CHAPTER 698d
UNAUTHORIZED INSURERS ACT

Table of Contents

Sec. 38a-271. (Formerly Sec. 38-263). Definitions. Acts of doing an insurance business. Exceptions.
Sec. 38a-272. (Formerly Sec. 38-264). Prohibited acts of an insurance business.
Sec. 38a-273. (Formerly Sec. 38-266). Secretary of the State as agent for service of process in proceedings by the state or commissioner. Judgment by default. Action by Attorney General.
Sec. 38a-274. (Formerly Sec. 38-268). Failure to make payment under contract or to defend in proceedings.
Sec. 38a-275. (Formerly Sec. 38-269). Contracts entered into by unauthorized insurers are unenforceable.
Sec. 38a-276. (Formerly Sec. 38-270). Investigators and adjusters to report unauthorized insurers.
Sec. 38a-277. (Formerly Sec. 38-271). Insureds involved with unauthorized insurers. Report to commissioner. Premium receipts tax. Penalty. Exceptions. Administration of tax.
Sec. 38a-278. (Formerly Sec. 38-272). Penalties.
Secs. 38a-279 to 38a-282.

      Sec. 38a-271. (Formerly Sec. 38-263). Definitions. Acts of doing an insurance business. Exceptions. (a) Unless otherwise indicated, as used in sections 38a-27 and 38a-271 to 38a-278, inclusive, "insurer" includes all corporations, associations, partnerships and individuals engaged as principals in the business of insurance and also includes interinsurance exchanges, mutual benefit societies and health care centers and "commissioner" means the Insurance Commissioner. Any of the following acts effected in this state by mail or otherwise is defined to be doing an insurance business in this state: (1) The making of or proposing to make, as an insurer, an insurance contract; (2) the making of or proposing to make, as guarantor or surety, any contract of guaranty or suretyship as a vocation and not merely incidental to any other legitimate business or activity of the guarantor or surety; (3) the taking or receiving of any application for insurance; (4) the receiving or collection of any premium, commission, membership fees, assessments, dues or other consideration for any insurance or any part thereof; (5) the issuance or delivery of contracts of insurance to residents of this state or to persons authorized to do business in this state; (6) directly or indirectly acting as an agent for or otherwise representing or aiding on behalf of another any person or insurer in the solicitation, negotiation, procurement or effectuation of insurance or renewals thereof or in the dissemination of information as to coverage or rates, or forwarding of applications, or delivery of policies or contracts, or inspection of risks, a filing of rates or investigation or adjustment of claims or losses or in the transaction of matters subsequent to effectuation of the contract and arising out of it, or in any other manner representing or assisting a person or insurer in the transaction of insurance with respect to subjects of insurance resident, located or to be performed in this state. The provisions of this subdivision shall not operate to prohibit full-time salaried employees of a corporate insured from acting in the capacity of an insurance manager or buyer in placing insurance on behalf of such employer; (7) the doing of or proposing to do any insurance business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of the general statutes relating to insurance; and (8) any other transactions of business in this state by an insurer. The venue of an act committed by mail is at the point where the matter transmitted by mail is delivered and takes effect.

      (b) The provisions of sections 38a-271 to 38a-278, inclusive, other than section 38a-277, do not apply to: (1) The lawful transaction of surplus lines insurance; (2) the lawful transaction of reinsurance by insurers; (3) transactions, in this state, involving a policy lawfully solicited, written and delivered outside of this state covering only subjects of insurance not resident, located or expressly to be performed in this state at the time of issuance, and which transactions are subsequent to the issuance of such policy; (4) transactions involving contracts of insurance independently procured pursuant to the unsolicited application of the insured or his agent which are reported and on which a premium tax is paid in accordance with section 38a-277; (5) attorneys acting in the ordinary relation of attorney-client in the adjustment of claims or losses; (6) transactions, in this state, involving contracts of insurance issued to one or more industrial insureds, provided nothing herein shall relieve an industrial insured from the taxation imposed upon independently procured insurance in subsection (c) of section 38a-277. For the purpose of this subdivision, an "industrial insured" shall mean an insured (i) which procures the insurance of any risk by the use of the services of a full-time employee acting as an insurance manager or buyer, or the services of a regularly and continuously retained qualified insurance consultant and (ii) whose aggregate annual premiums for insurance, excluding life, accident and health insurance, total at least fifty thousand dollars; (7) transactions involving contracts issued by a life insurance or annuity company, organized and operated without profit, to any private shareholder or individual exclusively for the purpose of aiding and strengthening educational institutions or charitable, health and welfare organizations by issuing insurance and annuity contracts only to or for the benefit of such institutions or organizations and individuals engaged in the service of such institutions or organizations; (8) transactions in this state involving group life and group sickness and accident or franchise sickness and accident insurance or group annuities where the master policy of such groups was lawfully issued and delivered in and pursuant to the laws of a state in which the insurer was authorized to do an insurance business to a group organized for purposes other than the procurement of insurance, and where the policyholder is domiciled or otherwise has a bona fide situs; (9) transactions in this state involving any policy of insurance or annuity contract issued prior to January 1, 1970.

