Sec. 38a-841. (Formerly Sec. 38-278). Obligations and rights of association.
Limitations. Assessments. Investigation of claims. Right to intervene in court proceedings. (1) Said association shall: (a) Be obligated to the extent of the covered claims
existing prior to the determination of insolvency and arising within thirty days after the
determination of insolvency, or before the policy expiration date if less than thirty days
after the determination, or before the insured replaces the policy or causes its cancellation, if he does so within thirty days of such determination, provided such obligation
shall be limited as follows: (i) With respect to covered claims for unearned premiums, to
one-half of the unearned premium on any policy, subject to a maximum of two thousand
dollars per policy; (ii) with respect to covered claims other than for unearned premiums,
such obligation shall include only that amount of each such claim which is in excess of
one hundred dollars and is less than three hundred thousand dollars, except that said
association shall pay the full amount of any such claim arising out of a workers' compensation policy, provided in no event shall (A) said association be obligated to any claimant
in an amount in excess of the obligation of the insolvent insurer under the policy form
or coverage from which the claim arises, or (B) said association be obligated for any
claim filed with the association after the expiration of two years from the date of the
declaration of insolvency unless such claim arose out of a workers' compensation policy
and was timely filed in accordance with section 31-294c; (b) be deemed the insurer to
the extent of its obligations on the covered claims and to such extent shall have all rights,
duties, and obligations of the insolvent insurer as if the insurer had not become insolvent;
(c) allocate claims paid and expenses incurred among the three accounts, created by
section 38a-839, separately, and assess member insurers separately (i) in respect of each
such account for such amounts as shall be necessary to pay the obligations of said
association under subdivision (a) of subsection (1) of this section subsequent to an
insolvency; (ii) the expenses of handling covered claims subsequent to an insolvency;
(iii) the cost of examinations under section 38a-846; and (iv) such other expenses as are
authorized by sections 38a-836 to 38a-853, inclusive. The assessments of each member
insurer shall be in the proportion that the net direct written premiums of such member
insurer for the calendar year preceding the assessment on the kinds of insurance in such
account bears to the net direct written premiums of all member insurers for the calendar
year preceding the assessment on the kinds of insurance in such account. Each member
insurer shall be notified of its assessment not later than thirty days before it is due. No
member insurer may be assessed in any year on any account an amount greater than
two per cent of that member insurer's net direct written premiums for the calendar year
preceding the assessment on the kinds of insurance in said account, provided if, at the
time an assessment is levied on the "all other insurance" account, as defined in subdivision (c) of section 38a-839, the board of directors finds that at least fifty per cent of the
total net direct written premiums of a member insurer and all its affiliates, for the year
on which such assessment is based, were from policies issued or delivered in Connecticut, on risks located in this state, such member insurer shall be assessed only on such
member insurer's net direct written premium that is attributable to the kind of insurance
that gives rise to each covered claim. If the maximum assessment, together with the
other assets of said association in any account, does not provide in any one year in any
account an amount sufficient to make all necessary payments from that account, the
funds available may be prorated and the unpaid portion shall be paid as soon thereafter
as funds become available. Said association may defer, in whole or in part, the assessment of any member insurer, if the assessment would cause the member insurer's financial statement to reflect amounts of capital or surplus less than the minimum amounts
required for a certificate of authority by any jurisdiction in which the member insurer
is authorized to transact insurance provided that during the period of deferment, no
dividends shall be paid to shareholders or policyholders. Deferred assessments shall be
paid when such payment will not reduce capital or surplus below the minimum amounts
required for a certificate of authority. Such payments shall be refunded to those insurers
receiving greater assessments because of such deferment or, at the election of the insurer,
be credited against future assessments. Each member insurer serving as a servicing
facility may set off against any assessment, authorized payments made on covered claims
and expenses incurred in the payment of such claims by such member insurer if they
are chargeable to the account in respect of which the assessment is made; (d) investigate
claims brought against said association and adjust, compromise, settle, and pay covered
claims to the extent of said association's obligations, and deny all other claims. The
association shall pay claims in any order it deems reasonable, including but not limited
to, payment in the order of receipt or by classification. It may review settlements, releases
and judgments to which the insolvent insurer or its insureds were parties to determine
the extent to which such settlements, releases and judgments may be properly contested;
(e) notify such persons as the commissioner may direct under subdivision (a) of subsection (2) of section 38a-843; (f) handle claims through its employees or through one or
more insurers or other persons designated by said association as servicing facilities,
provided such designation of a servicing facility shall be subject to the approval of the
commissioner, and may be declined by a member insurer; (g) reimburse each such
servicing facility for obligations of said association paid by such facility and for expenses
incurred by such facility while handling claims on behalf of said association and shall
pay such other expenses of said association as are authorized by sections 38a-836 to
38a-853, inclusive.
(2) Said association may: (a) Employ or retain such persons as are necessary to
handle claims and perform other duties of said association; (b) borrow such funds as
may be necessary from time to time to effect the purposes of sections 38a-836 to 38a-853, inclusive, in accord with the plan of operation under section 38a-842; (c) sue or
be sued; (d) intervene as a matter of right as a party in any proceeding before any court
in this state that has jurisdiction over an insolvent insurer, as defined in section 38a-838; (e) negotiate and become a party to such contracts as are necessary to carry out the
purpose of said sections; (f) perform such other acts as are necessary or proper to effectuate the purpose of said sections; (g) refund to the member insurers in proportion to the
contribution of each such member insurer to that account, that amount by which the
assets of the account exceed the liabilities, if, at the end of any calendar year, the board
of directors finds that the assets of said association in any account exceed the liabilities
of that account as estimated by the board of directors for the coming year.
(3) (A) Each insurer paying an assessment under sections 38a-836 to 38a-853, inclusive, may offset one hundred per cent of the amount of such assessment against its
premium tax liability to this state under chapter 207. Such offset shall be taken over a
period of the five successive tax years following the year of payment of the assessment,
at the rate of twenty per cent per year of the assessment paid to the association. Each
insurer to which has been refunded by the association, pursuant to subdivision (2) of
this section, all or a portion of an assessment previously paid to the association by the
insurer shall be required to pay to the Department of Revenue Services an amount equal
to the total amount that has been claimed as an offset against the premiums tax liability
on the premiums tax return or returns, as the case may be, filed by such insurer and that
is attributable to such refunded assessment, provided the amount required to be paid to
said department shall not exceed the amount of the refunded assessment. If the amount
of the refunded assessment exceeds the total amount that has been claimed as an offset
against the premiums tax liability on the premiums tax return or returns filed by such
insurer and that is attributable to such refunded assessment, such excess may not be
claimed as an offset against the premiums tax liability on a premiums tax return or
returns filed by such insurer or, if the offset has been transferred to another person
pursuant to subparagraph (B) of this subdivision, by such other person. For purposes
of this subparagraph, if the offset has been transferred to another person pursuant to
subparagraph (B) of this subdivision, the total amount that has been claimed as an offset
against the premiums tax liability on the premiums tax return or returns filed by such
insurer includes the total amount that has been claimed as an offset against the premiums
tax liability on the premiums tax return or returns filed by such other person. The association shall promptly notify the Commissioner of Revenue Services of the name and
address of the insurers to which such refunds have been made, the amount of such
refunds and the date on which such refunds were mailed to such insurer. If the amount
that an insurer is required to pay to the Department of Revenue Services has not been
so paid on or before the forty-fifth day after the date of mailing of such refunds, the
insurer shall be liable for interest on such amount at the rate of one per cent per month
or fraction thereof from such forty-fifth day to the date of payment.
