State Codes and Statutes

Statutes > Utah > Title-31a > Chapter-28 > 31a-28-108

31A-28-108. Powers and duties of the association.
(1) (a) If a member insurer is an impaired insurer, subject to any conditions imposed bythe association that do not impair the contractual obligations of the impaired insurer, theassociation may provide the protections provided by this part.
(b) If the association makes the election described in Subsection (1)(a), the associationmay proceed under one or more of the options described in Subsection (3).
(2) If a member insurer is an insolvent insurer, the association shall provide theprotections provided by this part by electing in its discretion to proceed under one or more of theoptions in Subsection (3).
(3) With respect to the covered portions of covered policies of an impaired or insolventinsurer, the association may:
(a) (i) (A) guaranty, assume, or reinsure, or cause to be guaranteed, assumed, orreinsured, the policies or contracts of the insurer; or
(B) assure payment of the contractual obligations of the insolvent insurer; and
(ii) provide the money, pledges, guarantees, or other means as are reasonably necessaryto discharge such duties; or
(b) provide benefits and coverages in accordance with Subsection (4).
(4) (a) In accordance with Subsection (3)(b), the association may:
(i) assure payment of benefits for premiums identical to the premiums and benefits,except for terms of conversion and renewability, that would have been payable under the policiesor contracts of the insurer, for claims incurred:
(A) with respect to group policies:
(I) not later than the earlier of the next renewal date under the policies or contracts or 45days after the coverage date; and
(II) in no event less than 30 days after the coverage date; or
(B) with respect to nongroup policies or contracts:
(I) not later than the earlier of the next renewal date, if any, under the policies orcontracts or one year from the coverage date; and
(II) in no event less than 30 days from the coverage date;
(ii) make diligent efforts to notify the following 30 days before any termination of thebenefits that are provided under a policy or contract of the insurer:
(A) the known insureds or annuitants for nongroup policies and contracts;
(B) owners if other than an insured or annuitant; or
(C) group policy owners for group policies and contracts; and
(iii) with respect to nongroup life and accident and health insurance policies andannuities, make available substitute coverage on an individual basis, in accordance withSubsection (4)(b), to each known insured, annuitant, or owner and to each individual formerlyinsured or formerly an annuitant under a group policy who is not eligible for replacement groupcoverage on an individual basis in accordance with Subsection (4)(b), if the insured or annuitanthad a right under law or the terminated policy or annuity contract to:
(A) convert coverage to individual coverage; or
(B) continue an individual policy in force until a specified age or for a specified timeduring which the insurer had:
(I) no right unilaterally to make changes in any provision of the policy; or
(II) a right only to make changes in premium by class.

(b) (i) In providing the substitute coverage required under Subsection (4)(a)(iii), theassociation may offer to:
(A) reissue the terminated coverage; or
(B) issue an alternative policy.
(ii) An alternative or reissued policy under Subsection (4)(b)(i):
(A) shall be offered without requiring evidence of insurability; and
(B) may not provide for any waiting period or exclusion that would not have appliedunder the terminated policy.
(iii) The association may reinsure an alternative or reissued policy.
(c) (i) An alternative policy adopted by the association is subject to the approval of thecommissioner.
(ii) The association may adopt alternative policies of various types for future issuancewithout regard to any particular impairment or insolvency.
(iii) An alternative policy:
(A) shall contain at least the minimum statutory provisions required in this state; and
(B) provide benefits that are not unreasonable in relation to the premium charged.
(iv) The association shall set the premium for an alternative policy in accordance with atable of rates that the association adopts. The premium shall reflect:
(A) the amount of insurance to be provided; and
(B) the age and class of risk of each insured.
(v) For an alternative policy issued under an individual policy of the impaired orinsolvent insurer:
(A) age shall be determined in accordance with the original policy provisions; and
(B) class of risk is the class of risk under the original policy.
(vi) For an alternative policy issued to individuals insured under a group policy:
(A) age and class of risk shall be determined by the association in accordance with thealternative policy provisions and risk classification standards approved by the commissioner; and
(B) the premium may not reflect any changes in the health of the insured after theoriginal policy was last underwritten.
(vii) An alternative policy issued by the association shall provide coverage of a typesimilar to that of the policy issued by the impaired or insolvent insurer, as determined by theassociation.
(d) If the association elects to reissue terminated coverage at a premium rate differentfrom that charged under the terminated policy, the association shall set the premium inaccordance with the amount of insurance provided and the age and class of risk, subject to theapproval of the commissioner or by a court of competent jurisdiction.
(e) The association's obligations with respect to coverage under any policy of theimpaired or insolvent insurer or under any reissued or alternative policy ceases on the date thecoverage or policy is replaced by another similar policy by:
(i) the owner;
(ii) the insured; or
(iii) the association.
(f) (i) With respect to a claim unpaid as of the coverage date and a claim incurred duringthe period defined in Subsection (4)(a)(i), a provider of health care services, by accepting apayment from the association upon a claim of the provider against an insured whose health care

insurer is an insolvent member insurer, agrees to forgive the insured of 20% of the debt whichotherwise would be paid by the insurer had it not been insolvent, subject to a maximum of$8,000 being required to be forgiven by any one provider as to each claimant.
(ii) The obligations of a solvent insurer to pay all or part of the covered claim are notdiminished by the forgiveness provided for in this section.
(5) When proceeding under Subsection (3)(b) with respect to any policy or contractcarrying guaranteed minimum interest rates, the association shall assure the payment or creditingof a rate of interest consistent with Subsection 31A-28-103(2)(b)(iii).
(6) Nonpayment of premiums within 31 days after the date required under the terms ofany guaranteed, assumed, alternative, or reissued policy or contract or substitute coverageterminates the association's obligations under the policy or coverage under this part with respectto the policy or coverage, except with respect to any claims incurred or any net cash surrendervalue that may be due in accordance with this part.
(7) (a) Premium due after the coverage date with respect to the covered portion of apolicy or contract of an impaired or insolvent insurer belongs to and is payable at the direction ofthe association. If a liquidator of an insolvent insurer requests the report, the association shallreport to the liquidator the premium collected by the association.
(b) The association is liable to a policy or contract owner for unearned premiums due tothe policy or contract owner arising after the coverage date with respect to the covered portion ofthe policy or contract.
(8) The protection provided by this part does not apply if any guaranty protection isprovided to residents of this state by laws of the domiciliary state or jurisdiction of the impairedor insolvent insurer other than this state.
(9) In carrying out its duties under Subsection (2), and subject to approval by a court inthis state, the association may:
(a) impose permanent policy or contract liens in connection with a guarantee,assumption, or reinsurance agreement, if the association finds that:
(i) the amounts that can be assessed under this part are less than the amounts needed toassure full and prompt performance of the association's duties under this part; or
(ii) the economic or financial conditions as they affect member insurers are sufficientlyadverse to render the imposition of the permanent policy or contract liens to be in the publicinterest;
(b) impose temporary moratoriums or liens on payments of cash values and policy loans,or any other right to withdraw funds held in conjunction with policies or contracts, in addition toany contractual provisions for deferral of cash or policy loan value; and
(c) if the receivership court imposes a temporary moratorium or moratorium charge onpayment of cash values or policy loans, or on any other right to withdraw funds held inconjunction with policies or contracts, out of the assets of the impaired or insolvent insurer, deferthe payment of cash values, policy loans, or other rights by the association for the period of themoratorium or moratorium charge imposed by the receivership court, except for claims coveredby the association to be paid in accordance with a hardship procedure:
(i) established by the receiver; and
(ii) approved by the receivership court.
(10) (a) A special deposit in this state held pursuant to law or required by thecommissioner for the benefit of creditors, including policy owners, that is not turned over to the

