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Introduced Version Senate Bill 689 History

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Senate Bill No. 689

(By Senator Minard)

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[Introduced March 23, 2009; referred to the Committee on Banking and Insurance; and then to the Committee on the Judiciary.]

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A BILL to amend and reenact §33-26A-3, §33-26A-5, §33-26A-6, §33- 26A-8, §33-26A-9, §33-26A-10 and §33-26A-18 of the Code of West Virginia, 1931, as amended, all relating to the life and health insurance guaranty association; making specific provision for treatment of unallocated annuity contracts and structured settlement contracts; providing how payments to residents and nonresidents are determined; providing that duplicate payments not be made; excluding certain policies, portions of policies and obligations from coverage; setting new limits on coverage for various types of policies and contracts; defining terms; changing the composition of the annuity and unallocated annuity accounts; eliminating the association's power to make loans to an insolvent insurer and making other changes to its powers and duties; increasing the permissible maximum annual pro rata assessment; setting forth a process for the protest of assessments; mandating that members comply with requests for information from the association; requiring that the plan of operation include provisions for removing a director for cause and addressing conflicts of interest; and increasing the length of the stay of court proceedings involving an insolvent insurer.

Be it enacted by the Legislature of West Virginia:

That §33-26A-3, §33-26A-5, §33-26A-6, §33-26A-8, §33-26A-9, §33-26A-10 and §33-26A-18 of the Code of West Virginia, 1931, as amended, be amended and reenacted, all to read as follows:

§33-26A-3.  Scope of article; policies and contracts covered; exclusions; extent of liability.

(a) This article shall provide coverage for the policies and contracts specified in subsection (b) of this section:
(1) To persons who, regardless of where they reside, are the beneficiaries, assignees or payees of the persons covered under subdivision (2) below of this subsection: Provided, That the provisions of this subdivision shall not apply to nonresident certificate holders under group policies or contracts;
(2) To persons who are owners of or certificate holders under such policies or contracts, or in the case of unallocated annuity contracts, persons who are contract holders, and who other than unallocated annuity contracts and structured settlement annuities, and in each case who:
(A) Are residents of the this state; or
(B) Are not residents of this state, but only under all of the following conditions:
(i) Such insurers which The insurer that issued these the policies or contracts are is domiciled in this state;
(ii) Such insurers never held a license or certificate of authority in the state in which such person resides;
(iii) (ii) Such states the states in which the persons reside have associations similar to the association created by this article; and
(iv) (iii) The persons are not eligible for coverage by such associations an association in any other state because the insurer was not licensed in the state at the time specified in the state's guaranty association law.
(3) For unallocated annuity contracts specified in subdivisions (1) and (2), subsection (b) of this section shall not apply, and this article shall, except as provided in subdivisions (5) and (6) of this subsection, provide coverage to:
(A) Persons who are the owners of the unallocated annuity contracts if the contracts are issued to or in connection with a specific benefit plan whose plan sponsor has its principal place of business in this state; and
(B) Persons who are owners of unallocated annuity contracts issued to or in connection with government lotteries if the owners are residents.
(4) For structured settlement annuities specified in subdivisions (1) and (2), subsection (b) of this section shall not apply, and this article shall, except as provided in subdivisions (5) and (6) of this subsection, provide coverage to a person who is a payee under a structured settlement annuity or beneficiary of a payee if the payee is deceased, if the payee:
(A) Is a resident, regardless of where the contract owner resides; or
(B) Is not a resident, but only under both of the following conditions:
(i) (I) The contract owner of the structured settlement annuity is a resident; or
(II) The contract owner of the structured settlement annuity is not a resident, but the insurer that issued the structured settlement annuity is domiciled in this state and the state in which the contract owner resides has an association similar to the association created by this article; and
(ii) Neither the payee or beneficiary nor the contract owner is eligible for coverage by the association of the state in which the payee or contract owner resides.
(5) This article shall not provide coverage to:
(A) A person who is a payee or beneficiary of a contract owner resident of this state, if the payee or beneficiary is afforded any coverage by the association of another state; or
(B) A person covered under subdivision (3) of this subsection, if any coverage is provided by the association of another state to the person.
(6) This article is intended to provide coverage to a person who is a resident of this state and, in special circumstances, to a nonresident. In order to avoid duplicate coverage, if a person who would otherwise receive coverage under this article is provided coverage under the laws of any other state, the person shall not be provided coverage under this article. In determining the application of the provisions of this subdivision in situations where a person could be covered by the association of more than one state, whether as an owner, payee, beneficiary or assignee, this article shall be construed in conjunction with other state laws to result in coverage by only one association.
(b) Coverage as provided by this article shall be as follows:
(1) This article shall provide coverage to the persons specified in subsection (a) of this section for direct, nongroup life, health, and annuity and supplemental policies or contracts, for any supplemental policies to the foregoing, for certificates under direct group policies and contracts, and for unallocated annuity contracts, issued by member insurers, except as limited by this article. Annuity contracts and certificates under group annuity contracts include, but are not limited to, guaranteed investment contracts, deposit administration contracts, unallocated funding agreements, allocated funding agreements, structured settlement agreements, lottery contracts annuities, annuities issued in connection with government lotteries and any immediate or deferred annuity contracts.