(B) An insurer, in this subparagraph called "the transferor", may transfer any offset
provided under subparagraph (A) of this subdivision to an affiliate, as defined in section
38a-1, of the transferor. Any such transfer of the offset by the transferor and any subsequent transfer or transfers of the same offset shall not affect the obligation of the transferor to pay to the Department of Revenue Services any sums which are acquired by
refund from the association pursuant to subdivision (2) of this section and which are
required to be paid to the Department of Revenue Services pursuant to subparagraph
(A) of this subdivision. Such offset may be taken by any transferee only against the
transferee's premium tax liability to this state under chapter 207. The Commissioner of
Revenue Services shall not allow such offset to a transferee against its premium tax
liability unless the transferor, the affiliate to which the offset was originally transferred,
each subsequent transferor and each subsequent transferee have filed such information
as may be required on forms provided by said commissioner with respect to any such
transfer or transfers on or before the due date of the premium tax return on which such
offset would have been taken by the transferor if no transfer had been made by the
transferor.
(1971, P.A. 466, S. 6; P.A. 79-376, S. 64; P.A. 81-83, S. 3; P.A. 87-290, S. 3, 8; P.A. 90-50, S. 1, 3; P.A. 97-43; 97-125, S. 3, 9; P.A. 00-174, S. 77, 83; June Sp. Sess. P.A. 01-6, S. 40, 41, 85.)
History: P.A. 79-376 substituted "workers' compensation" for "workmen's compensation"; P.A. 81-83 specified that
associations are not obligated for claims filed more than two years from date of declaration of insolvency, provided for
permissive rather than mandatory proration of funds in account, prohibited payment of dividends during deferment period,
added provisions re payment of deferred assessments and refunds and authorized payment of claims "in any order it deems
reasonable, including but not limited to, payment in the order of receipt or by classification" in Subsec. (1); P.A. 87-290
amended Subsec. (1) to limit the assessment levied on the "all other insurance account" of a member insurer whenever
over half the premiums received by the insurer were for policies issued in the state for risks in the state; P.A. 90-50 amended
Subsec. (1)(a)(i) to raise the per policy maximum for covered claims for unearned premiums from one thousand dollars
to two thousand dollars; Sec. 38-278 transferred to Sec. 38a-841 in 1991; P.A. 97-43 amended Subsec. (1) to exclude
timely filed workers' compensation claims from two-year filing deadline; P.A. 97-125 added new Subdiv. in Subsec. (2)
to allow the association to intervene in proceedings before any court with jurisdiction over an insolvent insurer, relettering
remaining Subdivs. accordingly, effective July 1, 1997; P.A. 00-174 added Subdiv. (3) re offsets against premium tax
liability for amounts assessed under this chapter, and to allow transfer of the offset to an affiliate, effective May 26, 2000,
and applicable to income years commencing on and after January 1, 2000; June Sp. Sess. P.A. 01-6 amended Subdiv.
(3)(A) to specify procedures for tax treatment of refunds of assessments of association members, effective July 1, 2001,
and amended Subdiv. (3)(B) to add procedures for the transfer to affiliates of tax offsets for association assessments,
effective July 1, 2001, and applicable to calendar years commencing on or after January 1, 2001.
Annotations to former section 38-278:
Cited. 215 C. 224, 226-228. Cited. 217 C. 371, 383.
Subsec. (1):
Cited. 217 C. 371, 372. Subdiv. (a)(ii) cited. Id., 371, 374, 375, 381, 382, 384, 392. Subdiv. (b) cited. Id., 371, 377,
385. Subdiv. (a) cited. Id., 371, 378.
Annotations to present section:
Cited. 217 C. 371, 383.
Subsec. (1):
Cited. 217 C. 371, 372. Subdiv. (a)(ii) cited. Id., 371, 374, 375, 381, 382, 384, 392. Subdiv. (b) cited. Id., 371, 377,
385. Subdiv. (a) cited. Id., 371, 378.
Sec. 38a-842. (Formerly Sec. 38-279). Plan of operation. (1) (a) Said 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 said association. The plan of operation and any amendments thereto shall become effective upon
approval in writing by the commissioner. (b) If said association fails to submit a suitable
plan of operation within ninety days following October 1, 1971, or if at any time thereafter said association fails to submit suitable amendments to the plan, the commissioner
shall, after notice and hearing, adopt and promulgate such reasonable regulations as
are necessary or advisable to effectuate the provisions of sections 38a-836 to 38a-853,
inclusive. Such regulations shall continue in force until modified by the commissioner or
superseded by a plan submitted by said association and approved by the commissioner.
(2) All member insurers shall comply with the plan of operation.
(3) The plan of operation shall: (a) Establish the procedures whereby all the powers
and duties of said association under section 38a-841 shall be performed; (b) establish
procedures for handling the assets of said association; (c) establish the number, the terms
of office and the amount and method of reimbursing members of the board of directors
under section 38a-840; (d) establish procedures by which claims may be filed with said
association and establish acceptable forms of proof of covered claims. Notice of claims
to the receiver or liquidator of the insolvent insurer shall be deemed notice to said
association or its agent and a list of such claims shall be periodically submitted to said
association or similar organization having a like function to that of said association in
another state by the receiver or liquidator; (e) establish regular places and times for
meetings of the board of directors; (f) establish procedures for records to be kept of all
financial transactions of said association, its agents, and the board of directors; (g) provide that any member insurer aggrieved by any final action or decision of said association
may appeal to the commissioner within thirty days after such action or decision; (h)
establish the procedures whereby selections for the board of directors shall be submitted
to the commissioner; (i) contain such additional provisions as may be necessary or
proper for the execution of the powers and duties of said association under sections 38a-836 to 38a-853, inclusive.
(4) The plan of operation may delegate any or all powers and duties of said association, except those under subdivision (c) of subsection (1) of section 38a-841 and subdivision (b) of subsection (2) of section 38a-841 to a corporation, association, or other
organization which performs or will perform functions similar to those of said association, or its equivalent having a like function to that of said association, in two or more
states. Such a corporation, association or organization shall be reimbursed by said association as a servicing facility would be reimbursed and shall be paid by said association
for its performance of any other functions of said association. Any 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 sections 38a-836 to 38a-853, inclusive.
(1971, P.A. 466, S. 7.)
History: Sec. 38-279 transferred to Sec. 38a-842 in 1991.