domiciliary receiver upon the entry of a final order of liquidation or order approving arehabilitation plan of an insurer domiciled in any state shall be promptly paid to the association.
(b) Any amount paid under Subsection (10)(a) to the association less the amount retainedby the association shall be treated as a distribution of estate assets pursuant to Sections31A-27a-601, 31A-27a-602, and 31A-27a-701.
(11) If the association fails to act within a reasonable period of time as provided in thissection, the commissioner has the powers and duties of the association under this part withrespect to an impaired or insolvent insurer.
(12) The association may assist or advise the commissioner, upon the commissioner'srequest, concerning:
(a) rehabilitation;
(b) payment of claims;
(c) continuance of coverage; or
(d) the performance of other contractual obligations of any impaired or insolvent insurer.
(13) (a) The association has standing to appear or intervene before a court or agency inthis state with jurisdiction over:
(i) an impaired or insolvent insurer concerning which the association is or may becomeobligated under this part; or
(ii) any person or property against which the association may have rights throughsubrogation or otherwise.
(b) The standing referred to in Subsection (13)(a) extends to all matters germane to thepowers and duties of the association, including:
(i) proposals for reinsuring, modifying, or guaranteeing the policies or contracts of theimpaired or insolvent insurer; and
(ii) the determination of the policies or contracts and contractual obligations.
(c) The association has the right to appear or intervene before a court in another statewith jurisdiction over:
(i) an impaired or insolvent insurer for which the association is or may become obligated;or
(ii) any person or property against which the association may have rights throughsubrogation of the insurer's policyowners.
(14) (a) A person receiving benefits under this part is considered to have assigned therights under, and any causes of action against any person for losses arising under, resulting from,or otherwise relating to the covered policy or contract to the association to the extent of thebenefits received because of this part, whether the benefits are payments of, or on account of:
(i) contractual obligations;
(ii) continuation of coverage; or
(iii) provision of substitute or alternative coverages.
(b) As a condition precedent to the receipt of any right or benefits conferred by this partupon that person, the association may require an assignment to it of the rights and causes ofaction described in Subsection (14)(a) by any:
(i) payee;
(ii) policy or contract owner;
(iii) beneficiary;
(iv) insured; or

(v) annuitant.
(c) The subrogation rights obtained by the association under this Subsection (14) havethe same priority against the assets of the impaired or insolvent insurer as that possessed by theperson entitled to receive benefits under this part.
(d) In addition to Subsections (14)(a) through (c), the association has the common lawrights of subrogation and any other equitable or legal remedy that would have been available tothe impaired or insolvent insurer or owner, beneficiary, or payee of a policy or contract withrespect to the policy or contract, including in the case of a structured settlement annuity anyrights of the owner, beneficiary, or payee of the annuity to the extent of benefits receivedpursuant to this part against a person originally or by succession responsible for the losses arisingfrom the personal injury relating to the annuity or payment of the annuity.
(e) If a provision of this Subsection (14) is invalid or ineffective with respect to a personor claim for any reason, the amount payable by the association with respect to the related coveredobligations shall be reduced by the amount realized by any other person with respect to theperson or claim that is attributable to the policies, or portion of the policies, covered by theassociation.
(f) If the association has provided benefits with respect to a covered policy and a personrecovers amounts as to which the association has rights as described in this Subsection (14), theperson shall pay to the association the portion of the recovery attributable to the covered policies.
(15) (a) In addition to the rights and powers elsewhere in this part, the association may:
(i) enter into a contract that is necessary or proper to carry out the provisions andpurposes of this part;
(ii) sue or be sued, including taking any legal actions necessary or proper to:
(A) recover any unpaid assessments under Section 31A-28-109; and
(B) settle claims or potential claims against the association;
(iii) borrow money to effect the purposes of this part;
(iv) employ or retain the persons necessary or the appropriate staff members to:
(A) handle the financial transactions of the association; and
(B) perform other functions as become necessary or proper under this part;
(v) take necessary or appropriate legal action to avoid or recover payment of improperclaims;
(vi) exercise, for the purposes of this part and to the extent approved by thecommissioner, the powers of a domestic life or health insurer, but in no case may the associationissue insurance policies or annuity contracts other than those issued to perform its obligationunder this part;
(vii) request information from a person seeking coverage from the association to aid theassociation in determining the association's obligations under this part with respect to the person;
(viii) take other necessary or appropriate action to discharge the association's duties andobligations under this part or to exercise the association's powers under this part; and
(ix) act as a special deputy receiver if appointed by the commissioner.
(b) Any note or other evidence of indebtedness of the association under Subsection(15)(a)(iii) that is not in default:
(i) is a legal investment for a domestic insurer; and
(ii) may be carried as admitted assets.
(c) A person seeking coverage from the association shall promptly comply with a request

for information by the association under Subsection (15)(a)(vii).
(16) The association may join an organization of one or more other state associations ofsimilar purposes to further the purposes and administer the powers and duties of the association.
(17) (a) At any time within 180 days after the coverage date, the association may elect tosucceed to the rights and obligations of the member insurer that:
(i) accrue on or after the coverage date; and
(ii) relate to covered policies under any one or more indemnity reinsurance agreements:
(A) entered into by the member insurer as a ceding insurer and its reinsurer; and
(B) selected by the association.
(b) An election made pursuant to Subsection (17)(a) is effective as of the date of theorder of liquidation.
(c) The association may make an election described in Subsection (17)(a) by notifying anaffected reinsurer in writing, with verification of receipt, through:
(i) the association; or
(ii) a nationally recognized association representing state guaranty associations that isapproved by the commissioner, that provides notice on behalf of the association.
(d) The association shall provide a copy of the notice described in Subsection (17)(c) tothe receiver.
(e) (i) The receiver of an insolvent insurer and each reinsurer of the ceding memberinsurers shall make available as soon as possible after commencement of formal delinquencyproceedings the information described in Subsection (17)(e)(ii) to:
(A) the association; or
(B) a nationally recognized association representing state guaranty associations that isapproved by the commissioner, on behalf of the association.
(ii) This Subsection (17)(e) applies to:
(A) copies of in-force contracts of reinsurance and the related records relevant to thedetermination of whether the in-force contracts of reinsurance should be assumed;
(B) notices of any default under a reinsurance contract; or
(C) any known event or condition that with the passage of time could become a defaultunder a reinsurance contract.
(f) If the association makes an election under Subsection (17)(a), the association shallcomply with Subsections (17)(f)(i) through (vii) with respect to the agreements selected by theassociation.
(i) For a contract covered, in whole or in part, by the association, the association isresponsible for:
(A) the unpaid premiums due under the agreements for periods both before and after thecoverage date; and
(B) the performance of the other obligations to be performed after the coverage date.
(ii) The association may charge a contract covered in part by the association the costs forreinsurance in excess of the obligations of the association, through reasonable allocationmethods.
(iii) The association shall provide notice and an accounting to the receiver of a chargemade pursuant to Subsection (17)(f)(ii).
(iv) The association is entitled to any amounts payable by the reinsurer under theagreements with respect to a loss or event that:

(A) occurs after the coverage date; and
(B) relates to a contract covered by the association, in whole or in part.
(v) On receipt of any amounts under Subsection (17)(f)(iv), the association shall pay tothe beneficiary under the policy or contract on account of which the amounts were paid anamount equal to the lesser of:
(A) the amount received by the association; and
(B) the excess of the amount received by the association over the benefits paid or payableby the association on account of the policy or contract less the retention of the insurer applicableto the loss or event.
(vi) (A) Within 30 days following the association's election, the association and eachindemnity reinsurer shall calculate the net balance due to or from the association under eachreinsurance agreement as of the date of the association's election, giving full credit to the itemspaid by either the member insurer, its receiver, or the indemnity reinsurer before the date of theassociation's election.
(B) Within five days of the completion of the calculation under Subsection(17)(f)(vi)(A):
(I) the reinsurer shall pay the receiver the amounts due for a loss or event before thecoverage date, subject to any set-off for premiums unpaid for a period before the coverage date;and
(II) the association or the reinsurer shall pay any remaining balance due the other.
(C) A dispute over an amount due to either party shall be resolved:
(I) by arbitration pursuant to the terms of the affected reinsurance contract; or
(II) if the reinsurance contract contains no arbitration clause, as otherwise provided bylaw.
(D) If the receiver receives an amount due the association pursuant to Subsection(17)(f)(iv), the receiver shall remit that amount to the association as promptly as practicable.
(vii) If the association, or the receiver on behalf of the association, within 60 days of theelection, pays the premiums due for periods both before and after the coverage date that relate tocontracts covered by the association, in whole or in part, the reinsurer may not:
(A) terminate the reinsurance agreement for failure to pay premium, to the extent thereinsurance agreement relates to a policy or contract covered by the association, in whole or inpart; and
(B) set off against amounts due the association an amount due:
(I) under another contract; or
(II) as an unpaid amount due from a person other than the association.
(g) (i) This Subsection (17)(g) applies during the period that:
(A) begins on the coverage date; and
(B) ends:
(I) on the election date; or
(II) if no election date occurs, 180 days after the coverage date.
(ii) During the period described in Subsection (17)(g)(i):
(A) neither the association nor the reinsurer have a right or obligation under areinsurance contract that the association may assume under Subsection (17)(a), whether for aperiod before or after the coverage date; and
(B) the reinsurer, the receiver, and the association, to the extent practicable, shall provide

each other data and records reasonably requested.
(iii) Notwithstanding Subsection (17)(g)(ii), once the association elects to assume areinsurance contract, the parties' rights and obligations are governed by Subsections (17)(f)(i)through (vi).
(h) If the association does not elect to assume a reinsurance contract by the election datepursuant to Subsection (17)(a), the association has no right or obligation with respect to thereinsurance contract, whether for a period before or after the coverage date.
(i) An insurer other than the association succeeds to the rights and obligations of theassociation under Subsections (17)(a) through (f) effective as of the date agreed upon by theassociation and the other insurer and regardless of whether the association has made the electionreferred to in Subsections (17)(a) through (f) provided that:
(i) the association transfers its obligations to the other insurer;
(ii) the association and the other insurer agree to the transfer;
(iii) the indemnity reinsurance agreements automatically terminate for new reinsuranceunless the indemnity reinsurer and the other insurer agree to the contrary;
(iv) the obligations described in Subsection (17)(f)(v) may not apply on and after the datethe indemnity reinsurance agreement is transferred to the third party insurer;
(v) the transferring party shall give notice in writing, with verification of receipt, to theaffected reinsurer not less than 30 days before the effective date of the transfer; and
(vi) this Subsection (17)(i) may not apply if the association has previously expresslydetermined in writing that the association will not exercise the election referred to in Subsections(17)(a) through (f).
(j) (i) This Subsection (17) supersedes the provisions of any law of this state or of anyaffected reinsurance agreement that provides for or requires any payment of reinsurance proceedson account of losses or events that occur in periods after the coverage date, to:
(A) the receiver of an insolvent member insurer; or
(B) another person.
(ii) The receiver is entitled to any amounts payable by the reinsurer under the reinsuranceagreement with respect to a loss or event that occurs before the coverage date, subject toapplicable setoff provisions.
(k) Except as otherwise expressly provided in Subsections (17)(a) through (j), thisSubsection (17) does not:
(i) alter or modify the terms and conditions of a reinsurance agreement of the insolventmember insurer;
(ii) abrogate or limit a right any reinsurer to claim that it is entitled to rescind areinsurance agreement;
(iii) give a policy owner or beneficiary an independent cause of action against a reinsurerthat is not otherwise set forth in the reinsurance agreement;
(iv) limit or affect the association's rights as a creditor of the estate of an insolventinsurer against the assets of the estate; or
(v) apply to a reinsurance agreement that covers property or casualty risks.
(18) The board of directors of the association has discretion and may exercise reasonablebusiness judgment to determine the means by which the association is to provide the benefits ofthis part in an economical and efficient manner.
(19) If the association arranges or offers to provide the benefits of this part to a covered

person under a plan or arrangement that fulfills the association's obligations under this part, theperson is not entitled to benefits from the association in addition to or other than those providedunder the plan or arrangement.
(20) (a) Venue in a suit against the association arising under this part is Salt LakeCounty.
(b) The association may not be required to give an appeal bond in an appeal that relatesto a cause of action arising under this part.

Amended by Chapter 292, 2010 General Session

State Codes and Statutes

Statutes > Utah > Title-31a > Chapter-28 > 31a-28-108

31A-28-108. Powers and duties of the association.
(1) (a) If a member insurer is an impaired insurer, subject to any conditions imposed bythe association that do not impair the contractual obligations of the impaired insurer, theassociation may provide the protections provided by this part.
(b) If the association makes the election described in Subsection (1)(a), the associationmay proceed under one or more of the options described in Subsection (3).
(2) If a member insurer is an insolvent insurer, the association shall provide theprotections provided by this part by electing in its discretion to proceed under one or more of theoptions in Subsection (3).
(3) With respect to the covered portions of covered policies of an impaired or insolventinsurer, the association may:
(a) (i) (A) guaranty, assume, or reinsure, or cause to be guaranteed, assumed, orreinsured, the policies or contracts of the insurer; or
(B) assure payment of the contractual obligations of the insolvent insurer; and
(ii) provide the money, pledges, guarantees, or other means as are reasonably necessaryto discharge such duties; or
(b) provide benefits and coverages in accordance with Subsection (4).
(4) (a) In accordance with Subsection (3)(b), the association may:
(i) assure payment of benefits for premiums identical to the premiums and benefits,except for terms of conversion and renewability, that would have been payable under the policiesor contracts of the insurer, for claims incurred:
(A) with respect to group policies:
(I) not later than the earlier of the next renewal date under the policies or contracts or 45days after the coverage date; and
(II) in no event less than 30 days after the coverage date; or
(B) with respect to nongroup policies or contracts:
(I) not later than the earlier of the next renewal date, if any, under the policies orcontracts or one year from the coverage date; and
(II) in no event less than 30 days from the coverage date;
(ii) make diligent efforts to notify the following 30 days before any termination of thebenefits that are provided under a policy or contract of the insurer:
(A) the known insureds or annuitants for nongroup policies and contracts;
(B) owners if other than an insured or annuitant; or
(C) group policy owners for group policies and contracts; and
(iii) with respect to nongroup life and accident and health insurance policies andannuities, make available substitute coverage on an individual basis, in accordance withSubsection (4)(b), to each known insured, annuitant, or owner and to each individual formerlyinsured or formerly an annuitant under a group policy who is not eligible for replacement groupcoverage on an individual basis in accordance with Subsection (4)(b), if the insured or annuitanthad a right under law or the terminated policy or annuity contract to:
(A) convert coverage to individual coverage; or
(B) continue an individual policy in force until a specified age or for a specified timeduring which the insurer had:
(I) no right unilaterally to make changes in any provision of the policy; or
(II) a right only to make changes in premium by class.