(2) This article shall not provide coverage for:
(A) Any A portion of a policy or contract not guaranteed by the insurer, or under which the risk is borne by the policy or contract holder owner;
(B) Any A policy or contract of reinsurance, unless assumption certificates have been issued pursuant to the reinsurance policy or contract;
(C) Any A portion of a policy or contract to the extent that the rate of interest on which it is based, or the interest rate, crediting rate or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value:
(i) Averaged over the period of four years prior to the date on which the association member insurer becomes obligated with respect to such policy or contract an impaired or insolvent insurer under this article, exceeds a rate of interest determined by subtracting two percentage points from Moody's Corporate Bond Yield Average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years before the association became obligated member insurer becomes an impaired or insolvent insurer under this article, whichever is earlier; and
(ii) On and after the date on which the association member insurer becomes obligated with respect to such policy or contract an impaired or insolvent insurer under this article, whichever is earlier, exceeds the rate of interest determined by subtracting three percentage points from Moody's Corporate Bond Yield Average as most recently available;
(D) Any A portion of a policy or contract issued to a plan or program of an employer, association or similar entity other person to provide life, health or annuity benefits to its employees, or members or others, to the extent that the plan or program is self- funded or uninsured, including, but not limited to, benefits payable by an employer, association or similar entity other person under:
(i) A multiple employer welfare arrangement as defined in section 514 of the Employee Retirement Income Security Act of 1974, 29 U.S.C. §1144, as amended;
(ii) A minimum premium group insurance plan;
(iii) A stop-loss group insurance plan; or
(iv) An administrative services only contract;
(E) Any A portion of a policy or contract to the extent that it provides for dividends or experience rating credits, voting rights, or provides that payment of any fees or allowances be paid to any person, including the policy or contract holder owner, in connection with the service to or administration of the policy or contract;
(F) Any A policy or contract issued in this state by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue the policy or contract in this state;
(G) Any An unallocated annuity contract issued to an employee benefit plan protected under the federal pension benefit guaranty corporation, regardless of whether the federal pension benefit guaranty corporation has yet become liable to make any payments with respect to the benefit plan; and
(H) Any A portion of any unallocated annuity contract which is not issued to or in connection with a specific employee, union or association of natural persons benefit plan or a government lottery.
(I) A portion of a policy or contract to the extent that the assessments required by section nine of this article with respect to the policy or contract are preempted by federal or state law;
(J) An obligation that does not arise under the express written terms of the policy or contract issued by the insurer to the contract owner or policy owner, including without limitation:
(i) Claims based on marketing materials;
(ii) Claims based on side letters, riders or other documents that were issued by the insurer without meeting applicable policy form filing or approval requirements;
(iii) Misrepresentations of or regarding policy benefits;
(iv) Extra-contractual claims; or
(v) A claim for penalties or consequential or incidental damages;
(K) A contractual agreement that establishes the member insurer's obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, which in each case is not an affiliate of the member insurer;
(L) A portion of a policy or contract to the extent it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but which have not been credited to the policy or contract, or as to which the policy or contract owner's rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this article, whichever is earlier. If a policy's or contract's interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and are not subject to forfeiture, the interest or change in value determined by using the procedures defined in the policy or contract will be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency, whichever is earlier, and will not be subject to forfeiture.
(M) A policy or contract providing any hospital, medical, prescription drug or 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 Medicare Part C & D) or any regulations issued pursuant thereto.

(c) The benefits for which that the association may become liable for shall in no event exceed the lesser of:
(1) The contractual obligations for which the insurer is liable or would have been liable if it were not an impaired or insolvent insurer; or
(2) (A) With respect to any one life, regardless of the number of policies or contracts:
(i) Three hundred thousand dollars in life insurance death benefits, but no more than $100,000 in net cash surrender and net cash withdrawal values for life insurance;
(ii) One hundred thousand dollars in In health insurance benefits including any net cash surrender and net cash withdrawal values:
(I) One hundred thousand dollars for coverages not defined as disability insurance or basic hospital, medical and surgical insurance or major medical insurance or long term care insurance as defined in section four, article fifteen-a, of this chapter, including any net cash surrender and net cash withdrawal values;
(II) Three hundred thousand dollars for disability insurance and $300,000 for long term care insurance as defined in section four, article fifteen-a of this chapter;
(III) Five hundred thousand dollars for basic accident and sickness insurance as defined in section two-a, article fifteen of this chapter; or
(iii) One hundred thousand dollars $250,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values;
(B) With respect to each individual participating in a governmental retirement plan established under section 401, 403(b) or 457 of the United States Internal Revenue Code covered by an unallocated annuity contract or the beneficiaries of each such individual if deceased, in the aggregate, one hundred fifty thousand dollars $250,000 in present value annuity benefits, including net cash surrender and net cash withdrawal values. Provided, That in no event shall the association be liable to expend more than three hundred thousand dollars in the aggregate with respect to any one individual under paragraphs 2(A) and (B) above;
(C) With respect to any one contract holder covered by any unallocated annuity contract not included in subsection (2)(B) of this section, one million dollars in benefits, irrespective of the number of contracts held by that contract holder each payee of a structured settlement annuity, or beneficiary or beneficiaries of the payee if deceased, $250,000 in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal value;
(D) However, in no event shall the association be obligated to cover more than:
(i) An aggregate of $300,000 in benefits with respect to any one life under paragraphs (A), (B) and (C) of this subdivision except with respect to benefits for basic hospital, medical and surgical insurance and major medical insurance under subparagraph (ii), paragraph (A) of this subdivision, in which case the aggregate liability of the association shall not exceed $500,000 with respect to any one individual, or
(ii) With respect to one owner of multiple nongroup policies of life insurance, whether the policy owner is an individual, firm, corporation or other person, and whether the persons insured are officers, managers, employees or other persons, more than $5 million in benefits, regardless of the number of policies and contracts held by the owner.
(E) With respect to either one contract owner provided coverage under paragraph (B), subdivision (3), subsection (a) of this section or one plan sponsor whose plans own directly or in trust one or more unallocated annuity contracts not included in paragraph (B), subdivision (2) of this subsection, $5 million in benefits, irrespective of the number of contracts with respect to the contract owner or plan sponsor. However, in the case where one or more unallocated annuity contracts are covered contracts under this article and are owned by a trust or other entity for the benefit of two or more plan sponsors, coverage shall be afforded by the association if the largest interest in the trust or entity owning the contract or contracts is held by a plan sponsor whose principal place of business is in this state. In no event shall the association be obligated to cover more than $5 million in benefits with respect to all of these unallocated contracts.
(F) The limitations set forth in this subsection are limitations on the benefits for which the association is obligated before taking into account either its subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer attributable to covered policies. The costs of the association's obligations under this article may be met by the use of assets attributable to covered policies or reimbursed to the association pursuant to its subrogation and assignment rights.
(d) The liability of the association is strictly limited by the express terms of the covered policies and contracts and by the provisions of this article and shall not in any event include any amount in excess of the applicable limits of coverage provided by the contracts or policies as limited by this article. The association is not liable for any extra contractual damages, claims, fees of any kind whatsoever, including interest, except as specifically provided by the terms of the policies or contracts as limited by this article.
(d) In performing its obligations to provide coverage under section eight of this article, the association shall not be required to guarantee, assume, reinsure or perform, or cause to be guaranteed, assumed, reinsured or performed, the contractual obligations of the insolvent or impaired insurer under a covered policy or contract that do not materially affect the economic values or economic benefits of the covered policy or contract.