Sec. 38a-843. (Formerly Sec. 38-280). Insolvent insurers. (1) The commissioner
shall: (a) Notify said association of the existence of an insolvent insurer, and notify the
chairman of the Workers' Compensation Commission and the State Treasurer of the
existence of an insolvent workers' compensation insurer, not later than three days after
he receives notice of the determination of any such insolvency; (b) upon request of the
board of directors, provide said association with a statement of the net direct written
premiums of each member insurer.
(2) The commissioner may: (a) Require that said association notify those persons
insured by the insolvent insurer, and any other interested parties, of the determination
of insolvency and of their rights under sections 38a-836 to 38a-853, inclusive. Such
notification shall be by mail sent to their last known address, where available, provided
if sufficient information for such notification by mail is not available, notice by publication in a newspaper of general circulation shall be sufficient to satisfy the requirements
of this subsection; (b) suspend or revoke, after notice and hearing, the certificate of
authority to transact insurance in this state of any member insurer which fails to pay an
assessment when due or which fails to comply with said plan of operation. In lieu of
any such suspension or revocation, the commissioner may levy a fine on any member
insurer which fails to pay an assessment when due, provided no such fine shall exceed
five per cent of the unpaid assessment per month, and provided no fine shall be less
than one hundred dollars per month; (c) revoke the designation of any servicing facility
if he finds claims are being handled unsatisfactorily.
(3) Any person aggrieved by any final action or order of the commissioner under
sections 38a-836 to 38a-853, inclusive, may within thirty days from the date of such
action or order petition the superior court for the judicial district of Hartford to require
the commissioner to show cause why said action or order should not be reversed or
eliminated, and, if said court finds that the action or order of the commissioner was
arbitrary and unjustified it shall take such action in the premises as may seem equitable.
The pendency of any such petitions to show cause shall act as a stay of execution of any
such order. Petitions under this section shall be privileged in respect of trial assignment.
(1971, P.A. 466, S. 8; P.A. 78-280, S. 6, 127; P.A. 86-35, S. 2; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; P.A. 93-142,
S. 4, 7, 8; P.A. 95-220, S. 4-6.)
History: P.A. 78-280 substituted "judicial district of Hartford-New Britain" for "Hartford county" in Subsec. (3); P.A.
86-35 amended Subsec.(1) to require the insurance commissioner to notify the chairman of the workers' compensation
commission and the state treasurer whenever a workers' compensation insurer becomes insolvent; P.A. 88-230 replaced
"judicial district of Hartford-New Britain" with "judicial district of Hartford", effective September 1, 1991; P.A. 90-98
changed the effective date of P.A. 88-230 from September 1, 1991, to September 1, 1993; Sec. 38-280 transferred to Sec.
38a-843 in 1991; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996,
effective June 14, 1993; P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1,
1998, effective July 1, 1995.
Sec. 38a-844. (Formerly Sec. 38-281). Assignment of rights under policy. Receiver or liquidator bound by settlements. Preservation of rights of association.
Right of recovery. (1) Any person recovering any moneys under sections 38a-836 to
38a-853, inclusive, shall be deemed to have assigned his rights under the policy to said
association to the extent of his recovery from said association. Every insured or claimant
seeking the protection of said sections shall cooperate with said association to the same
extent as such person would have been required to cooperate with the insolvent insurer.
Said association shall have no cause of action against any insured of the insolvent insurer
for any sums it has paid out to such insured except such causes of action as the insolvent
insurer would have had if such sums had been paid by the insolvent insurer. In the case
of an insolvent insurer operating on a plan with assessment liability, payments of claims
of said association shall not operate to reduce the liability of insureds to the receiver,
liquidator, or statutory successor for unpaid assessments.
(2) The receiver, liquidator, or statutory successor of an insolvent insurer shall be
bound by determinations of covered claim eligibility under sections 38a-836 to 38a-853, inclusive, and by settlements of claims made by said association or any similar
organization having a like function to that of said association in another state. The court
having jurisdiction shall grant such claims priority equal to that to which the claimant
would have been entitled in the absence of said sections 38a-836 to 38a-853, inclusive,
against the assets of the insolvent insurer. The expenses of said association or any similar
organization having a like function to that of said association in handling claims shall
be accorded the same priority as the receiver's or liquidator's expenses.
(3) Said association shall periodically file with the receiver or liquidator of the
insolvent insurer statements of the covered claims paid by said association, the expenses
paid for the processing of covered claims paid or contested and estimates of anticipated
claims on said association, and expenses of processing such claims which shall preserve
the rights of said association against the assets of the insolvent insurer.
(4) The association shall have the right to recover from the following persons the
amount of any covered claim paid on behalf of such person pursuant to sections 38a-836 to 38a-853, inclusive: (A) Any person who is an affiliate of the insolvent insurer
and whose liability obligations to other persons are satisfied in whole or in part by
payments made under this chapter; and (B) any insured whose net worth on December
thirty-first of the year next preceding the date the insurer becomes an insolvent insurer
exceeds fifty million dollars and whose liability obligations to other persons are satisfied
in whole or in part by payments made under said sections. For purposes of this subdivision, "insured" does not include a municipality, as defined in section 7-148.
(1971, P.A. 466, S. 9; P.A. 81-83, S. 4; P.A. 87-290, S. 4, 8; P.A. 97-125, S. 4, 9; P.A. 03-182, S. 1; P.A. 04-10, S. 9.)
History: P.A. 81-83 required that association file statements of expenses paid for processing paid or contested claims
in Subsec. (3); P.A. 87-290 added Subsec. (4) describing the persons from whom the association has the right to recover;
Sec. 38-281 transferred to Sec. 38a-844 in 1991; P.A. 97-125 made a technical change in Subsec. (1) and amended Subsec.
(2) re determinations of covered claim eligibility and settlements of claims made by the association, effective July 1, 1997;
P.A. 03-182 amended Subdiv. (4) to make technical changes and provide that "insured" does not include a municipality,
as defined in Sec. 7-148, effective June 26, 2003; P.A. 04-10 made technical changes in Subdiv. (4) (Revisor's note: In
2005, a provision in Subdiv. (4) defining "insured", added by P.A. 03-182 and inadvertently omitted from P.A. 04-10, was
reinstated editorially by the Revisors).
Annotation to former section 38-281:
Subsec. (1):
Cited. 217 C. 371, 381.
Annotation to present section:
Subsec. (1):
Cited. 217 C. 371, 381.
Sec. 38a-845. (Formerly Sec. 38-282). Exhaustion of rights under policy prior
to claim against association. Claims recoverable from more than one association.
Persons required to exhaust rights under governmental insurance or guaranty
program. (1) Any person having a claim against an insurer under any provision in an
insurance policy, other than a policy of an insolvent insurer, which is also a covered
claim under sections 38a-836 to 38a-853, inclusive, shall exhaust first his rights under
such policy. Any amount payable on a covered claim under said sections shall be reduced
by the amount recoverable under the claimant's insurance policy or chapter 568.