(b) (i) In providing the substitute coverage required under Subsection (4)(a)(iii), theassociation may offer to:
(A) reissue the terminated coverage; or
(B) issue an alternative policy.
(ii) An alternative or reissued policy under Subsection (4)(b)(i):
(A) shall be offered without requiring evidence of insurability; and
(B) may not provide for any waiting period or exclusion that would not have appliedunder the terminated policy.
(iii) The association may reinsure an alternative or reissued policy.
(c) (i) An alternative policy adopted by the association is subject to the approval of thecommissioner.
(ii) The association may adopt alternative policies of various types for future issuancewithout regard to any particular impairment or insolvency.
(iii) An alternative policy:
(A) shall contain at least the minimum statutory provisions required in this state; and
(B) provide benefits that are not unreasonable in relation to the premium charged.
(iv) The association shall set the premium for an alternative policy in accordance with atable of rates that the association adopts. The premium shall reflect:
(A) the amount of insurance to be provided; and
(B) the age and class of risk of each insured.
(v) For an alternative policy issued under an individual policy of the impaired orinsolvent insurer:
(A) age shall be determined in accordance with the original policy provisions; and
(B) class of risk is the class of risk under the original policy.
(vi) For an alternative policy issued to individuals insured under a group policy:
(A) age and class of risk shall be determined by the association in accordance with thealternative policy provisions and risk classification standards approved by the commissioner; and
(B) the premium may not reflect any changes in the health of the insured after theoriginal policy was last underwritten.
(vii) An alternative policy issued by the association shall provide coverage of a typesimilar to that of the policy issued by the impaired or insolvent insurer, as determined by theassociation.
(d) If the association elects to reissue terminated coverage at a premium rate differentfrom that charged under the terminated policy, the association shall set the premium inaccordance with the amount of insurance provided and the age and class of risk, subject to theapproval of the commissioner or by a court of competent jurisdiction.
(e) The association's obligations with respect to coverage under any policy of theimpaired or insolvent insurer or under any reissued or alternative policy ceases on the date thecoverage or policy is replaced by another similar policy by:
(i) the owner;
(ii) the insured; or
(iii) the association.
(f) (i) With respect to a claim unpaid as of the coverage date and a claim incurred duringthe period defined in Subsection (4)(a)(i), a provider of health care services, by accepting apayment from the association upon a claim of the provider against an insured whose health care

insurer is an insolvent member insurer, agrees to forgive the insured of 20% of the debt whichotherwise would be paid by the insurer had it not been insolvent, subject to a maximum of$8,000 being required to be forgiven by any one provider as to each claimant.
(ii) The obligations of a solvent insurer to pay all or part of the covered claim are notdiminished by the forgiveness provided for in this section.
(5) When proceeding under Subsection (3)(b) with respect to any policy or contractcarrying guaranteed minimum interest rates, the association shall assure the payment or creditingof a rate of interest consistent with Subsection 31A-28-103(2)(b)(iii).
(6) Nonpayment of premiums within 31 days after the date required under the terms ofany guaranteed, assumed, alternative, or reissued policy or contract or substitute coverageterminates the association's obligations under the policy or coverage under this part with respectto the policy or coverage, except with respect to any claims incurred or any net cash surrendervalue that may be due in accordance with this part.
(7) (a) Premium due after the coverage date with respect to the covered portion of apolicy or contract of an impaired or insolvent insurer belongs to and is payable at the direction ofthe association. If a liquidator of an insolvent insurer requests the report, the association shallreport to the liquidator the premium collected by the association.
(b) The association is liable to a policy or contract owner for unearned premiums due tothe policy or contract owner arising after the coverage date with respect to the covered portion ofthe policy or contract.
(8) The protection provided by this part does not apply if any guaranty protection isprovided to residents of this state by laws of the domiciliary state or jurisdiction of the impairedor insolvent insurer other than this state.
(9) In carrying out its duties under Subsection (2), and subject to approval by a court inthis state, the association may:
(a) impose permanent policy or contract liens in connection with a guarantee,assumption, or reinsurance agreement, if the association finds that:
(i) the amounts that can be assessed under this part are less than the amounts needed toassure full and prompt performance of the association's duties under this part; or
(ii) the economic or financial conditions as they affect member insurers are sufficientlyadverse to render the imposition of the permanent policy or contract liens to be in the publicinterest;
(b) impose temporary moratoriums or liens on payments of cash values and policy loans,or any other right to withdraw funds held in conjunction with policies or contracts, in addition toany contractual provisions for deferral of cash or policy loan value; and
(c) if the receivership court imposes a temporary moratorium or moratorium charge onpayment of cash values or policy loans, or on any other right to withdraw funds held inconjunction with policies or contracts, out of the assets of the impaired or insolvent insurer, deferthe payment of cash values, policy loans, or other rights by the association for the period of themoratorium or moratorium charge imposed by the receivership court, except for claims coveredby the association to be paid in accordance with a hardship procedure:
(i) established by the receiver; and
(ii) approved by the receivership court.
(10) (a) A special deposit in this state held pursuant to law or required by thecommissioner for the benefit of creditors, including policy owners, that is not turned over to the

domiciliary receiver upon the entry of a final order of liquidation or order approving arehabilitation plan of an insurer domiciled in any state shall be promptly paid to the association.
(b) Any amount paid under Subsection (10)(a) to the association less the amount retainedby the association shall be treated as a distribution of estate assets pursuant to Sections31A-27a-601, 31A-27a-602, and 31A-27a-701.
(11) If the association fails to act within a reasonable period of time as provided in thissection, the commissioner has the powers and duties of the association under this part withrespect to an impaired or insolvent insurer.
(12) The association may assist or advise the commissioner, upon the commissioner'srequest, concerning:
(a) rehabilitation;
(b) payment of claims;
(c) continuance of coverage; or
(d) the performance of other contractual obligations of any impaired or insolvent insurer.
(13) (a) The association has standing to appear or intervene before a court or agency inthis state with jurisdiction over:
(i) an impaired or insolvent insurer concerning which the association is or may becomeobligated under this part; or
(ii) any person or property against which the association may have rights throughsubrogation or otherwise.
(b) The standing referred to in Subsection (13)(a) extends to all matters germane to thepowers and duties of the association, including:
(i) proposals for reinsuring, modifying, or guaranteeing the policies or contracts of theimpaired or insolvent insurer; and
(ii) the determination of the policies or contracts and contractual obligations.
(c) The association has the right to appear or intervene before a court in another statewith jurisdiction over:
(i) an impaired or insolvent insurer for which the association is or may become obligated;or
(ii) any person or property against which the association may have rights throughsubrogation of the insurer's policyowners.
(14) (a) A person receiving benefits under this part is considered to have assigned therights under, and any causes of action against any person for losses arising under, resulting from,or otherwise relating to the covered policy or contract to the association to the extent of thebenefits received because of this part, whether the benefits are payments of, or on account of:
(i) contractual obligations;
(ii) continuation of coverage; or
(iii) provision of substitute or alternative coverages.
(b) As a condition precedent to the receipt of any right or benefits conferred by this partupon that person, the association may require an assignment to it of the rights and causes ofaction described in Subsection (14)(a) by any:
(i) payee;
(ii) policy or contract owner;
(iii) beneficiary;
(iv) insured; or

