsection, if the insureds had a right under law or the terminated policyto convert coverage to individual coverage or to continue an individualpolicy in force until a specified age or for a specified time, during whichthe insurer had no right unilaterally to make changes in any provision ofthe policy or had a right only to make changes in premium by class;
(4) (A) in providing the substitute coverage required under paragraph(3) of this subsection, the association may offer either to reissue theterminated coverage or to issue an alternative policy;
(B) alternative or reissued policies shall be offered withoutrequiring evidence of insurability, and shall not provide for any waitingperiod or exclusion that would not have applied under the terminated policy;and
(C) the association may reinsure any alternative or reissued policy;
(5) (A) alternative policies adopted by the association shall besubject to the approval of the commissioner. The association may adoptalternative policies of various types for future issuance without regard toany particular impairment or insolvency;
(B) alternative policies shall contain at least the minimum statutoryprovisions required in this state and provide benefits that shall not beunreasonable in relation to the premiums charged. The association shall setthe premiums in accordance with a table of rates which it shall adopt. Thepremiums shall reflect the amount of insurance to be provided and the ageand class of risk of each insured, but shall not reflect any changes in thehealth of the insured after the original policy was last underwritten;
(C) any alternative policy issued by the association shall providecoverage of a type similar to that of the policy issued by the impaired orinsolvent insurer, as determined by the association;
(6) if the association elects to reissue the insured's terminatedcoverage at a premium rate different from that charged under the terminatedpolicy, the premium shall be set by the association in accordance with theamount of insurance provided and the age and class of risk, subject toapproval by the commissioner and by a court of competent jurisdiction;
(7) the association's obligations with respect to coverage under anypolicy of the impaired or insolvent insurer or under any reissued oralternative policy shall cease on the date such coverage or policy isreplaced by another similar policy by the policyholder, the insured or the association.
(e) When proceeding under subsection (b)(1)(B) or (c) with respect toany policy or contract carrying guaranteed minimum interest rates, theassociation shall assure the payment or crediting of a rate of interestconsistent with subsection (n)(3).
(f) Nonpayment of premiums within 31 days after the date requiredunder the terms of any guaranteed, assumed, alternative or reissued policyor contract or substitute coverage shall terminate the association'sobligations under such policy or coverage under this act with respect tosuch policy or coverage, except with respect to any claims incurred or anynet cash surrender value which may be due in accordance with the provisions of this act.
(g) Premiums due after entry of an order of liquidation of aninsolvent insurer shall belong to and be payable at the direction of theassociation, and the association shall be liable for unearned premiums dueto policy or contract owners arising after the entry of such order.
(h) The protection provided by this act shall not apply where anyguaranty protection is provided to residents of this state by the laws ofthe domiciliary state or jurisdiction of the impaired or insolvent insurerother than this state.
(i) In carrying out its duties under subsections (b) and (c), theassociation may, subject to approval by the court: (1) Impose permanentpolicy or contract liens in connection with any guarantee, assumption orreinsurance agreement, if the association finds that the amounts which canbe assessed under this act are less than the amounts needed to assure fulland prompt performance of the association's duties under this act, or thatthe economic or financial conditions as they affect member insurers aresufficiently adverse to render the imposition of such permanent policy orcontract liens to be in the public interest; and
(2) impose temporary moratoriums or liens on payments of cash valuesand policy loans, or any other right to withdraw funds held in conjunctionwith policies or contracts, in addition to any contractual provisions fordeferral of cash or policy loan value.
(j) If the association fails to act within a reasonable period of timeas provided in subsections (b)(1)(B), (c) and (d) of this section, thecommissioner shall have the powers and duties of the association under thisact with respect to impaired or insolvent insurers.
(k) The association may render assistance and advice to thecommissioner, upon request, concerning rehabilitation, payment ofclaims, continuance of coverage or the performance of othercontractual obligations of any impaired or insolvent insurer.
(l) The association shall have standing to appear before any courtin this state with jurisdiction over an impaired or insolvent insurerconcerning which the association is or may become obligated under this act.Suchstanding shall extend to all matters germane to the powers and duties ofthe association, including, but not limited to, proposals for reinsuringor guaranteeing the covered policies of the impaired insurer and thedetermination of the covered policies or contracts and contractual obligations.The association shall also have the right to appear or intervene before acourt in another state with jurisdiction over an impaired or insolventinsurer for which the association is or may become obligated or withjurisdiction over a third party against whom the association may haverights through subrogation of the insurer's policyholders.
(m) (1) Any person receiving benefits under this act shall bedeemed to have assigned the rights under any cause of actionrelating to the covered policy or contract to theassociation to the extent of the benefits received because of this act,whether thebenefits are payments of or on account of contractual obligations,continuation of coverage or provision of substitute or alternativecoverages. The association may require an assignment toit of such rights and cause of action by any payee, policy or contractowner, beneficiary,insured or annuitant as a condition precedent to the receipt of any rightor benefits conferred by this act upon such person.