(2) Any person having a claim which may be recovered under more than one insurance guaranty association or its equivalent having a like function to that of said association shall seek recovery first from the association operating in the area of the residence
of the insured except that (A) if it is a first party claim for damage to property with a
permanent location, such person shall seek recovery first from the association operating
in the location of the property, and (B) if it is a workers' compensation claim, such
person shall seek recovery first from the association operating in the area of residence
of the claimant. Any recovery under sections 38a-836 to 38a-853, inclusive, shall be
reduced by the amount recoverable from any other insurance guaranty association or
its equivalent having a like function to that of said association.
(3) Any person having a claim under any governmental insurance or guaranty program which such claim is also a covered claim shall be required to first exhaust his
rights under such program. Any amount payable on a covered claim under sections
38a-836 to 38a-853, inclusive, shall be reduced by any amount recoverable under such
program.
(1971, P.A. 466, S. 10; P.A. 79-376, S. 65; P.A. 87-290, S. 5, 8; P.A. 88-76, S. 3, 10; P.A. 97-125, S. 5, 9; P.A. 03-49,
S. 2.)
History: P.A. 79-376 replaced "workmen's compensation" with "workers' compensation"; P.A. 87-290 amended Subsec. (2) to delete references to the procedure for the recovery of a workers' compensation claim from more than one
association; P.A. 88-76 amended Subsec. (1) to reduce the amount payable to a claimant by the amount of recovery under
the claimant's insurance or workers' compensation; Sec. 38-282 transferred to Sec. 38a-845 in 1991; P.A. 97-125 substituted
"amount recoverable" for "amount of any recovery" in Subsecs. (1) and (2), and added new Subsec. (3) re exhaustion of
claims under governmental insurance or guaranty programs, effective July 1, 1997; P.A. 03-49 amended Subdiv. (2) to
substitute "residence of the insured" for "residence of the claimant", designate existing exception as Subpara. (A) and add
Subpara. (B) re workers' compensation claims, effective May 23, 2003, and applicable to claims filed on or after that date.
Annotations to former section 38-282:
Cited. 215 C. 224, 226, 228. Cited. 217 C. 371, 389.
Subsec. (1):
Cited. 217 C. 371, 372, 375, 387-390.
Subsec. (2):
Cited. 217 C. 371, 391.
Annotations to present section:
Cited. 217 C. 371, 389. Section inapplicable where plaintiff does not have claim against an insurer under an insurance
policy. 247 C. 442.
Subsec. (1):
Cited. 217 C. 371, 372, 375, 387-390.
Subsec. (2):
Cited. 217 C. 371, 391.
Sec. 38a-846. (Formerly Sec. 38-283). Detection and prevention of insurer insolvencies. To aid in the detection and prevention of insurer insolvencies:
(1) The board of directors, upon majority vote, shall notify the commissioner of
any information which it may have indicating any member insurer may be insolvent or
in a financial condition hazardous to its policyholders or the public.
(2) The board of directors may, upon majority vote, request that the commissioner
order an examination of any member insurer which the board in good faith believes
may be in a financial condition hazardous to its policyholders or the public. Within
thirty days of the receipt of such request, the commissioner shall begin such examination.
The examination may be conducted as a National Association of Insurance Commissioners examination or may be conducted by the commissioner or by such persons as the
commissioner may designate. The cost of such examination shall be paid by said association. In no event shall such examination report be released to the board of directors prior
to its release to the public, provided this shall not preclude the commissioner from
complying with subdivision (3) of this section. The commissioner shall notify the board
of directors when the examination is completed. The request for an examination shall
be kept on file by the commissioner but it shall not be open to public inspection prior
to the release of the examination report to the public.
(3) The commissioner shall report to the board of directors when he has reasonable
cause to believe that any member insurer examined or being examined at the request of
the board of directors may be insolvent or in a financial condition hazardous to its
policyholders or the public.
(4) The board of directors may, upon majority vote, make reports and recommendations to the commissioner and the chief insurance regulatory official in any jurisdiction
upon any matter germane to the solvency, liquidation, rehabilitation or conservation of
any member insurer. Such reports and recommendations shall not be considered public
documents.
(5) The board of directors may, upon majority vote, make recommendations to the
commissioner and any other public official in any jurisdiction for the detection and
prevention of insurer insolvencies.
(6) At the request of the commissioner, the board of directors shall, at the conclusion
of any insurer insolvency in which said association was obligated to pay any covered
claim, prepare a report on the history and causes of such insolvency, based on the information available to said association, and submit such report to the commissioner.
(1971, P.A. 466, S. 11; P.A. 81-83, S. 5; P.A. 97-125, S. 6, 9; P.A. 98-27, S. 18.)
History: P.A. 81-83 provided that the board shall prepare report "at the request of the commissioner" in Subsec. (6);
Sec. 38-283 transferred to Sec. 38a-846 in 1991; P.A. 97-125 made a technical change in Subdiv. (2), amended Subdiv.
(4) re recommendations to chief insurance regulatory officials and amended Subdiv. (5) re recommendations to any other
public official, effective July 1, 1997; P.A. 98-27 amended Subdiv. (1) to substitute "it" for "they".
Sec. 38a-847. (Formerly Sec. 38-284). Association subject to examination and
regulation by commissioner. Annual financial report. Said association shall be subject to examination and regulation by the commissioner. The board of directors shall
submit, not later than March thirtieth of each year, a financial report for the preceding
calendar year in a form approved by the commissioner.
(1971, P.A. 466, S. 12.)
History: Sec. 38-284 transferred to Sec. 38a-847 in 1991.
Sec. 38a-848. (Formerly Sec. 38-285). Exemption from fees and taxes. Exception. Said association shall be exempt from payment of all fees and all taxes levied by
the state or any of its subdivisions provided it shall not be exempt from the payment of
real or personal property taxes.
(1971, P.A. 466, S. 13.)
History: Sec. 38-285 transferred to Sec. 38a-848 in 1991.
Sec. 38a-849. (Formerly Sec. 38-286). Rates and premiums to include recoupment of assessments. Section 38a-849 is repealed, effective July 1, 2000.
(1971, P.A. 466, S. 14; P.A. 00-174, S. 82, 83.)
Sec. 38a-850. (Formerly Sec. 38-287). No liability for action taken in performance of powers and duties. No liability for failure to act. There shall be no liability
on the part of and no cause of action of any nature shall arise against any member insurer,
said association or its agents or employees, the board of directors, or any person serving
as an alternate or substitute representative of any director or the commissioner or his
representatives for any action taken or any failure to act by them in the performance of
their powers and duties under sections 38a-836 to 38a-853, inclusive.
(1971, P.A. 466, S. 15; P.A. 97-125, S. 7, 9.)
History: Sec. 38-287 transferred to Sec. 38a-850 in 1991; P.A. 97-125 extended "no liability" provision to any person
serving as an alternate or substitute representative of any director, and to any failure to act, effective July 1, 1997.