(v) annuitant.
(c) The subrogation rights obtained by the association under this Subsection (14) havethe same priority against the assets of the impaired or insolvent insurer as that possessed by theperson entitled to receive benefits under this part.
(d) In addition to Subsections (14)(a) through (c), the association has the common lawrights of subrogation and any other equitable or legal remedy that would have been available tothe impaired or insolvent insurer or owner, beneficiary, or payee of a policy or contract withrespect to the policy or contract, including in the case of a structured settlement annuity anyrights of the owner, beneficiary, or payee of the annuity to the extent of benefits receivedpursuant to this part against a person originally or by succession responsible for the losses arisingfrom the personal injury relating to the annuity or payment of the annuity.
(e) If a provision of this Subsection (14) is invalid or ineffective with respect to a personor claim for any reason, the amount payable by the association with respect to the related coveredobligations shall be reduced by the amount realized by any other person with respect to theperson or claim that is attributable to the policies, or portion of the policies, covered by theassociation.
(f) If the association has provided benefits with respect to a covered policy and a personrecovers amounts as to which the association has rights as described in this Subsection (14), theperson shall pay to the association the portion of the recovery attributable to the covered policies.
(15) (a) In addition to the rights and powers elsewhere in this part, the association may:
(i) enter into a contract that is necessary or proper to carry out the provisions andpurposes of this part;
(ii) sue or be sued, including taking any legal actions necessary or proper to:
(A) recover any unpaid assessments under Section 31A-28-109; and
(B) settle claims or potential claims against the association;
(iii) borrow money to effect the purposes of this part;
(iv) employ or retain the persons necessary or the appropriate staff members to:
(A) handle the financial transactions of the association; and
(B) perform other functions as become necessary or proper under this part;
(v) take necessary or appropriate legal action to avoid or recover payment of improperclaims;
(vi) exercise, for the purposes of this part and to the extent approved by thecommissioner, the powers of a domestic life or health insurer, but in no case may the associationissue insurance policies or annuity contracts other than those issued to perform its obligationunder this part;
(vii) request information from a person seeking coverage from the association to aid theassociation in determining the association's obligations under this part with respect to the person;
(viii) take other necessary or appropriate action to discharge the association's duties andobligations under this part or to exercise the association's powers under this part; and
(ix) act as a special deputy receiver if appointed by the commissioner.
(b) Any note or other evidence of indebtedness of the association under Subsection(15)(a)(iii) that is not in default:
(i) is a legal investment for a domestic insurer; and
(ii) may be carried as admitted assets.
(c) A person seeking coverage from the association shall promptly comply with a request

for information by the association under Subsection (15)(a)(vii).
(16) The association may join an organization of one or more other state associations ofsimilar purposes to further the purposes and administer the powers and duties of the association.
(17) (a) At any time within 180 days after the coverage date, the association may elect tosucceed to the rights and obligations of the member insurer that:
(i) accrue on or after the coverage date; and
(ii) relate to covered policies under any one or more indemnity reinsurance agreements:
(A) entered into by the member insurer as a ceding insurer and its reinsurer; and
(B) selected by the association.
(b) An election made pursuant to Subsection (17)(a) is effective as of the date of theorder of liquidation.
(c) The association may make an election described in Subsection (17)(a) by notifying anaffected reinsurer in writing, with verification of receipt, through:
(i) the association; or
(ii) a nationally recognized association representing state guaranty associations that isapproved by the commissioner, that provides notice on behalf of the association.
(d) The association shall provide a copy of the notice described in Subsection (17)(c) tothe receiver.
(e) (i) The receiver of an insolvent insurer and each reinsurer of the ceding memberinsurers shall make available as soon as possible after commencement of formal delinquencyproceedings the information described in Subsection (17)(e)(ii) to:
(A) the association; or
(B) a nationally recognized association representing state guaranty associations that isapproved by the commissioner, on behalf of the association.
(ii) This Subsection (17)(e) applies to:
(A) copies of in-force contracts of reinsurance and the related records relevant to thedetermination of whether the in-force contracts of reinsurance should be assumed;
(B) notices of any default under a reinsurance contract; or
(C) any known event or condition that with the passage of time could become a defaultunder a reinsurance contract.
(f) If the association makes an election under Subsection (17)(a), the association shallcomply with Subsections (17)(f)(i) through (vii) with respect to the agreements selected by theassociation.
(i) For a contract covered, in whole or in part, by the association, the association isresponsible for:
(A) the unpaid premiums due under the agreements for periods both before and after thecoverage date; and
(B) the performance of the other obligations to be performed after the coverage date.
(ii) The association may charge a contract covered in part by the association the costs forreinsurance in excess of the obligations of the association, through reasonable allocationmethods.
(iii) The association shall provide notice and an accounting to the receiver of a chargemade pursuant to Subsection (17)(f)(ii).
(iv) The association is entitled to any amounts payable by the reinsurer under theagreements with respect to a loss or event that:

(A) occurs after the coverage date; and
(B) relates to a contract covered by the association, in whole or in part.
(v) On receipt of any amounts under Subsection (17)(f)(iv), the association shall pay tothe beneficiary under the policy or contract on account of which the amounts were paid anamount equal to the lesser of:
(A) the amount received by the association; and
(B) the excess of the amount received by the association over the benefits paid or payableby the association on account of the policy or contract less the retention of the insurer applicableto the loss or event.
(vi) (A) Within 30 days following the association's election, the association and eachindemnity reinsurer shall calculate the net balance due to or from the association under eachreinsurance agreement as of the date of the association's election, giving full credit to the itemspaid by either the member insurer, its receiver, or the indemnity reinsurer before the date of theassociation's election.
(B) Within five days of the completion of the calculation under Subsection(17)(f)(vi)(A):
(I) the reinsurer shall pay the receiver the amounts due for a loss or event before thecoverage date, subject to any set-off for premiums unpaid for a period before the coverage date;and
(II) the association or the reinsurer shall pay any remaining balance due the other.
(C) A dispute over an amount due to either party shall be resolved:
(I) by arbitration pursuant to the terms of the affected reinsurance contract; or
(II) if the reinsurance contract contains no arbitration clause, as otherwise provided bylaw.
(D) If the receiver receives an amount due the association pursuant to Subsection(17)(f)(iv), the receiver shall remit that amount to the association as promptly as practicable.
(vii) If the association, or the receiver on behalf of the association, within 60 days of theelection, pays the premiums due for periods both before and after the coverage date that relate tocontracts covered by the association, in whole or in part, the reinsurer may not:
(A) terminate the reinsurance agreement for failure to pay premium, to the extent thereinsurance agreement relates to a policy or contract covered by the association, in whole or inpart; and
(B) set off against amounts due the association an amount due:
(I) under another contract; or
(II) as an unpaid amount due from a person other than the association.
(g) (i) This Subsection (17)(g) applies during the period that:
(A) begins on the coverage date; and
(B) ends:
(I) on the election date; or
(II) if no election date occurs, 180 days after the coverage date.
(ii) During the period described in Subsection (17)(g)(i):
(A) neither the association nor the reinsurer have a right or obligation under areinsurance contract that the association may assume under Subsection (17)(a), whether for aperiod before or after the coverage date; and
(B) the reinsurer, the receiver, and the association, to the extent practicable, shall provide