      (c) The provisions of section 38a-27 do not apply to: (1) The lawful transaction of surplus lines insurance; (2) transactions, in this state, involving a policy lawfully solicited, written and delivered outside of this state covering only subjects of insurance not resident, located or expressly to be performed in this state at the time of issuance, and which transactions are subsequent to the issuance of such policy; (3) transactions involving contracts of insurance independently procured pursuant to the unsolicited application of the insured or his agent which are reported and on which a premium tax is paid in accordance with section 38a-277; (4) attorneys acting in the ordinary relation of attorney-client in the adjustment of claims or losses; (5) transactions, in this state, involving contracts of insurance issued to one or more industrial insureds, provided nothing in this section shall relieve an industrial insured from the taxation imposed upon independently procured insurance in subsection (c) of section 38a-277; (6) transactions involving contracts issued by a life insurance or annuity company, organized and operated without profit, to any private shareholder or individual exclusively for the purpose of aiding and strengthening educational institutions or charitable, health and welfare organizations by issuing insurance and annuity contracts only to or for the benefit of such institutions or organizations and individuals engaged in the service of such institutions or organizations; (7) transactions in this state involving group life and group sickness and accident or franchise sickness and accident insurance or group annuities where the master policy of such group was lawfully issued and delivered in and pursuant to the laws of a state in which the insurer was authorized to do an insurance business to a group organized for purposes other than the procurement of insurance, and where the policyholder is domiciled or otherwise has a bona fide situs; (8) transactions in this state involving any policy of insurance or annuity contract, other than a reinsurance contract, issued prior to January 1, 1970. For the purposes of subdivision (5) of this subsection, an "industrial insured" means an insured (A) which procures the insurance of any risk by the use of the services of a full-time employee acting as an insurance manager or buyer, or the services of a regularly and continuously retained qualified insurance consultant, and (B) whose aggregate annual premiums for insurance, excluding life, accident and health insurance, total at least fifty thousand dollars.

      (1969, P.A. 561, S. 1; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 319, 348; P.A. 90-243, S. 149; P.A. 93-239, S. 3; P.A. 96-78, S. 2; P.A. 98-98, S. 5; P.A. 10-32, S. 118.)

      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. 90-243 substituted "surplus lines" for "excess line" insurance in Subsec. (b); Sec. 38-263 transferred to Sec. 38a-271 in 1991; P.A. 93-239 made technical corrections for statutory consistency; P.A. 96-78 amended Subsec. (b) to delete the reference to Sec. 38a-27 and added a new Subsec. (c) re exemptions to provisions of Sec. 38a-27; P.A. 98-98 amended definition of "insurer" in Subsec. (a) to include health care centers; P.A. 10-32 made technical changes in Subsec. (a), effective May 10, 2010.

      Provisions of Subsec. (b) exempting reinsurers from this statute prevent the application of Subsec. (c), exempting industrial insureds from the provisions of Sec. 38a-27, to such reinsurers. 103 CA 319.

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      Sec. 38a-272. (Formerly Sec. 38-264). Prohibited acts of an insurance business. No person or insurer shall directly or indirectly do any of the acts of an insurance business set forth in subsection (a) of section 38a-271 except as authorized by the general statutes. In respect to the insurance of subjects resident, located or to be performed within this state this section shall not prohibit the collection of premium or other acts performed outside of this state by persons or insurers authorized to do business in this state, provided such transactions and insurance contracts are otherwise lawful.

      (1969, P.A. 561, S. 2.)

      History: Sec. 38-264 transferred to Sec. 38a-272 in 1991.

      Annotation to former section 38-264:

      Cited. 9 CA 622.