Sec. 38a-851. (Formerly Sec. 38-288). Association rights in proceedings to
which insolvent insurer is party. Access to insolvent insurer's records. (a) All proceedings in which an insolvent insurer is a party or is obligated to defend an insured as
a party in any court in this state shall be stayed for up to six months and for such additional
time thereafter as may be determined by the court from the date of declaration of insolvency or from the time an ancillary proceeding is instituted in the state, whichever is
later, to permit proper defense by said association of all pending causes of action in the
case. Whenever any covered claims arise from a judgment under any decision, verdict
or finding based on the default of an insolvent insurer or based on such insolvent insurer's
failure to defend an insured, said association, either on its own behalf or on behalf of
such insured, may apply to have such judgment, order, decision, verdict or finding set
aside by the same court or administrator that made such judgment, order, decision,
verdict or finding and said association may defend against any such claim on the merits
of the case.
(b) The liquidator, receiver or statutory successor of an insolvent insurer covered by
sections 38a-836 to 38a-853, inclusive, shall permit access by the board or its authorized
representative to such insolvent insurer's records which the board determines are necessary for the board to carry out its functions under said sections 38a-836 to 38a-853,
inclusive, with regard to covered claims. The liquidator, receiver or statutory successor
shall provide the board or its representative with copies of such records upon the request
of the board.
(1971, P.A. 466, S. 16; P.A. 81-83, S. 6; P.A. 86-403, S. 80, 132; P.A. 97-125, S. 8, 9.)
History: P.A. 81-83 required that proceedings be stayed for up to six months and for additional time as determined by
the court, eliminating requirement of stay of sixty days from insolvency determination; P.A. 86-403 made technical change;
Sec. 38-288 transferred to Sec. 38a-851 in 1991; P.A. 97-125 designated existing provisions as Subsec. (a) and added
Subsec. (b) re access to insolvent insurer's records, effective July 1, 1997.
Sec. 38a-852. (Formerly Sec. 38-288a). Prohibited unfair trade practice. It
shall be a prohibited unfair trade practice and a violation of section 38a-815 for any
person to make use in any manner of the protection afforded by sections 38a-836 to 38a-853, inclusive, in the solicitation, negotiation, procurement or effectuation of insurance
provided, this section shall not apply to the distribution of any publication approved by
the commissioner and describing the general purposes and current limitations of sections
38a-836 to 38a-853, inclusive. Violations of this section shall be subject to the provisions
of section 38a-817.
(P.A. 85-105, S. 1; P.A. 92-60, S. 22.)
History: Sec. 38-288a transferred to Sec. 38a-852 in 1991; P.A. 92-60 included the provisions of this section as a
violation of Sec. 38a-815 and excluded its effect from the distribution of publications approved by the insurance commissioner describing the general purposes or current limitations of the Connecticut Insurance Guaranty Association Act.
Sec. 38a-853. (Formerly Sec. 38-289). Regulations. The commissioner may promulgate such reasonable regulations as he deems necessary to carry out the intent of
sections 38a-836 to 38a-853, inclusive. Such regulations may include definitions of the
kinds of insurance specified in section 38a-837.
(1971, P.A. 466, S. 17; P.A. 88-76, S. 4, 10.)
History: P.A. 88-76 authorized the commissioner to adopt regulations defining the kinds of insurance specified in Sec.
38a-274; Sec. 38-289 transferred to Sec. 38a-853 in 1991.
Secs. 38a-854 to 38a-857. Reserved for future use.
PART II*
CONNECTICUT LIFE AND HEALTH INSURANCE
GUARANTY ASSOCIATION ACT
*Annotation to former chapter 689:
Cited. 173 C. 352, 353.
Sec. 38a-858. (Formerly Sec. 38-301). Short title: Connecticut Life and Health
Insurance Guaranty Association Act. Sections 38a-858 to 38a-875, inclusive, shall
be known and may be cited as the "Connecticut Life and Health Insurance Guaranty
Association Act".
(1972, P.A. 280, S. 1.)
History: Sec. 38-301 transferred to Sec. 38a-858 in 1991.
Sec. 38a-859. (Formerly Sec. 38-302). Association of insurers. To provide protection for policyowners, insureds, beneficiaries, annuitants, payees and assignees of
life insurance policies, health insurance policies, annuity contracts, and supplemental
contracts, subject to certain limitations, against failure in the performance of contractual
obligations due to the impairment of the insurer issuing such policies or contracts, an
association of insurers is created to enable the guaranty of payment of benefits and of
continuation of coverages. Members of the association are subject to assessment to
provide funds to carry out the purpose of sections 38a-858 to 38a-875, inclusive, and
the association is authorized to assist the commissioner in the prescribed manner in the
detection and prevention of insurer impairments.
(1972, P.A. 280, S. 2.)
History: Sec. 38-302 transferred to Sec. 38a-859 in 1991.
Sec. 38a-860. (Formerly Sec. 38-303). Application of chapter. Obligations of
association. (a) Sections 38a-858 to 38a-875, inclusive, shall provide coverage for the
policies and contracts specified in subsection (f) of this section: (1) To any person,
except for a nonresident certificate holder under a group policy or contract, who is
the beneficiary, assignee or payee of the person covered under subdivision (2) of this
subsection, regardless of where the person resides, and (2) any person who is the owner
of, or certificate holder under, such policy or contract and in each case who (A) is a
resident, or (B) is not a resident, provided (i) the insurer that issued such policy or
contract is domiciled in this state, (ii) the state in which the person resides has an association similar to the association created by this section and sections 38a-837, 38a-838,
38a-845, 38a-853, 38a-862, 38a-863, 38a-865 and 38a-866, and (iii) the person is not
eligible for coverage by 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.
(b) For unallocated annuity contracts specified in subsection (f) of this section,
subdivisions (1) and (2) of subsection (a) of this section shall not apply, and except as
provided in subsections (d) and (e) of this section, sections 38a-858 to 38a-875, inclusive, shall apply to: (1) Any person who is the owner of the unallocated annuity contract
if the contract is issued to, or in connection with, a specific benefit plan whose plan
sponsor has its principal place of business in this state; and (2) any person who is the
owner of an unallocated annuity contract issued to, or in connection with, government
lotteries if the owners are residents.
(c) For structured settlement annuities specified in subsection (f) of this section,
subdivisions (1) and (2) of subsection (a) of this section shall not apply, and except as
provided in subsections (d) and (e) of this section, sections 38a-858 to 38a-875, inclusive, shall apply to a person who is a payee under a structured settlement annuity, or to
a beneficiary of a payee if the payee is deceased, if the payee: (1) Is a resident, regardless
of where the contract owner resides, or (2) is not a resident, provided: (A) (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 sections 38a-858 to 38a-875, inclusive; and (B) neither the payee, beneficiary or contract owner is eligible for
coverage by the association of the state in which the payee, beneficiary or contract owner
resides.