each other data and records reasonably requested.
(iii) Notwithstanding Subsection (17)(g)(ii), once the association elects to assume areinsurance contract, the parties' rights and obligations are governed by Subsections (17)(f)(i)through (vi).
(h) If the association does not elect to assume a reinsurance contract by the election datepursuant to Subsection (17)(a), the association has no right or obligation with respect to thereinsurance contract, whether for a period before or after the coverage date.
(i) An insurer other than the association succeeds to the rights and obligations of theassociation under Subsections (17)(a) through (f) effective as of the date agreed upon by theassociation and the other insurer and regardless of whether the association has made the electionreferred to in Subsections (17)(a) through (f) provided that:
(i) the association transfers its obligations to the other insurer;
(ii) the association and the other insurer agree to the transfer;
(iii) the indemnity reinsurance agreements automatically terminate for new reinsuranceunless the indemnity reinsurer and the other insurer agree to the contrary;
(iv) the obligations described in Subsection (17)(f)(v) may not apply on and after the datethe indemnity reinsurance agreement is transferred to the third party insurer;
(v) the transferring party shall give notice in writing, with verification of receipt, to theaffected reinsurer not less than 30 days before the effective date of the transfer; and
(vi) this Subsection (17)(i) may not apply if the association has previously expresslydetermined in writing that the association will not exercise the election referred to in Subsections(17)(a) through (f).
(j) (i) This Subsection (17) supersedes the provisions of any law of this state or of anyaffected reinsurance agreement that provides for or requires any payment of reinsurance proceedson account of losses or events that occur in periods after the coverage date, to:
(A) the receiver of an insolvent member insurer; or
(B) another person.
(ii) The receiver is entitled to any amounts payable by the reinsurer under the reinsuranceagreement with respect to a loss or event that occurs before the coverage date, subject toapplicable setoff provisions.
(k) Except as otherwise expressly provided in Subsections (17)(a) through (j), thisSubsection (17) does not:
(i) alter or modify the terms and conditions of a reinsurance agreement of the insolventmember insurer;
(ii) abrogate or limit a right any reinsurer to claim that it is entitled to rescind areinsurance agreement;
(iii) give a policy owner or beneficiary an independent cause of action against a reinsurerthat is not otherwise set forth in the reinsurance agreement;
(iv) limit or affect the association's rights as a creditor of the estate of an insolventinsurer against the assets of the estate; or
(v) apply to a reinsurance agreement that covers property or casualty risks.
(18) The board of directors of the association has discretion and may exercise reasonablebusiness judgment to determine the means by which the association is to provide the benefits ofthis part in an economical and efficient manner.
(19) If the association arranges or offers to provide the benefits of this part to a covered

person under a plan or arrangement that fulfills the association's obligations under this part, theperson is not entitled to benefits from the association in addition to or other than those providedunder the plan or arrangement.
(20) (a) Venue in a suit against the association arising under this part is Salt LakeCounty.
(b) The association may not be required to give an appeal bond in an appeal that relatesto a cause of action arising under this part.

Amended by Chapter 292, 2010 General Session


State Codes and Statutes


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State Codes and Statutes

Statutes > Utah > Title-31a > Chapter-28 > 31a-28-108

31A-28-108. Powers and duties of the association.
(1) (a) If a member insurer is an impaired insurer, subject to any conditions imposed bythe association that do not impair the contractual obligations of the impaired insurer, theassociation may provide the protections provided by this part.
(b) If the association makes the election described in Subsection (1)(a), the associationmay proceed under one or more of the options described in Subsection (3).
(2) If a member insurer is an insolvent insurer, the association shall provide theprotections provided by this part by electing in its discretion to proceed under one or more of theoptions in Subsection (3).
(3) With respect to the covered portions of covered policies of an impaired or insolventinsurer, the association may:
(a) (i) (A) guaranty, assume, or reinsure, or cause to be guaranteed, assumed, orreinsured, the policies or contracts of the insurer; or
(B) assure payment of the contractual obligations of the insolvent insurer; and
(ii) provide the money, pledges, guarantees, or other means as are reasonably necessaryto discharge such duties; or
(b) provide benefits and coverages in accordance with Subsection (4).
(4) (a) In accordance with Subsection (3)(b), the association may:
(i) assure payment of benefits for premiums identical to the premiums and benefits,except for terms of conversion and renewability, that would have been payable under the policiesor contracts of the insurer, for claims incurred:
(A) with respect to group policies:
(I) not later than the earlier of the next renewal date under the policies or contracts or 45days after the coverage date; and
(II) in no event less than 30 days after the coverage date; or
(B) with respect to nongroup policies or contracts:
(I) not later than the earlier of the next renewal date, if any, under the policies orcontracts or one year from the coverage date; and
(II) in no event less than 30 days from the coverage date;
(ii) make diligent efforts to notify the following 30 days before any termination of thebenefits that are provided under a policy or contract of the insurer:
(A) the known insureds or annuitants for nongroup policies and contracts;
(B) owners if other than an insured or annuitant; or
(C) group policy owners for group policies and contracts; and
(iii) with respect to nongroup life and accident and health insurance policies andannuities, make available substitute coverage on an individual basis, in accordance withSubsection (4)(b), to each known insured, annuitant, or owner and to each individual formerlyinsured or formerly an annuitant under a group policy who is not eligible for replacement groupcoverage on an individual basis in accordance with Subsection (4)(b), if the insured or annuitanthad a right under law or the terminated policy or annuity contract to:
(A) convert coverage to individual coverage; or
(B) continue an individual policy in force until a specified age or for a specified timeduring which the insurer had:
(I) no right unilaterally to make changes in any provision of the policy; or
(II) a right only to make changes in premium by class.

(b) (i) In providing the substitute coverage required under Subsection (4)(a)(iii), theassociation may offer to:
(A) reissue the terminated coverage; or
(B) issue an alternative policy.
(ii) An alternative or reissued policy under Subsection (4)(b)(i):
(A) shall be offered without requiring evidence of insurability; and
(B) may not provide for any waiting period or exclusion that would not have appliedunder the terminated policy.
(iii) The association may reinsure an alternative or reissued policy.
(c) (i) An alternative policy adopted by the association is subject to the approval of thecommissioner.
(ii) The association may adopt alternative policies of various types for future issuancewithout regard to any particular impairment or insolvency.
(iii) An alternative policy:
(A) shall contain at least the minimum statutory provisions required in this state; and
(B) provide benefits that are not unreasonable in relation to the premium charged.
(iv) The association shall set the premium for an alternative policy in accordance with atable of rates that the association adopts. The premium shall reflect:
(A) the amount of insurance to be provided; and
(B) the age and class of risk of each insured.
(v) For an alternative policy issued under an individual policy of the impaired orinsolvent insurer:
(A) age shall be determined in accordance with the original policy provisions; and
(B) class of risk is the class of risk under the original policy.
(vi) For an alternative policy issued to individuals insured under a group policy:
(A) age and class of risk shall be determined by the association in accordance with thealternative policy provisions and risk classification standards approved by the commissioner; and
(B) the premium may not reflect any changes in the health of the insured after theoriginal policy was last underwritten.
(vii) An alternative policy issued by the association shall provide coverage of a typesimilar to that of the policy issued by the impaired or insolvent insurer, as determined by theassociation.
(d) If the association elects to reissue terminated coverage at a premium rate differentfrom that charged under the terminated policy, the association shall set the premium inaccordance with the amount of insurance provided and the age and class of risk, subject to theapproval of the commissioner or by a court of competent jurisdiction.
(e) The association's obligations with respect to coverage under any policy of theimpaired or insolvent insurer or under any reissued or alternative policy ceases on the date thecoverage or policy is replaced by another similar policy by:
(i) the owner;
(ii) the insured; or
(iii) the association.
(f) (i) With respect to a claim unpaid as of the coverage date and a claim incurred duringthe period defined in Subsection (4)(a)(i), a provider of health care services, by accepting apayment from the association upon a claim of the provider against an insured whose health care