§33-26A-5. Definitions.
As used in this article:
(1) "Account" means either of the two accounts created under section six of this article.
(2) "Association" means the West Virginia Life and Health Insurance Guaranty Association created under section six of this article.
(3) "Authorized assessment" or the term "authorized" when used in the context of assessments means a resolution by the board of directors has been passed whereby an assessment will be called immediately or in the future from member insurers for a specified amount. An assessment is authorized when the resolution is passed.
(4) "Benefit plan" means a specific employee, union or association of natural persons benefit plan.
(5) "Called assessment" or the term "called" when used in the context of assessments means that a notice has been issued by the association to member insurers requiring that an authorized assessment be paid within the time frame set forth within the notice. An authorized assessment becomes a called assessment when notice is mailed by the association to member insurers.
(3) (6) "Commissioner" means the Commissioner of Insurance of this state.
(4) (7) "Contractual obligation" means any obligation under a policy or contract or certificate under a group policy or contract, or portion thereof for which coverage is provided under section three of this article.
(5) (8) "Covered policy" means any policy or contract within the scope of this article under section three of this article.
(9) "Extra-contractual claims" shall include claims such as those relating to bad faith in the payment of claims, punitive or exemplary damages or attorneys' fees and costs.
(6) (10) "Impaired insurer" means a member insurer which, after the effective date of this article, is not an insolvent insurer, and (1) is deemed by the commissioner to be potentially unable to fulfill its contractual obligations or (2) is placed under an order of rehabilitation or conservation by a court of competent jurisdiction.
(7) (11) "Insolvent insurer" means a member insurer which, after the effective date of this article, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.
(8) (12) "Member insurer" means any insurer licensed or which holds a certificate of authority to transact in this state any kind of insurance for which coverage is provided under section three of this article, and includes any an insurer whose license or certificate of authority in this state may have been suspended, revoked, not renewed or voluntarily withdrawn, and includes nonprofit service corporations as defined in article twenty-four of this chapter and health care corporations as defined in article twenty-five of this chapter Provided, That the term "member insurer" does not include but does not include:
(A) A health maintenance organization;
(B) A fraternal benefit society;
(C) A mandatory state polling pooling plan;
(D) A mutual assessment company or any entity that operates on an assessment basis;
(E) An insurance exchange; or
(F) An organization which has a certificate or license limited to the issuance of charitable gift annuities under article thirteen-b of this chapter; or
(F) (G) Any entity similar to any of the above.
(9) (13) "Moody's Corporate Bond Yield Average" means the Monthly Average Corporates as published by Moody's Investors Service, Inc., or any successor thereto.
(14) "Owner" of a policy or contract and "policy owner" and "contract owner" mean the person who is identified as the legal owner under the terms of the policy or contract or who is otherwise vested with legal title to the policy or contract through a valid assignment completed in accordance with the terms of the policy or contract and properly recorded as the owner on the books of the insurer. The terms owner, contract owner and policy owner do not include persons with a mere beneficial interest in a policy or contract.
(10) (15) "Person" means any individual, corporation, partnership, association or voluntary organization.
(16) "Plan sponsor" means:
(A) The employer in the case of a benefit plan established or maintained by a single employer;
(B) The employee organization in the case of a benefit plan established or maintained by an employee organization; or
(C) In a case of a benefit plan established or maintained by two or more employers or jointly by one or more employers and one or more employee organizations, the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the benefit plan.

(11) (17) "Premiums" means amounts or considerations (by whatever name called) received on covered policies or contracts less premiums, considerations and deposits returned thereon, and less dividends and experience credits thereon. "Premiums" does not include any amounts or considerations received for any policies or contracts or for the portions of any policies or contracts for which coverage is not provided under subsection (b), of section three of this article, except that assessable premium shall not be reduced on account of paragraph (C), subdivision (2), subsection (b), of section three of this article relating to interest limitations and subdivision (2), subsection (c), of section three of this article relating to limitations with respect to any one individual, any one participant and any one contract holder owner. Provided, That "premiums" Premiums shall not include any:
(A) Premiums in excess of one $5 million dollars on any unallocated annuity contract not issued under a government retirement plan established under section 401, 403(b) or 457 of the United States Internal Revenue Code; or
(B) With respect to multiple nongroup policies of life insurance owned by one owner, whether the policy owner is an individual, firm, corporation or other person, and whether the persons insured are officers, managers, employees or other persons, premiums in excess of $5 million with respect to these policies or contracts, regardless of the number of policies or contracts held by the owner.
(18) (A) "Principal place of business" of a plan sponsor or a person other than a natural person means the single state in which the natural persons who establish policy for the direction, control and coordination of the operations of the entity as a whole primarily exercise that function, determined by the association in its reasonable judgment by considering the following factors:
(i) The state in which the primary executive and administrative headquarters of the entity is located;
(ii) The state in which the principal office of the chief executive officer of the entity is located;
(iii) The state in which the board of directors (or similar governing person or persons) of the entity conducts the majority of its meetings;
(iv) The state in which the executive or management committee of the board of directors (or similar governing person or persons) of the entity conducts the majority of its meetings;
(v) The state from which the management of the overall operations of the entity is directed;
(vi) In the case of a benefit plan sponsored by affiliated companies comprising a consolidated corporation, the state in which the holding company or controlling affiliate has its principal place of business as determined using the above factors; and
(vii) In the case of a plan sponsor, if more than fifty percent of the participants in the benefit plan are employed in a single state, that state shall be deemed to be the principal place of business of the plan sponsor.
(B) The principal place of business of a plan sponsor of a benefit plan described in paragraph (C), subdivision (16) of this section shall be deemed to be the principal place of business of the association, committee, joint board of trustees or other similar group of representatives of the parties who establish or maintain the benefit plan that, in lieu of a specific or clear designation of a principal place of business, shall be deemed to be the principal place of business of the employer or employee organization that has the largest investment in the benefit plan in question.
(19) "Receivership court" means the court in the insolvent or impaired insurer's state having jurisdiction over the conservation, rehabilitation or liquidation of the insurer.