(d) Sections 38a-858 to 38a-875, inclusive, shall not provide coverage to: (1) 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 (2)
a person covered under subsection (b) of this section, if any coverage is provided by
the association of another state to the person.
(e) Sections 38a-858 to 38a-875, inclusive, shall provide coverage to a person who
is a resident and, in special circumstances, to a nonresident. In order to avoid duplicate
coverage, if a person who would otherwise receive coverage under sections 38a-858 to
38a-875, inclusive, is provided coverage under the laws of any other state, the person
shall not be provided coverage under sections 38a-858 to 38a-875, inclusive. In determining the application of the provisions of this subsection in situations where a person
could be covered by the association of more than one state, whether as an owner, payee,
beneficiary or assignee, sections 38a-858 to 38a-875, inclusive, shall be construed in
conjunction with the laws of other states to result in coverage by only one association.
(f) (1) Sections 38a-858 to 38a-875, inclusive, shall provide coverage to the persons specified in subsections (a) to (d), inclusive, of this section for direct, nongroup
life, health or annuity policies or contracts and supplemental contracts to such policies
or contracts, for certificates under direct group policies and contracts, and for unallocated
annuity contracts issued by member insurers, except as limited by said sections. 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 annuities, annuities
issued to or in connection with government lotteries and any immediate or deferred
annuity contracts. (2) Said sections 38a-858 to 38a-875, inclusive, shall not provide
coverage for: (A) Any portion of a policy or contract not guaranteed by the insurer, or
under which the risk is borne by the policy or contract holder; (B) any policy or contract
of reinsurance, unless assumption certificates have been issued; (C) any 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 member
insurer becomes an impaired or insolvent insurer under sections 38a-858 to 38a-875,
inclusive, exceeds the 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
member insurer becomes an impaired or insolvent insurer under sections 38a-858 to
38a-875, inclusive, whichever is earlier; and (ii) on and after the date on which the
member insurer becomes an impaired or insolvent insurer under sections 38a-858 to
38a-875, inclusive, 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 plan or program of an employer, association or similar entity
to provide life, health or annuity benefits to its employees or members to the extent that
such plan or program is self-funded or uninsured, including, but not limited to, benefits
payable by an employer, association or similar entity under (i) a multiple employer
welfare arrangement as defined in Section 514 of the federal Employee Retirement
Income Security Act of 1974, as amended from time to time; (ii) a minimum premium
group insurance plan; (iii) a stop-loss group insurance plan; or (iv) an administrative
services only contract; (E) any portion of a policy or contract to the extent that it provides
dividends, experience rating credits, voting rights or provides that any fees or allowances
be paid to any person, including, but not limited to, the policy or contract holder, in
connection with the service to or administration of such policy or contract; (F) any 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 such policy or contract in this state;
(G) any 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; (H) any portion of an unallocated annuity contract that
is not issued to, or in connection with a specific employee, union or association of natural
persons benefit plan or a government lottery; (I) any subscriber contract issued by a
health care center; (J) a contractual agreement that establishes the insurer's obligation
by reference to a portfolio of assets that is not owned or possessed by the insurance
company; (K) 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,
but not limited to: (i) A claim based on marketing materials; (ii) a claim based on side
letters, riders or other documents that were issued by the insurer without meeting applicable policy form filing or approval requirements; (iii) a misrepresentation of or regarding
policy benefits; (iv) an extra-contractual claim; or (v) a claim for penalties or consequential or incidental damages; (L) 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;
and (M) 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 sections 38a-858 to 38a-875, inclusive, 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 under this
subparagraph, the interest or change in value determined by using the procedures defined
in the policy or contract shall be credited as if the contractual date of crediting interest
or changing values was the date of impairment or insolvency, whichever is earlier, and
shall not be subject to forfeiture.
(g) The benefits for which the association may become liable 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 insurer, or (2) (A) with respect to any
one life, regardless of the number of policies or contracts: (i) Five hundred thousand
dollars in life insurance death benefits, but no more than five hundred thousand dollars
in net cash surrender and net cash withdrawal values for life insurance; (ii) five hundred
thousand dollars in health insurance benefits, including, but not limited to, any net cash
surrender and net cash withdrawal values; (iii) five hundred thousand dollars in the
present value of annuity benefits, including, but not limited to, 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, five hundred thousand dollars in
present value annuity benefits, including, but not limited to, net cash surrender and net
cash withdrawal values; (C) with respect to each payee of a structured settlement annuity,
or beneficiary or beneficiaries of the payee if deceased, five hundred thousand dollars
in present value annuity benefits, in the aggregate, including, but not limited to, net
cash surrender and net cash withdrawal values, if any, provided in no event shall the
association be liable to expend (i) more than the five hundred thousand dollars in the
aggregate with respect to any one individual under subparagraphs (A), (B) and (C) of
this subdivision, and (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 five million dollars in benefits, regardless of the number of policies and
contracts held by the owner; (D) with respect to either (i) one contract owner provided
coverage under subparagraph (B) of subdivision (2) of subsection (b) of this section, or
(ii) one plan sponsor whose plans own directly or in trust one or more unallocated annuity
contracts not included in subdivision (2) of subsection (f) of this section, five million
dollars in benefits regardless of the number of contracts with respect to the contract
owner or plan sponsor, except that in the case where one or more unallocated annuity
contracts are covered contracts under sections 38a-858 to 38a-875, inclusive, 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 and in no event shall the association be obligated to cover more than five
million dollars in benefits with respect to all such unallocated contracts.
(h) The limits set forth in subsection (g) of this section are limits on the benefits
for which the association is obligated before taking into account either the association's
subrogation and assignment rights or the extent to which those benefits could be provided
out of the assets of the impaired or insolvent insurer that are attributable to covered
policies. The costs of the association's obligations under sections 38a-858 to 38a-875,
inclusive, may be met by the use of assets attributable to covered policies or reimbursed
to the association pursuant to the association's subrogation and assignment rights.
(i) In performing its obligation to provide coverage under section 38a-865, 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 does not materially
affect the economic value or economic benefit of the covered policy or contract.
(1972, P.A. 280, S. 3; P.A. 75-224; P.A. 87-290, S. 6, 8; P.A. 88-76, S. 5, 10; P.A. 90-243, S. 152; P.A. 97-108, S. 4;
P.A. 98-19, S. 1, 2; P.A. 01-67, S. 1; P.A. 04-17, S. 1.)
History: P.A. 75-224 divided section into Subsecs., rephrased provisions re applicability of chapter, now Subsec. (b),
specifically exempted variable life insurance or annuity contract not guaranteed by an insurer and added reference to
"insolvent" insurers; P.A. 87-290 amended Subsec. (a) to limit the chapter's application to policies and contracts issued
to residents of this state; P.A. 88-76 rewrote section entirely, describing the limits of coverage in greater detail; P.A. 90-243 amended Subsec. (b) to exempt coverage for subscriber contracts issued by a health care center; Sec. 38-303 transferred
to Sec. 38a-860 in 1991; P.A. 97-108 amended Subsec. (b) by adding new Subpara. (J) re a contractual agreement that
establishes the insurer's obligation by reference to a portfolio not owned by the insurer; P.A. 98-19 amended Subsec.