insurer is an insolvent member insurer, agrees to forgive the insured of 20% of the debt whichotherwise would be paid by the insurer had it not been insolvent, subject to a maximum of$8,000 being required to be forgiven by any one provider as to each claimant.
(ii) The obligations of a solvent insurer to pay all or part of the covered claim are notdiminished by the forgiveness provided for in this section.
(5) When proceeding under Subsection (3)(b) with respect to any policy or contractcarrying guaranteed minimum interest rates, the association shall assure the payment or creditingof a rate of interest consistent with Subsection 31A-28-103(2)(b)(iii).
(6) Nonpayment of premiums within 31 days after the date required under the terms ofany guaranteed, assumed, alternative, or reissued policy or contract or substitute coverageterminates the association's obligations under the policy or coverage under this part with respectto the policy or coverage, except with respect to any claims incurred or any net cash surrendervalue that may be due in accordance with this part.
(7) (a) Premium due after the coverage date with respect to the covered portion of apolicy or contract of an impaired or insolvent insurer belongs to and is payable at the direction ofthe association. If a liquidator of an insolvent insurer requests the report, the association shallreport to the liquidator the premium collected by the association.
(b) The association is liable to a policy or contract owner for unearned premiums due tothe policy or contract owner arising after the coverage date with respect to the covered portion ofthe policy or contract.
(8) The protection provided by this part does not apply if any guaranty protection isprovided to residents of this state by laws of the domiciliary state or jurisdiction of the impairedor insolvent insurer other than this state.
(9) In carrying out its duties under Subsection (2), and subject to approval by a court inthis state, the association may:
(a) impose permanent policy or contract liens in connection with a guarantee,assumption, or reinsurance agreement, if the association finds that:
(i) the amounts that can be assessed under this part are less than the amounts needed toassure full and prompt performance of the association's duties under this part; or
(ii) the economic or financial conditions as they affect member insurers are sufficientlyadverse to render the imposition of the permanent policy or contract liens to be in the publicinterest;
(b) impose temporary moratoriums or liens on payments of cash values and policy loans,or any other right to withdraw funds held in conjunction with policies or contracts, in addition toany contractual provisions for deferral of cash or policy loan value; and
(c) if the receivership court imposes a temporary moratorium or moratorium charge onpayment of cash values or policy loans, or on any other right to withdraw funds held inconjunction with policies or contracts, out of the assets of the impaired or insolvent insurer, deferthe payment of cash values, policy loans, or other rights by the association for the period of themoratorium or moratorium charge imposed by the receivership court, except for claims coveredby the association to be paid in accordance with a hardship procedure:
(i) established by the receiver; and
(ii) approved by the receivership court.
(10) (a) A special deposit in this state held pursuant to law or required by thecommissioner for the benefit of creditors, including policy owners, that is not turned over to the

domiciliary receiver upon the entry of a final order of liquidation or order approving arehabilitation plan of an insurer domiciled in any state shall be promptly paid to the association.
(b) Any amount paid under Subsection (10)(a) to the association less the amount retainedby the association shall be treated as a distribution of estate assets pursuant to Sections31A-27a-601, 31A-27a-602, and 31A-27a-701.
(11) If the association fails to act within a reasonable period of time as provided in thissection, the commissioner has the powers and duties of the association under this part withrespect to an impaired or insolvent insurer.
(12) The association may assist or advise the commissioner, upon the commissioner'srequest, concerning:
(a) rehabilitation;
(b) payment of claims;
(c) continuance of coverage; or
(d) the performance of other contractual obligations of any impaired or insolvent insurer.
(13) (a) The association has standing to appear or intervene before a court or agency inthis state with jurisdiction over:
(i) an impaired or insolvent insurer concerning which the association is or may becomeobligated under this part; or
(ii) any person or property against which the association may have rights throughsubrogation or otherwise.
(b) The standing referred to in Subsection (13)(a) extends to all matters germane to thepowers and duties of the association, including:
(i) proposals for reinsuring, modifying, or guaranteeing the policies or contracts of theimpaired or insolvent insurer; and
(ii) the determination of the policies or contracts and contractual obligations.
(c) The association has the right to appear or intervene before a court in another statewith jurisdiction over:
(i) an impaired or insolvent insurer for which the association is or may become obligated;or
(ii) any person or property against which the association may have rights throughsubrogation of the insurer's policyowners.
(14) (a) A person receiving benefits under this part is considered to have assigned therights under, and any causes of action against any person for losses arising under, resulting from,or otherwise relating to the covered policy or contract to the association to the extent of thebenefits received because of this part, whether the benefits are payments of, or on account of:
(i) contractual obligations;
(ii) continuation of coverage; or
(iii) provision of substitute or alternative coverages.
(b) As a condition precedent to the receipt of any right or benefits conferred by this partupon that person, the association may require an assignment to it of the rights and causes ofaction described in Subsection (14)(a) by any:
(i) payee;
(ii) policy or contract owner;
(iii) beneficiary;
(iv) insured; or

(v) annuitant.
(c) The subrogation rights obtained by the association under this Subsection (14) havethe same priority against the assets of the impaired or insolvent insurer as that possessed by theperson entitled to receive benefits under this part.
(d) In addition to Subsections (14)(a) through (c), the association has the common lawrights of subrogation and any other equitable or legal remedy that would have been available tothe impaired or insolvent insurer or owner, beneficiary, or payee of a policy or contract withrespect to the policy or contract, including in the case of a structured settlement annuity anyrights of the owner, beneficiary, or payee of the annuity to the extent of benefits receivedpursuant to this part against a person originally or by succession responsible for the losses arisingfrom the personal injury relating to the annuity or payment of the annuity.
(e) If a provision of this Subsection (14) is invalid or ineffective with respect to a personor claim for any reason, the amount payable by the association with respect to the related coveredobligations shall be reduced by the amount realized by any other person with respect to theperson or claim that is attributable to the policies, or portion of the policies, covered by theassociation.
(f) If the association has provided benefits with respect to a covered policy and a personrecovers amounts as to which the association has rights as described in this Subsection (14), theperson shall pay to the association the portion of the recovery attributable to the covered policies.
(15) (a) In addition to the rights and powers elsewhere in this part, the association may:
(i) enter into a contract that is necessary or proper to carry out the provisions andpurposes of this part;
(ii) sue or be sued, including taking any legal actions necessary or proper to:
(A) recover any unpaid assessments under Section 31A-28-109; and
(B) settle claims or potential claims against the association;
(iii) borrow money to effect the purposes of this part;
(iv) employ or retain the persons necessary or the appropriate staff members to:
(A) handle the financial transactions of the association; and
(B) perform other functions as become necessary or proper under this part;
(v) take necessary or appropriate legal action to avoid or recover payment of improperclaims;
(vi) exercise, for the purposes of this part and to the extent approved by thecommissioner, the powers of a domestic life or health insurer, but in no case may the associationissue insurance policies or annuity contracts other than those issued to perform its obligationunder this part;
(vii) request information from a person seeking coverage from the association to aid theassociation in determining the association's obligations under this part with respect to the person;
(viii) take other necessary or appropriate action to discharge the association's duties andobligations under this part or to exercise the association's powers under this part; and
(ix) act as a special deputy receiver if appointed by the commissioner.
(b) Any note or other evidence of indebtedness of the association under Subsection(15)(a)(iii) that is not in default:
(i) is a legal investment for a domestic insurer; and
(ii) may be carried as admitted assets.
(c) A person seeking coverage from the association shall promptly comply with a request