(2) The subrogation rights of the association under this subsectionshall have the same priority against the assets of the impaired or insolvent insureras that possessed by the person entitled to receive benefits under thisact.
(3) In addition to paragraphs (1) and (2), the association shall haveall common-law rights of subrogation and any other equitable or legalremedy which would have been available to the impaired or insolvent insureror holder of a policy or contract with respect to such policy or contracts.
(n) The contractual obligations of the impaired or insolventinsurer for whichthe association becomes, or may become, liable shall be as great as but nogreater than the contractual obligations of the impaired or insolvent insurerwouldhave been in the absence of an impairment or insolvency unless such obligationsarereduced as permitted by subsection (e) but the association shall not providecoverage for:(1) Any portion of a policy or contract not guaranteed by the insurer, orunder which the risk is borne by the policy or contract holder;
(2) any policy or contract of reinsurance, unless assumptioncertificates have been issued;
(3) any portion of a policy or contract to the extent that the rate ofinterest on which it is based: (A) Averaged over the period of four yearsprior to the date on which the association becomes obligated with respectto such policy or contract, exceeds a rate of interest determined bysubtracting two percentage points from Moody's corporate bond yield averageaveraged for that same four-year period or for such lesser period if thepolicy or contract was issued less than four years before the associationbecame obligated; and
(B) on and after the date on which the association becomes obligatedwith respect to such policy or contract, exceeds the rate of interestdetermined by subtracting three percentage points from Moody's corporatebond yield average as most recently available;
(4) any plan or program of an employer, association or similar entityto provide life, health or annuity benefits to its employees or members tothe extent that such plan or program is self-funded or uninsured, includingbut not limited, to benefits payable by an employer, association or similarentity under: (A) A multiple employer welfare arrangement as defined insection 514 of the employee retirement income security act of 1974, as amended;
(B) a minimum premium group insurance plan;
(C) a stop-loss group insurance plan; or
(D) an administrative services only contract;
(5) any portion of a policy or contract to the extent that it providesdividends or experience rating credits, or provides that any fees orallowances be paid to any person, including the policy or contract holder,in connection with the service to or administration of such policy or contract;
(6) any policy or contract issued in this state by a member insurer ata time when it was not licensed or did not have a certificate of authorityto issue such policy or contract in this state;
(7) any unallocated annuity contract, except as provided in subsection (b)of K.S.A. 40-3003 and amendments thereto; and
(8) a policy or contract providing any hospital, medical, prescription drugor other health care benefits pursuant to part C or part D of subchapter XVIII,chapter 7 of title 42 of the United States code (commonly known as medicarepartC & D) or any regulations issued pursuant thereto.
(o) The benefits for which the association may become liable shall inno event exceed the lesser of: (1) The contractual obligations for whichthe insurer is liable or would have been liable if it were not an impairedor insolvent insurer; or
(2) with respect to any one life, regardless of the number of policiesor contracts: (A) $300,000 in lifeinsurance death benefits, but not more than $100,000 in net cash surrender andnet cashwithdrawal values for life insurance;
(B) $100,000 in health insurancebenefits,including any net cash surrender and net cash withdrawal values; or
(C) $250,000 in the present value ofannuitybenefits, including net cash surrender and net cash withdrawal values;
(D) In no event shall the association be liable to expend more than $300,000in the aggregate with respect to any one life asprovided inparagraph (A), (B) or (C) of this subsection.
(E) The guaranty association's limits of liability with respect to theobligations of any impaired or insolvent insurer shall be the limits ofliability in effect under this act on the date the guaranty association becameliable for that impaired or insolvent insurer.
The provisions of subsection (o) shall not apply to annuity contractsfor future economic loss procured pursuant to a judgment or settlementagreement in amedical malpractice liability action.
(p) The association may:(1) Enter into such contracts as are necessary or proper to carryout the provisions and purposes of this act;
(2) sue or be sued, including taking any legal actions necessary orproper to recover any unpaid assessments underK.S.A. 40-3009 and amendments thereto, and to settle claims orpotential claims against it;
(3) borrow money to effect the purposes of this act. Any notes orother evidence of indebtedness of the association not in default shallbe legal investments for domestic insurers and may be carried asadmitted assets;
(4) employ or retain such persons as are necessary to handle thefinancial transactions of the association, and to perform such otherfunctions as become necessary or proper under this act;
(5) take such legal action as may be necessary to avoid payment of improper claims; or
(6) exercise, for the purposes of this act and to the extentapproved by the commissioner, the powers of a domestic life or healthinsurer, but in no case may the association issue insurance policies orannuity contracts other than those issued to performits obligations under this act.
(q) The association may join an organization of one or more other stateassociations of similar purposes to further the purposes and administerthe powers and duties of the association.
(r) The association shall pay any and all persons who, as a provider, mayhave claims as a result of a member insurer being found insolvent between March1, 1999 and June 1, 1999.