(c)(2)(A)(ii) to substitute "five hundred thousand" for "three hundred thousand" re health insurance, and amended Subsec.
(c)(2)(B) to substitute "five hundred thousand" for "three hundred thousand" re aggregate with respect to any individual
under Subparas. (A) and (B), effective April 24, 1998; P.A. 01-67 amended Subsec. (a) to make a technical change and
replace former Subdivs. (1) and (2) with new Subdivs. (1) and (2), added new Subsecs. (b) to (e), redesignated existing
Subsecs. (b) and (c) as Subsecs. (f) and (g) and made substantial revisions thereto, adding new Subparas. (K) to (M) in
Subsec. (f) and new Subpara. (D) in Subsec. (g), and added new Subsecs. (h) and (i) re obligations of the association;
P.A. 04-17 substituted "five hundred thousand" for "three hundred thousand" and "one hundred thousand" re benefits in
Subsec. (g).
Sec. 38a-861. (Formerly Sec. 38-304). Liberal construction. Sections 38a-858
to 38a-875, inclusive, shall be liberally construed to effect the purpose under section
38a-859 which shall constitute an aid and guide to interpretation.
(1972, P.A. 280, S. 4.)
History: Sec. 38-304 transferred to Sec. 38a-861 in 1991.
Sec. 38a-862. (Formerly Sec. 38-305). Definitions. As used in sections 38a-858
to 38a-875, inclusive:
(1) "Account" means either of the two accounts created under section 38a-863;
(2) "Association" means the Connecticut Life and Health Insurance Guaranty Association created under section 38a-863;
(3) "Authorized assessment" or "authorized" when used in the context of assessments means a resolution that has been passed by the board of directors of the association
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 "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 in the notice. An authorized
assessment becomes a called assessment when notice is mailed by the association to
member insurers;
(6) "Commissioner" means the Insurance Commissioner of this state;
(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 38a-860;
(8) "Covered policy" means any policy or contract within the scope of section
38a-860;
(9) "Entity" means a person other than a natural person;
(10) "Impaired insurer" means a member insurer that, after October 1, 1972, is not
an insolvent insurer, and is placed under an order of rehabilitation or conservation by
a court of competent jurisdiction;
(11) "Insolvent insurer" means a member insurer that after October 1, 1972, is
placed under an order of liquidation by a court of competent jurisdiction with a finding
of insolvency;
(12) "Member insurer" means any insurer licensed or who holds a certificate of
authority to issue in this state any kind of insurance to which sections 38a-858 to 38a-875, inclusive, apply under section 38a-860, and may include an insurer whose license
in this state has been suspended, revoked or voluntarily withdrawn. "Member insurer"
does not include a health care center;
(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", "policy owner" or "contract owner" means 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. "Owner", "contract owner" and "policy owner" does not
include a person with a mere beneficial interest in a policy or contract;
(15) "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 the
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;
(16) "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 (A) 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 (f) of section 38a-860, except that assessable premium shall not be reduced
on account of subparagraph (C) of subdivision (2) of subsection (f) of section 38a-860,
relating to interest limitations, and subdivision (2) of subsection (g) of section 38a-860,
relating to limitations with respect to any one individual, any one participant and any
one contract owner; provided that "premiums" shall not include any premiums in excess
of five million dollars on any unallocated annuity contract not issued under a governmental retirement benefit plan established under Section 401, 403(b) or 457 of the Internal
Revenue Code of 1986, or any subsequent corresponding internal revenue code of the
United States, as from time to time amended, 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 five million dollars with respect
to such policies or contracts, regardless of the number of policies or contracts held by
the owner;
(17) "Person" means any individual, corporation, limited liability company, partnership, association or voluntary organization;
(18) "Principal place of business" of a plan sponsor or an entity means the single
state in which the natural persons who establish policy for the direction, control and
coordination of the operations of the plan sponsor or entity as a whole primarily exercise
that function, as determined by the association in its reasonable judgment by considering
the factors set forth in subparagraphs (A) to (G), inclusive, of this subdivision: (A) The
state in which the primary executive and administrative headquarters of the plan sponsor
or entity is located; (B) the state in which the principal office of the chief executive officer
of the plan sponsor or entity is located; (C) the state in which the board of directors, or
similar governing person or persons, of the plan sponsor or entity conducts the majority
of its meetings; (D) the state in which the executive or management committee of the
board of directors, or similar governing person or persons, of the plan sponsor or entity
conducts the majority of its meetings; (E) the state from which the management of the
overall operations of the plan sponsor or entity is directed; (F) 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 factors set forth in subparagraphs (A) to (E), inclusive, of this
subdivision; and (G) notwithstanding subparagraphs (A) to (F), inclusive, of this subdivision, in the case of a plan sponsor, if more than fifty per cent 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. The principal place of business of a plan sponsor
of a benefit plan described in subparagraph (C) of subdivision (15) 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;
(20) "Resident" means a person to whom a contractual obligation is owed and who
resides in this state 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 an entity shall be its principal place of business. Citizens of the
United States that are either (A) residents of foreign countries, or (B) residents of United
States possessions, territories or protectorates that do not have an association similar
to the association created by sections 38a-858 to 38a-875, inclusive, 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 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) "Supplemental contract" means any agreement entered into for the distribution
of policy or contract proceeds under a life, health or annuity policy or contract; and
(23) "Unallocated annuity contract" means any annuity contract or group annuity
certificate that 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.
(1972, P.A. 280, S. 5; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 323, 345, 348; P.A. 88-76, S. 6, 10; P.A. 90-243, S.
153; P.A. 93-57, S. 11; P.A. 95-79, S. 151, 189; P.A. 01-67, S. 2; P.A. 02-24, S. 4.)
History: P.A. 77-614 placed insurance commissioner within the department of business regulation and made insurance
department a division within that department, effective January 1, 1979; P.A. 80-482 restored insurance commissioner
and division to prior independent status and abolished the department of business regulation; P.A. 88-76 revised the
definitions of "account", "contractual obligation", "premiums" and "resident", and added definitions of "Moody's corporate
bond yield average", "supplemental contract" and "unallocated annuity contract"; P.A. 90-243 amended the definition of
"member insurer" to exclude "health care center"; Sec. 38-305 transferred to Sec. 38a-862 in 1991; P.A. 93-57 redefined
"member insurer"; P.A. 95-79 redefined "person" to include a limited liability company, effective May 31, 1995; P.A. 01-67 changed alphabetic Subdiv. designators to numeric designators, defined "authorized assessment", "authorized", "benefit
plan", "called assessment", "called", "entity", "insolvent insurer", "owner", "policy owner", "contract owner", "plan
sponsor", "principal place of business", "receivership court", and "structured settlement annuity", redefined "impaired
insurer", "premiums", "resident" and "supplemental contract", and made technical changes; P.A. 02-24 substituted "exercise" for "exercises" in Subdiv. (18).