for information by the association under Subsection (15)(a)(vii).
(16) The association may join an organization of one or more other state associations ofsimilar purposes to further the purposes and administer the powers and duties of the association.
(17) (a) At any time within 180 days after the coverage date, the association may elect tosucceed to the rights and obligations of the member insurer that:
(i) accrue on or after the coverage date; and
(ii) relate to covered policies under any one or more indemnity reinsurance agreements:
(A) entered into by the member insurer as a ceding insurer and its reinsurer; and
(B) selected by the association.
(b) An election made pursuant to Subsection (17)(a) is effective as of the date of theorder of liquidation.
(c) The association may make an election described in Subsection (17)(a) by notifying anaffected reinsurer in writing, with verification of receipt, through:
(i) the association; or
(ii) a nationally recognized association representing state guaranty associations that isapproved by the commissioner, that provides notice on behalf of the association.
(d) The association shall provide a copy of the notice described in Subsection (17)(c) tothe receiver.
(e) (i) The receiver of an insolvent insurer and each reinsurer of the ceding memberinsurers shall make available as soon as possible after commencement of formal delinquencyproceedings the information described in Subsection (17)(e)(ii) to:
(A) the association; or
(B) a nationally recognized association representing state guaranty associations that isapproved by the commissioner, on behalf of the association.
(ii) This Subsection (17)(e) applies to:
(A) copies of in-force contracts of reinsurance and the related records relevant to thedetermination of whether the in-force contracts of reinsurance should be assumed;
(B) notices of any default under a reinsurance contract; or
(C) any known event or condition that with the passage of time could become a defaultunder a reinsurance contract.
(f) If the association makes an election under Subsection (17)(a), the association shallcomply with Subsections (17)(f)(i) through (vii) with respect to the agreements selected by theassociation.
(i) For a contract covered, in whole or in part, by the association, the association isresponsible for:
(A) the unpaid premiums due under the agreements for periods both before and after thecoverage date; and
(B) the performance of the other obligations to be performed after the coverage date.
(ii) The association may charge a contract covered in part by the association the costs forreinsurance in excess of the obligations of the association, through reasonable allocationmethods.
(iii) The association shall provide notice and an accounting to the receiver of a chargemade pursuant to Subsection (17)(f)(ii).
(iv) The association is entitled to any amounts payable by the reinsurer under theagreements with respect to a loss or event that:

(A) occurs after the coverage date; and
(B) relates to a contract covered by the association, in whole or in part.
(v) On receipt of any amounts under Subsection (17)(f)(iv), the association shall pay tothe beneficiary under the policy or contract on account of which the amounts were paid anamount equal to the lesser of:
(A) the amount received by the association; and
(B) the excess of the amount received by the association over the benefits paid or payableby the association on account of the policy or contract less the retention of the insurer applicableto the loss or event.
(vi) (A) Within 30 days following the association's election, the association and eachindemnity reinsurer shall calculate the net balance due to or from the association under eachreinsurance agreement as of the date of the association's election, giving full credit to the itemspaid by either the member insurer, its receiver, or the indemnity reinsurer before the date of theassociation's election.
(B) Within five days of the completion of the calculation under Subsection(17)(f)(vi)(A):
(I) the reinsurer shall pay the receiver the amounts due for a loss or event before thecoverage date, subject to any set-off for premiums unpaid for a period before the coverage date;and
(II) the association or the reinsurer shall pay any remaining balance due the other.
(C) A dispute over an amount due to either party shall be resolved:
(I) by arbitration pursuant to the terms of the affected reinsurance contract; or
(II) if the reinsurance contract contains no arbitration clause, as otherwise provided bylaw.
(D) If the receiver receives an amount due the association pursuant to Subsection(17)(f)(iv), the receiver shall remit that amount to the association as promptly as practicable.
(vii) If the association, or the receiver on behalf of the association, within 60 days of theelection, pays the premiums due for periods both before and after the coverage date that relate tocontracts covered by the association, in whole or in part, the reinsurer may not:
(A) terminate the reinsurance agreement for failure to pay premium, to the extent thereinsurance agreement relates to a policy or contract covered by the association, in whole or inpart; and
(B) set off against amounts due the association an amount due:
(I) under another contract; or
(II) as an unpaid amount due from a person other than the association.
(g) (i) This Subsection (17)(g) applies during the period that:
(A) begins on the coverage date; and
(B) ends:
(I) on the election date; or
(II) if no election date occurs, 180 days after the coverage date.
(ii) During the period described in Subsection (17)(g)(i):
(A) neither the association nor the reinsurer have a right or obligation under areinsurance contract that the association may assume under Subsection (17)(a), whether for aperiod before or after the coverage date; and
(B) the reinsurer, the receiver, and the association, to the extent practicable, shall provide

each other data and records reasonably requested.
(iii) Notwithstanding Subsection (17)(g)(ii), once the association elects to assume areinsurance contract, the parties' rights and obligations are governed by Subsections (17)(f)(i)through (vi).
(h) If the association does not elect to assume a reinsurance contract by the election datepursuant to Subsection (17)(a), the association has no right or obligation with respect to thereinsurance contract, whether for a period before or after the coverage date.
(i) An insurer other than the association succeeds to the rights and obligations of theassociation under Subsections (17)(a) through (f) effective as of the date agreed upon by theassociation and the other insurer and regardless of whether the association has made the electionreferred to in Subsections (17)(a) through (f) provided that:
(i) the association transfers its obligations to the other insurer;
(ii) the association and the other insurer agree to the transfer;
(iii) the indemnity reinsurance agreements automatically terminate for new reinsuranceunless the indemnity reinsurer and the other insurer agree to the contrary;
(iv) the obligations described in Subsection (17)(f)(v) may not apply on and after the datethe indemnity reinsurance agreement is transferred to the third party insurer;
(v) the transferring party shall give notice in writing, with verification of receipt, to theaffected reinsurer not less than 30 days before the effective date of the transfer; and
(vi) this Subsection (17)(i) may not apply if the association has previously expresslydetermined in writing that the association will not exercise the election referred to in Subsections(17)(a) through (f).
(j) (i) This Subsection (17) supersedes the provisions of any law of this state or of anyaffected reinsurance agreement that provides for or requires any payment of reinsurance proceedson account of losses or events that occur in periods after the coverage date, to:
(A) the receiver of an insolvent member insurer; or
(B) another person.
(ii) The receiver is entitled to any amounts payable by the reinsurer under the reinsuranceagreement with respect to a loss or event that occurs before the coverage date, subject toapplicable setoff provisions.
(k) Except as otherwise expressly provided in Subsections (17)(a) through (j), thisSubsection (17) does not:
(i) alter or modify the terms and conditions of a reinsurance agreement of the insolventmember insurer;
(ii) abrogate or limit a right any reinsurer to claim that it is entitled to rescind areinsurance agreement;
(iii) give a policy owner or beneficiary an independent cause of action against a reinsurerthat is not otherwise set forth in the reinsurance agreement;
(iv) limit or affect the association's rights as a creditor of the estate of an insolventinsurer against the assets of the estate; or
(v) apply to a reinsurance agreement that covers property or casualty risks.
(18) The board of directors of the association has discretion and may exercise reasonablebusiness judgment to determine the means by which the association is to provide the benefits ofthis part in an economical and efficient manner.
(19) If the association arranges or offers to provide the benefits of this part to a covered

person under a plan or arrangement that fulfills the association's obligations under this part, theperson is not entitled to benefits from the association in addition to or other than those providedunder the plan or arrangement.
(20) (a) Venue in a suit against the association arising under this part is Salt LakeCounty.
(b) The association may not be required to give an appeal bond in an appeal that relatesto a cause of action arising under this part.

Amended by Chapter 292, 2010 General Session


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