(12) (20) "Resident" means any a person to whom a contractual obligation is owed and who resides in this state at the time a member insurer is determined to be an impaired or insolvent insurer and to whom a contractual obligation is owed on the date of entry of a court order that determines a member insurer to be an impaired insurer or a court order that determines a member insurer to be an insolvent insurer, whichever occurs first. A person may be a resident of only one state, which in the case of a person other than a natural person shall be its principal place of business. Citizens of the United States that are either residents of foreign countries, or residents of United States possessions, territories, or protectorates that do not have an association similar to the association created by this article, shall be deemed residents of the state of domicile of the insurer that issued the policies or contracts.
(21) "Structured settlement annuity" means an annuity purchased in order to fund periodic payments for a plaintiff or other claimant in payment for or with respect to personal injury suffered by the plaintiff or other claimant.
(22) "Health insurance" means accident and sickness insurance as defined in subsection (b), section ten, article one of this chapter.
(23) "Supplemental contract" means any agreement entered into for the distribution of policy or contract proceeds.
(24) "Unallocated annuity contract" means any annuity contract or group annuity certificate which is not issued to and owned by an individual, except to the extent of any annuity benefits guaranteed to an individual by an insurer under such contract or certificate.
§33-26A-6. Creation of association; required accounts; supervision of commissioner; meetings and records.

(a) There is created a nonprofit legal entity to be known as the West Virginia Life and Health Insurance Guaranty Association. All member insurers shall be and remain members of the association as a condition of their authority to transact insurance in this state. The association shall perform its functions under the plan of operation established and approved under section ten of this article and shall exercise its powers through a board of directors established under section seven of this article. For purposes of administration and assessment, the association shall maintain the following two accounts:
(1) The life insurance and annuity account which includes the following subaccounts:
(A) Life insurance account;
(B) Annuity account which shall include annuity contracts owned by a governmental retirement plan or its trustee established under section 401, 403(b) or 457 of the United States Internal Revenue Code, but shall otherwise exclude unallocated annuities; and
(C) Unallocated annuity account which shall include exclude contracts qualified owned by a governmental retirement plan or its trustee established under section 401, 403(b) or 457 of the United States Internal Revenue Code.
(2) The health insurance account.
(b) The association shall come under the immediate supervision of the commissioner and shall be subject to the applicable provisions of the insurance laws of this state. Meetings or records of the association may be opened to the public upon majority vote of the board of directors of the association.
§33-26A-8. Powers and duties of association.
(a) If a member insurer is an impaired domestic insurer, the association may, in its discretion, and subject to any conditions imposed by the association that do not impair the contractual obligations of the impaired insurer, that are approved by the commissioner and that are, except in cases of court-ordered conservation or rehabilitation, also approved by the impaired insurer:
(1) Guarantee, assume, or reinsure, or cause to be guaranteed, assumed or reinsured, any or all the covered policies or contracts of the impaired insurer; or
(2) Provide such moneys, pledges, notes, guarantees or other means as are proper to effectuate subdivision (1) of this subsection and assure payment of the contractual obligations of the impaired insurer pending action under said subdivision (1). or
(3) Loan 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 subject to the preconditions specified in subdivision (2) of this subsection, the association shall, in its discretion, either:
(A) Take any of the actions specified in subsection (a) of this section, subject to the conditions therein; or
(B) Provide substitute benefits in lieu of the contractual obligations of the impaired insurer solely for health claims, periodic annuity benefit payments, death benefits, supplemental benefits, and cash withdrawals for policy or contract owners who petition therefor under claims of emergency or hardship in accordance with standards proposed by the association and approved by the commissioner.
(2) The association shall be subject to the requirements of subdivision (1) of this subsection only if:
(A) The laws of the impaired insurer's state of domicile provide that until all payments of or on account of the impaired insurer's contractual obligations by all guaranty associations, along with all expenses thereof and interest on all payments and expenses, shall have been repaid to the guaranty associations or a plan of repayment by the impaired insurer shall have been approved by the guaranty associations:
(i) The delinquency proceeding shall not be dismissed;
(ii) Neither the impaired insurer nor its assets shall be returned to the control of its shareholders or private management; (iii) It shall not be permitted to solicit or accept new business or have any suspended or revoked license restored; and (B) (i) If the impaired insurer is a domestic insurer, it has been placed under an order of rehabilitation by a court of competent jurisdiction in this state; or
(ii) The impaired insurer is a foreign or alien insurer;
(I) It has been prohibited from soliciting or accepting new business in this state;
(II) Its certificate of authority has been suspended or revoked in this state; and
(III)A petition for rehabilitation or liquidation has been filed in a court of competent jurisdiction in its state of domicile by the commissioner of the state.
(c) (b) If a member insurer is an insolvent insurer, the association shall, in its discretion, either:
(1) (A) (i) Guarantee, assume or reinsure, or cause to be guaranteed, assumed or reinsured, the policies or contracts of the insolvent insurer; or
(B) (ii) Assure payment of the contractual obligations of the insolvent insurer; and
(C) (B) Provide moneys, pledges, guarantees, or other means as are reasonably necessary to discharge such duties; or
(2) With respect only to life and health insurance policies, Provide benefits and coverages in accordance with subsection (d) of this section. the following provisions:
(d) When proceeding under (b)(1)(B) or (c)(2) of this section, the association shall,
(2) (A) With respect to only life and health insurance policies and annuities 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 policies or contracts of the insolvent insurer, for claims incurred:
(i) With respect to group policies and contracts, not later than the earlier of the next renewal date under such policies or contracts or forty-five days, but in no event less than thirty days, after the date on which the association becomes obligated with respect to such policies and contracts;
(B) (ii) With respect to individual policies nongroup policies, contracts and annuities, not later than the earlier of the next renewal date, if any, under these policies or contracts or one year, but in no event less than thirty days, from the date on which the association becomes obligated with respect to such policies or contracts;
(2) (B) Make diligent efforts to provide all known insureds or annuitants or group policyholders with respect to group policies and contracts thirty days' notice of the termination of the benefits provided pursuant to paragraph (A) of this subdivision; and
(3) (C) With respect to individual policies nongroup life and health insurance policies and annuities covered by the association, make available to each known insured or annuitant, or owner if other than the insured or annuitant, and with respect to an individual formerly insured or formerly an annuitant under a group policy who is not eligible for replacement group coverage, make available substitute coverage on an individual basis in accordance with the provisions of subdivision (4) paragraph (D) of this subsection subdivision, if the insureds or annuitants had a right under law or the terminated policy or annuity to convert coverage to individual coverage or to continue an individual policy or annuity in force until a specified age or for a specified time, during which the insurer had no right unilaterally to make changes in any provision of the policy or had a right only to make changes in premium by class.