Sec. 38a-863. (Formerly Sec. 38-306). Creation of association. Accounts. Supervision. (a) There is created a nonprofit legal entity to be known as the Connecticut
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 38a-867 and shall exercise its powers through
a board of directors established under section 38a-864. For purposes of administration
and assessment, the association shall maintain two accounts: (1) The life insurance and
annuity account which includes the following subaccounts: (A) Life insurance account;
(B) annuity account which shall include, but is not limited to, annuity contracts owned
by a governmental retirement plan, or its trustee, established under Section 401, 403(b)
or 457 of the Internal Revenue Code of 1986, or any subsequent corresponding internal
revenue code of the United States, as from time to time amended, but shall otherwise
exclude unallocated annuities; and (C) unallocated annuity account which shall exclude
contracts owned by a governmental retirement benefit plan, or its trustee, established
under Section 401, 403(b) or 457 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time
amended; and (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.
(1972, P.A. 280, S. 6; P.A. 88-76, S. 7, 10; P.A. 01-67, S. 3.)
History: P.A. 88-76 amended Subsec. (a) restructuring the accounts to be maintained by the association by reducing
their number from three to two, combining the life insurance account and the annuity account, and creating three subaccounts
under such combined account; Sec. 38-306 transferred to Sec. 38a-863 in 1991; P.A. 01-67 amended Subsec. (a)(1)(B) and
(C) to include in annuity accounts, and exclude from unallocated annuity accounts, those contracts owned by a governmental
retirement plan or its trustee established under the internal revenue code.
Sec. 38a-864. (Formerly Sec. 38-307). Board of directors. (a) The board of directors of the association shall consist of not less than five nor more than nine members
serving terms as established in the plan of operation. The members of the board shall
be selected by member insurers subject to the approval of the commissioner. Vacancies
on the board shall be filled for the remaining period of the term in the manner described
in the plan of operation. To select the initial board of directors, and initially organize
the association, the commissioner shall give notice to all member insurers of the time and
place of the organizational meeting. In determining voting rights at the organizational
meeting each member insurer shall be entitled to one vote in person or by proxy. If the
board of directors is not selected within sixty days after notice of the organizational
meeting, the commissioner may appoint the initial members.
(b) In approving selections or in appointing members to the board, the commissioner
shall consider, among other things, whether all member insurers are fairly represented.
(c) Members of the board may be reimbursed from the assets of the association for
expenses incurred by them as members of the board of directors but members of the
board shall not otherwise be compensated by the association for their services.
(1972, P.A. 280, S. 7.)
History: Sec. 38-307 transferred to Sec. 38a-864 in 1991.
Sec. 38a-865. (Formerly Sec. 38-308). Powers. (a) If a member insurer is an impaired 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 and that are approved by the commissioner, (1) guarantee, assume or reinsure,
or cause to be guaranteed, assumed or reinsured, any or all of the policies or contracts
of the impaired insurer; or (2) provide such moneys, pledges, loans, 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
subdivision (1) of this subsection.
(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 (ii) assure payment of the
contractual obligations of the insolvent insurer, and (B) provide moneys, pledges, loans,
notes, guarantees or other means reasonably necessary to discharge the association's
duties; or
(2) Provide benefits and coverages in accordance with the following provisions:
(A) With respect to 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 those 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 the policies and contracts; (ii) with
respect to nongroup policies, contracts and annuities, not later than the earlier of the
next renewal date, if any, under the 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 the policies or contracts;
(B) Make diligent efforts to provide all known insureds or annuitants, for nongroup
policies and contracts, or group policy owners with respect to group policies and contracts, thirty days' notice of the termination of benefits pursuant to subparagraph (A)
of this subdivision;
(C) With respect to 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 subparagraph (D) of this 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 to make unilateral changes in
any provision of the policy or annuity or had a right only to make changes in premium
by class;
(D) In providing the substitute coverage required under subparagraph (C) of this
subdivision, the association may offer either to reissue the terminated coverage or to
issue an alternative policy. 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. The association may
reinsure any alternative or reissued policy;
(E) Alternative policies adopted by the association shall be subject to the approval
of the domiciliary insurance 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;
(F) Alternative policies adopted by the association 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 that 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;
(G) 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;
(H) 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 domiciliary insurance commissioner and the receivership
court;
(I) 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 the coverage or policy is replaced by another similar policy by the owner, the
insured or the association;
(J) When proceeding under this subdivision with respect to a policy or contract
carrying guaranteed minimum interest rates, the association shall assure the payment
or crediting of a rate of interest consistent with subparagraph (C) of subdivision (2) of
subsection (f) of section 38a-860.
(c) Nonpayment of premiums by the thirty-first day 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 the policy or coverage under
sections 38a-858 to 38a-875, inclusive, with respect to the policy or coverage, except
with respect to any claims incurred or any net surrender value that may be due in accordance with the provisions of sections 38a-858 to 38a-875, inclusive.
(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 the association shall be liable for unearned premiums due to policy or contract owners arising after
the entry of the order.
(e) The protection provided by sections 38a-858 to 38a-875, inclusive, 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.
(f) Repealed by P.A. 87-290, S. 7, 8.
(g) In carrying out its duties under subsection (b) of this section, the association may:
(1) Subject to approval by a court in this state, impose permanent policy or contract
liens in connection with a guarantee, assumption or reinsurance agreement, if the association finds that the amounts which can be assessed under sections 38a-858 to 38a-875,
inclusive, are less than the amounts needed to assure full and prompt performance of the
association's duties under sections 38a-858 to 38a-875, inclusive, 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) Subject to approval by a court in this state, 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 addition, 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.
(h) If the association fails to act within a reasonable period of time with respect to
any insolvent insurer, as provided in subsection (b) of this section, the commissioner
shall have the powers and duties of the association under sections 38a-858 to 38a-875,
inclusive, with respect to the insolvent insurer.
(i) The association may render assistance and advice to the commissioner, upon the
commissioner's request, concerning rehabilitation, payment of claims, continuation of
coverage, or the performance of other contractual obligations of an impaired or insolvent
insurer.
(j) The association shall have standing to appear or intervene before a court or
agency in this state with jurisdiction over an impaired or insolvent insurer concerning
which the association is or may become obligated under sections 38a-858 to 38a-875,
inclusive, 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 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 any
person or property against whom the association may have rights through subrogation or
otherwise.
(k) (1) A person receiving benefits under sections 38a-858 to 38a-875, inclusive,
whether the benefits are payments of or on account of contractual obligations, continuation of coverage or provision of substitute or alternative coverages, shall be deemed to
have assigned (A) the rights under the covered policy or contract to the association to
the extent of the benefits received under sections 38a-858 to 38a-875, inclusive, and
(B) any causes of action against any person for losses arising under, resulting from or
otherwise relating to, the covered policy or