(4) (A) (D)(i) In providing the substitute coverage required under subdivision (3) paragraph (C) of this subsection subdivision, the association may offer either to reissue the terminated coverage or to issue an alternative policy.
(B) (ii) Alternative or reissued policies shall be offered without requiring evidence of insurability, and shall not provide for any waiting period or exclusion that would not have applied under the terminated policy.
(C) (iii) The association may reinsure any alternative or reissued policy.
(5) (A) (E)(i) Alternative policies adopted by the association shall be subject to the approval of the commissioner domiciliary commissioner and the receivership court. The association may adopt alternative policies of various types for future issuance without regard to any particular impairment or insolvency.
(B) (ii) Alternative policies shall contain at least the minimum statutory provisions required in this state and provide benefits that shall not be unreasonable in relation to the premium charged. The association shall set the premium in accordance with a table of rates which it shall adopt. The premium shall reflect the amount of insurance to be provided and the age and class of risk of each insured, but shall not reflect any changes in the health of the insured after the original policy was last underwritten.
(C) (iii) Any alternative policy issued by the association shall provide coverage of a type similar to that of the policy issued by the impaired or insolvent insurer, as determined by the association.
(6) (F) If the association elects to reissue terminated coverage at a premium rate different from that charged under the terminated policy, the premium shall be set by the association in accordance with the amount of insurance provided and the age and class of risk, subject to approval of the commissioner or by a court of competent jurisdiction domiciliary commissioner and the receivership court.
(7) (G) The association's obligations with respect to coverage under any policy of the impaired or insolvent insurer or under any reissued or alternative policy shall cease on the date that the coverage or policy is replaced by another similar policy by the policyholder, the insured or the association.
(e) (H) When proceeding under subsection (b)(1)(B) or (C) subdivision (2) of this section subsection with respect to any policy or contract carrying guaranteed minimum interest rates, the association shall assure the payment or crediting of a rate of interest consistent with subsection (b)(2)(C) of paragraph (C), subdivision (2), subsection (b), section three of this article.
(f) (c) Nonpayment of premium within thirty-one days after the date required under the terms of any guaranteed, assumed, alternative or reissued policy or contract or substitute coverage shall terminate the association's obligations under such policy or coverage under this article with respect to such policy or coverage, except with respect to any claims incurred or any net cash surrender value which may be due in accordance with the provisions of this article.
(g) (d) Premiums due for coverage after entry of an order of liquidation of an insolvent insurer shall belong to and be payable at the direction of the association. and If the liquidator of an insolvent insurer requests, the association shall provide a report to the liquidator regarding such premium collected by the association. The association shall be liable for unearned premiums due to policy or contract owners arising after the entry of the order.
(h) (e) The protection provided by this article shall not apply where any guaranty protection is provided to residents of this state by the laws of the domiciliary state or jurisdiction of the impaired or insolvent insurer other than this state.
(i) (f) In carrying out its duties under subsections subsection (b) and (c) of this section, the association may, subject to approval by the court a court in this state:
(1) Impose permanent policy or contract liens in connection with any guarantee, assumption or reinsurance agreement, if the association finds that the amounts which can be assessed under this article are less than the amounts needed to assure full and prompt performance of the association's duties under this article, or that the economic or financial conditions as they affect member insurers are sufficiently adverse to render the imposition of such permanent policy or contract liens, to be in the public interest;
(2) 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 to any contractual provisions for deferral of cash or policy loan value. In the event of a temporary moratorium or moratorium charge imposed by the receivership court on payment of cash values or policy loans, or on any other right to withdraw funds held in conjunction with policies or contracts, out of the assets of the impaired or insolvent insurer, the association may defer the payment of cash values, policy loans or other rights by the association for the period of the moratorium or moratorium charge imposed by the receivership court, except for claims covered by the association to be paid in accordance with a hardship procedure established by the liquidator or rehabilitator and approved by the receivership court.
(g) A deposit in this state, held pursuant to law or required by the commissioner for the benefit of creditors, including policy owners, not turned over to the domiciliary liquidator upon the entry of a final order of liquidation or order approving a rehabilitation plan of an insurer domiciled in this state or in a reciprocal state, pursuant to article ten of this chapter, shall be promptly paid to the association. The association shall be entitled to retain a portion of any amount so paid to it equal to the percentage determined by dividing the aggregate amount of policy owners claims related to that insolvency for which the association has provided statutory benefits by the aggregate amount of all policy owners' claims in this state related to that insolvency and shall remit to the domiciliary receiver the amount so paid to the association less the amount retained pursuant to this subsection. Any amount so paid to the association and retained by it shall be treated as a distribution of estate assets pursuant to article ten of this chapter.
(j) (h) If the association fails to act within a reasonable period of time with respect to an insolvent insurer as provided in subsections (b)(1)(B), (c) and (d) subsection (b) of this section, the commissioner shall have the powers and duties of the association under this article with respect to impaired or insolvent insurers the insolvent insurer.
(k) (i) The association may render assistance and advice to the commissioner, upon his or her request, concerning rehabilitation, payment of claims, continuance of coverage, or the performance of other contractual obligations of any impaired or insolvent insurer.
(l) (j) The association shall have standing to appear or intervene before any court in this state with jurisdiction over an impaired or insolvent insurer concerning which the association is or may become obligated under this article or with jurisdiction over any person or property against which the association may have rights through subrogation or otherwise. Such standing shall extend to all matters germane to the powers and duties of the association, including, but not limited to, proposals for reinsuring, modifying, or guaranteeing the policies or contracts of the impaired or insolvent insurer and the determination of the policies or contracts and contractual obligations. The association shall also have the right to appear or intervene before a court or agency in another state with jurisdiction over an impaired or insolvent insurer for which the association is or may become obligated or with jurisdiction over a third any person or property party against whom the association may have rights through subrogation of the insurer's policyholders or otherwise.
(m) (k) (1) Any person receiving benefits under this article shall be deemed to have assigned the rights 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 the benefits received because of this article, whether the benefits are payments of or on account of contractual obligations, continuation of coverage or provision of substitute or alternative coverages. The association may require an assignment to it of such rights and cause of action by any payee, policy or contract owner, beneficiary, insured or annuitant as a condition precedent to the receipt of any right or benefits conferred by this article upon such person.
(2) The subrogation rights of the association under this subsection shall have the same priority against the assets of the impaired or insolvent insurer as that possessed by the person entitled to receive benefits under this article.
(3) In addition to subdivisions (1) and (2) above of this subsection, the association shall have all common law rights of subrogation and any other equitable or legal remedy which that would have been available to the impaired or insolvent insurer or holder owner, beneficiary or payee of a policy or contract with respect to such policy or contracts, including without limitation, in the case of a structured settlement annuity, any rights of the owner, beneficiary or payee of the annuity, to the extent of benefits received pursuant to this article, against a person originally or by succession responsible for the losses arising from the personal injury relating to the annuity or payment therefor, excepting any such person responsible solely by reason of serving as an assignee in respect of a qualified assignment under Internal Revenue Code section 130.
(4) If the preceding provisions of this subsection are invalid or ineffective with respect to any person or claim for any reason, the amount payable by the association with respect to the related covered obligations shall be reduced by the amount realized by any other person with respect to the person or claim that is attributable to the policies or portion thereof covered by the association.
(5) If the association has provided benefits with respect to a covered obligation and a person recovers amounts as to which the association has rights as described in the preceding paragraphs of this subsection, the person shall pay to the association the portion of the recovery attributable to the policies or portion thereof covered by the association.
(n) (l) In addition to the rights and powers elsewhere in this article, the association may:
(1) Enter into such contracts as are necessary or proper to carry out the provisions and purposes of this article;
(2) Sue or be sued, including taking any legal actions necessary or proper to recover any unpaid assessments under section nine of this article and to settle claims or potential claims against it;
(3) Borrow money to effect the purpose of this article; any notes or other evidence of indebtedness of the association not in default shall be legal investments for domestic insurers and may be carried as admitted assets;
(4) Employ or retain such persons as are necessary to handle the financial transactions of the association, and to perform such other functions as become necessary or proper under this article;
(5) Take such legal action as may be necessary to avoid or recover payment of improper claims;
(6) Exercise, for the purposes of this article and to the extent approved by the commissioner, the powers of a domestic life or health insurer, but in no case may the association issue insurance policies or annuity contracts other than those issued to perform its obligations under this article.
(7) Organize itself as a corporation or in other legal form permitted by the laws of the state;
(8) Request information from a person seeking coverage from the association in order to aid the association in determining its obligations under this article with respect to the person, and the person shall promptly comply with the request; and
(9) Take other necessary or appropriate action to discharge its duties and obligations under this article or to exercise its powers under this article.
(o) (m) The association may join an organization of one or more other state associations of similar purposes, to further the purposes and administer the powers and duties of the association.
(n) (1) (A) At any time within one hundred eighty days of the date of the order of liquidation, the association may elect to succeed to the rights and obligations of the ceding member insurer that relate to policies or annuities covered, in whole or in part, by the association, in each case under any one or more reinsurance contracts entered into by the insolvent insurer and its reinsurers and selected by the association. Any such assumption shall be effective as of the date of the order of liquidation. The election shall be effected by the association or the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA) on its behalf sending written notice, return receipt requested, to the affected reinsurers.
(
B) To facilitate the earliest practicable decision about whether to assume any of the contracts of reinsurance, and in order to protect the financial position of the estate, the receiver and each reinsurer of the ceding member insurer shall make available upon request to the association or to NOLHGA on its behalf as soon as possible after commencement of formal delinquency proceedings (i) copies of in-force contracts of reinsurance and all related files and records relevant to the determination of whether such contracts should be assumed, and (ii) notices of any defaults under the reinsurance contacts or any known event or condition which with the passage of time could become a default under the reinsurance contracts.
(C) The following shall apply to reinsurance contracts so assumed by the association:
(i) The association shall be responsible for all unpaid premiums due under the reinsurance contracts for periods both before and after the date of the order of liquidation, and shall be responsible for the performance of all other obligations to be performed after the date of the order of liquidation, in each case which relate to policies or annuities covered, in whole or in part, by the a
ssociation. The association may charge policies or annuities covered in part by the association, through reasonable allocation methods, the costs for reinsurance in excess of the obligations of the association and shall provide notice and an accounting of these charges to the liquidator;
(ii) The association shall be entitled to any amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods after the date of the order of liquidation and that relate to policies or annuities covered, in whole or in part, by the association, provided that, upon receipt of any such amounts, the association shall be obliged to pay to the beneficiary under the policy or annuity on account of which the amounts were paid a portion of the amount equal to lesser of:
(
I) The amount received by the association; and
(
II) The excess of the amount received by the association over the amount equal to the benefits paid by the association on account of the policy or annuity less the retention of the insurer applicable to the loss or event.
(iii) Within thirty days following the association's election (the "election date"), the association and each reinsurer under contracts assumed by the association shall calculate the net balance due to or from the association under each reinsurance contract as of the election date with respect to policies or annuities covered, in whole or in part, by the association, which calculation shall give full credit to all items paid by either the insurer or its receiver or the reinsurer prior to the election date. The reinsurer shall pay the receiver any amounts due for losses or events prior to the date of the order of liquidation, subject to any set-off for premiums unpaid for periods prior to the date, and the association or reinsurer shall pay any remaining balance due the other, in each case within five days of the completion of the aforementioned calculation. Any disputes over the amounts due to either the association or the reinsurer shall be resolved by arbitration pursuant to the terms of the affected reinsurance contracts or, if the contract contains no arbitration clause, as otherwise provided by law. If the receiver has received any amounts due the association pursuant to subparagraph (ii) of this paragraph, the receiver shall remit the same to the association as promptly as practicable.
(iv) If the association or receiver, on the association's behalf, within sixty days of the election date, pays the unpaid premiums due for periods both before and after the election date that relate to policies or annuities covered, in whole or in part, by the association, the reinsurer shall not be entitled to terminate the reinsurance contracts for failure to pay premium insofar as the reinsurance contracts relate to policies or annuities covered, in whole or in part, by the association, and shall not be entitled to set off any unpaid amounts due under other contracts, or unpaid amounts due from parties other than the association, against amounts due the association.
(2) During the period from the date of the order of liquidation until the election date or, if the election date does not occur, until one hundred eighty days after the date of the order of liquidation,
(A) (i) Neither the association nor the reinsurer shall have any rights or obligations under reinsurance contracts that the association has the right to assume under subdivision (1) of this subsection, whether for periods prior to or after the date of the order of liquidation; and
(ii) The reinsurer, the receiver and the association shall, to the extent practicable, provide each other data and records reasonably requested;
(B) Provided that once the association has elected to assume a reinsurance contract, the parties' rights and obligations shall be governed by subdivision (1) of this subsection.
(3) If the association does not elect to assume a reinsurance contract by the election date pursuant to subdivision (1) of this subsection, the association shall have no rights or obligations, in each case for periods both before and after the date of the order of liquidation, with respect to the reinsurance contract.
(4) When policies or annuities, or covered obligations with respect thereto, are transferred to an assuming insurer, reinsurance on the policies or annuities may also be transferred by the association, in the case of contracts assumed under subdivision (1) of this subsection, subject to the following:
(A) Unless the reinsurer and the assuming insurer agree otherwise, the reinsurance contract transferred shall not cover any new policies of insurance or annuities in addition to those transferred;
(B) The obligations described in subdivision (1) of this subsection shall no longer apply with respect to matters arising after the effective date of the transfer; and
(C) Notice shall be given in writing, return receipt requested, by the transferring party to the affected reinsurer not less than thirty days prior to the effective date of the transfer.
(5) The provisions of this subsection shall supersede the provisions of any law or of any affected reinsurance contract that provides for or requires any payment of reinsurance proceeds, on account of losses or events that occur in periods after the date of the order of liquidation, to the receiver of the insolvent insurer or any other person. The receiver shall remain entitled to any amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods prior to the date of the order of liquidation, subject to applicable setoff provisions.
(6) Except as otherwise provided in this subsection, nothing in this subsection shall alter or modify the terms and conditions of any reinsurance contract. Nothing in this subsection shall abrogate or limit any rights of any reinsurer to claim that it is entitled to rescind a reinsurance contract. Nothing in this subsection shall give a policyholder or beneficiary an independent cause of action against a reinsurer that is not otherwise set forth in the reinsurance contract. Nothing in this subsection shall limit or affect the association's rights as a creditor of the estate against the assets of the estate. Nothing in this subsection shall apply to reinsurance agreements covering property or casualty risks.
(o) The board of directors of the association shall have discretion and may exercise reasonable business judgment to determine the means by which the association is to provide the benefits of this article in an economical and efficient manner.
(p) Where the association has arranged or offered to provide the benefits of this article to a covered person under a plan or arrangement that fulfills the association's obligations under this article, the person shall not be entitled to benefits from the association in addition to or other than those provided under the plan or arrangement.
(q) Venue in a suit against the association arising under the article shall be in Kanawha County. The association shall not be required to give an appeal bond in an appeal that relates to a cause of action arising under this act.
(r) In carrying out its duties in connection with guaranteeing, assuming or reinsuring policies or contracts under subsections (a) or (b) of this section, the association may, subject to approval of the receivership court, issue substitute coverage for a policy or contract that provides an interest rate, crediting rate or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value by issuing an alternative policy or contract in accordance with the following provisions:
(1) In lieu of the index or other external reference provided for in the original policy or contract, the alternative policy or contract provides for:
(i) A fixed interest rate;
(ii) Payment of dividends with minimum guarantees; or
(iii) A different method for calculating interest or changes in value;
(2) There is no requirement for evidence of insurability, waiting period or other exclusion that would not have applied under the replaced policy or contract; and
(3) The alternative policy or contract is substantially similar to the replaced policy or contract in all other material terms.
§33-26A-9.  Assessments.
(a) For the purpose of providing the funds necessary to carry out the powers and duties of the association, the board of directors shall assess the member insurers, separately for each account, at such time and for such amounts as the board finds necessary. Assessments shall be due not less than thirty days after prior written notice to the member insurers and shall accrue interest at ten percent per annum on and after the due date.
(b) There shall be two assessments, as follows:
(1) Class A assessments shall be made authorized and called for the purpose of meeting administrative and legal costs and other expenses and examinations conducted under the authority of subsection (e) of section twelve, of this article. Class A assessments may be made authorized and called whether or not related to a particular impaired or insolvent insurer.
(2) Class B assessments shall be made authorized and called to the extent necessary to carry out the powers and duties of the association under section eight of this article with regard to an impaired or insolvent insurer.
(c) (1) The amount of any Class A assessment shall be determined by the board and may be made authorized and called on a pro rata or nonpro rata basis. If pro rata, the board may provide that it be credited against future Class B assessments. A nonpro rata assessment shall not exceed one hundred fifty dollars $300 per member insurer in any one calendar year. The amount of any Class B assessment shall be allocated for assessment purposes among the accounts pursuant to an allocation formula which may be based on the premiums or reserves of the impaired or insolvent insurer or any other standard deemed by the board in its sole discretion as being fair and reasonable under the circumstances.
(2) Class B assessments against member insurers for each account and subaccount shall be in the proportion that the premiums received on business in this state by each assessed member insurer on policies or contracts covered by each account for the three most recent calendar years for which information is available preceding the year in which the insurer became impaired or insolvent, as the case may be, bears to such premiums received on business in this state for such calendar years by all assessed member insurers.
(3) Assessments for funds to meet the requirements of the association with respect to an impaired or insolvent insurer shall not be made authorized or called until necessary to implement the purposes of this article. Classification of assessments under subsection (b) of this section and computation of assessments under this subsection shall be made with reasonable degree of accuracy, recognizing that exact determinations may not always be possible. The association shall notify each member insurer of its anticipated pro rata share of an authorized assessment not yet called within one hundred eighty days after the assessment is authorized.
(d) The association may abate or defer, in whole or in part, the assessment of a member insurer if, in the opinion of the board, payment of the assessment would endanger the ability of the member insurer to fulfill its contractual obligations. In the event an assessment against a member insurer is abated, or deferred, in whole or in part, the amount by which such assessment is abated or deferred may be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this section. Once the conditions that caused a deferral have been removed or rectified, the member insurer shall pay all assessments that were deferred pursuant to a repayment plan approved by the association.
(e) (1) (A) The Subject to the provisions of paragraph (B) of this subdivision, the total of all assessments upon a member insurer for each subaccount of the life and annuity account and for each subaccount thereunder and for the health account shall not in any one calendar year exceed two percent and for the health account shall not in any one calendar year exceed two percent of such insurer's average premiums received in this state on the policies and contracts covered by the subaccount or account during the three calendar years preceding the year in which the insurer became an impaired or insolvent insurer.
(B) If two or more assessments are authorized in one calendar year with respect to insurers that become impaired or insolvent in different calendar years, the average annual premiums for purposes of the aggregate assessment percentage limitation referenced in paragraph (A) of this subdivision shall be equal and limited to the higher of the three-year average annual premiums for the applicable subaccount or account as calculated pursuant to this section.
(C)
If the maximum assessment, together with the other assets of the association in any an account, does not provide in any one year in either account an amount sufficient to carry out the responsibilities of the association, the necessary additional funds shall be assessed as soon thereafter as permitted by this article.
(2) The board may provide in the plan of operation a method of allocating funds among claims, whether relating to one or more impaired or insolvent insurers, when the maximum assessment will be insufficient to cover anticipated claims.
(3) If a one percent the maximum assessment for any subaccount of the life and annuity account in any one year does not provide an amount sufficient to carry out the responsibilities of the association, then pursuant to subdivision (2), subsection (c) of this section, the board shall assess all subaccounts of the life and annuity account for the necessary additional amount, subject to the maximum stated in subdivision (1), subsection (e) of this section. (f) The board may, by an equitable method as established in the plan of operation, refund to member insurers, in proportion to the contribution of each insurer to that account, the amount by which the assets of the account exceed the amount the board finds is necessary to carry out during the coming year the obligations of the association with regard to that account, including assets accruing from assignment, subrogation, net realized gains and income from investments. A reasonable amount may be retained in any account to provide funds for the continuing expenses of the association and for future losses claims.
(g) It shall be proper for any member insurer, in determining its premium rates and policy owner dividends as to any kind of insurance within the scope of this article, to consider the amount reasonably necessary to meet its assessment obligations under this article.
(h) The association shall issue to each insurer paying an assessment under this article, other than Class A assessment, a certificate of contribution, in a form prescribed by the commissioner, for the amount of the assessment so paid. All outstanding certificates shall be of equal dignity and priority without reference to amounts or dates of issue. A certificate of contribution may be shown by the insurer in its financial statement as an asset in such form and for such amount, if any, and period of time as the commissioner may approve.
(i)(1) A member insurer that wishes to protest all or part of an assessment shall pay when due the full amount of the assessment as set forth in the notice provided by the association. The payment shall be available to meet association obligations during the pendency of the protest or any subsequent appeal. Payment shall be accompanied by a statement in writing that the payment is made under protest and setting forth a brief statement of the grounds for the protest.
(2) Within sixty days following the payment of an assessment under protest by a member insurer, the association shall notify the member insurer in writing of its determination with respect to the protest unless the a
ssociation notifies the member insurer that additional time is required to resolve the issues raised by the protest.
(3) Within thirty days after a final decision has been made, the association shall notify the protesting member insurer in writing of that final decision. Within sixty days of receipt of notice of the final decision, the protesting member insurer may appeal that final action to the commissioner.
(4) In the alternative to rendering a final decision with respect to a protest based on a question regarding the assessment base, the association may refer protests to the commissioner for a final decision, with or without a recommendation from the association.
(5) If the protest or appeal on the assessment is upheld, the amount paid in error or excess shall be returned to the member company. Interest on a refund due a protesting member shall be paid at the rate actually earned by the association.
(j) The association may request information of member insurers in order to aid in the exercise of its power under this section and member insurers shall promptly comply with a request.
§33-26A-10. Plan of operation.
(a) (1) The association shall submit to the commissioner a plan of operation and any amendments thereto necessary or suitable to assure the fair, reasonable and equitable administration of the association. The plan of operation and any amendments thereto shall become effective upon the commissioner's written approval or unless he or she has not disapproved of the same within thirty days.
(b) (2) If the association fails to submit a suitable plan of operation within one hundred eighty days following the effective date of this article or if at any time thereafter the association fails to submit suitable amendments to the plan, the commissioner shall, after notice and hearing, adopt and promulgate such reasonable rules as are necessary or advisable to effectuate the provisions of this article. Such rules shall continue in force until modified by the commissioner or superseded by a plan submitted by the association and approved by the commissioner. (c) (b) All member insurers shall comply with the plan of operation. (d) (c) The plan of operation shall, in addition to requirements enumerated elsewhere in this article:
(1) Establish procedures for handling the assets of the association;
(2) Establish the amount and method of reimbursing members of the board of directors under section seven of this article;
(3) Establish regular places and times for meetings including telephone conference calls of the board of directors;
(4) Establish procedures for records to be kept of all financial transactions of the association, its agents, and the board of directors;
(5) Establish the procedures whereby selections for the board of directors will be made and submitted to the commissioner;
(6) Establish any additional procedures for assessments under section nine of this article; and
(7) Contain additional provisions necessary or proper for the execution of the powers and duties of the association;
(8) Establish procedures whereby a director may be removed for cause, including in the case where a member insurer director becomes an impaired or insolvent insurer; and
(9) Require the board of directors to establish a policy and procedures for addressing conflicts of interests.
(e) (d) The plan of operation may provide that any or all powers and duties of the association, except those under subdivision (3), subsection (m) (l), section eight and section nine of this article, are delegated to a corporation, association, or other organization which performs or will perform functions similar to those of this association, or its equivalent, in two or more states. Such a corporation, association or organization shall be reimbursed for any payments made on behalf of the association and shall be paid for its performance of any function of the association. A delegation under this subsection shall take effect only with the approval of both the board of directors and the commissioner, and may be made only to a corporation, association or organization which extends protection not substantially less favorable and effective than that provided by this article.
§33-26A-18. Stay of court proceedings; reopening default judgments.

All proceedings in which the impaired or insolvent insurer is a party in any court in this state shall be stayed sixty one hundred eighty days from the date an order of liquidation, rehabilitation or conservation is final to permit proper legal action by the association on any matters germane to its powers or duties. As to a judgment under any decision, order, verdict or finding based on default the association may apply to have the judgment set aside by the same court that made the judgment and shall be permitted to defend against the suit on the merits.

NOTE: The purpose of this bill is to incorporate recent changes to the model legislation by the National Association of Insurance Commissioners concerning life and health guaranty associations.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.
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