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      Sec. 38a-273. (Formerly Sec. 38-266). Secretary of the State as agent for service of process in proceedings by the state or commissioner. Judgment by default. Action by Attorney General. (a) Any act of doing an insurance business, as set forth in subsection (a) of section 38a-271, by any unauthorized person or insurer is equivalent to and shall constitute an irrevocable appointment by such person or insurer, binding upon him, his executor, administrator or personal representative, or successor in interest if a corporation, of the Secretary of the State to be the true and lawful attorney of such person or insurer upon whom may be served all legal process in any action or proceeding in any court by the commissioner or by the state and upon whom may be served any notice, order, pleading or process in any proceeding before the commissioner and which arises out of doing an insurance business in this state by such person or insurer. Any such act of doing an insurance business by any unauthorized person or insurer shall be signification of its agreement that any such legal process in such court action or proceeding and any such notice, order, pleading or process in such administrative proceeding before the commissioner so served shall be of the same legal force and validity as personal service of process in this state upon such person or insurer, or upon his executor, administrator or personal representative, or its successor in interest if a corporation.

      (b) Such service of process in such court action or proceeding or of such notice, order, pleading or process in such administrative proceeding shall be made by leaving two copies thereof in the hands or at the office of the Secretary of the State. A certificate by the Secretary of the State showing such service and attached to the original or third copy of such process presented to him for that purpose shall be sufficient evidence thereof. Service upon the Secretary of the State as such attorney shall be service upon the principal.

      (c) The Secretary of the State shall forthwith mail one copy of such court process or such notice, order, pleading or process in proceedings before the commissioner to the defendant in such court proceeding or to the person or insurer to whom the notice, order, pleading or process in such administrative proceeding is addressed or directed at its last-known principal place of business and shall keep a record of all process so served on him which shall show the day and hour of service. Such service is sufficient, provided notice of such service and a copy of the court process or the notice, order, pleading or process in such administrative proceeding shall be sent within ten days thereafter by registered or certified mail by the plaintiff or the plaintiff's attorney in the court proceeding or by the commissioner in the administrative proceeding to the defendant in the court proceeding or to the person or insurer to whom the notice, order, pleading or process in such administrative proceeding is addressed or directed at its last-known principal place of business and the defendant's receipt, or the receipt issued by the post office with which the letter is registered or certified, showing the name of the sender of the letter and the name and address of the person or insurer to whom the letter is addressed, and the affidavit of the plaintiff or the plaintiff's attorney in court proceedings or of the commissioner in administrative proceedings, showing compliance herewith shall be filed with the clerk of the court in which such action, suit or proceeding is pending or with the commissioner in administrative proceedings, on or before the date the defendant in the court or administrative proceeding is required to appear or respond thereto, or within such further time as the court or commissioner may allow.

      (d) No plaintiff or complainant shall be entitled to a judgment or determination by default in any court or administrative proceeding in which court process or a notice, order, pleading or process in proceedings before the commissioner is served under this section until the expiration of forty-five days from the date of filing of the affidavit of compliance.

      (e) Nothing contained in this section shall limit or abridge the right to serve any process, notice, order, pleading or demand upon any person or insurer in any other manner permitted by law.

      (f) The Attorney General upon request of the commissioner is authorized to proceed in the courts of this or any other state or in any federal court or agency to enforce an order or decision in any court proceeding or in any administrative proceeding before the commissioner.

      (1969, P.A. 561, S. 4.)

      History: Sec. 38-266 transferred to Sec. 38a-273 in 1991.

      Given statutes' repeated references to "any" act or "an act" of doing insurance business, legislature has made clear that one unauthorized act of doing insurance business will satisfy the statutory requirement for the long arm jurisdiction of Insurance Commissioner. 282 C. 505.

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      Sec. 38a-274. (Formerly Sec. 38-268). Failure to make payment under contract or to defend in proceedings. In an action against an unauthorized person or insurer upon a contract of insurance issued or delivered in this state to a resident thereof or to a corporation authorized to do business therein, if the person or insurer has failed for thirty days after demand prior to the commencement of the action to make payment in accordance with the terms of the contract, and it appears to the court that such refusal was vexatious and without reasonable cause, the court may allow to the plaintiff a reasonable attorney fee and include such fee in any judgment that may be rendered in such action. Failure of the person or insurer to defend any such action shall be deemed prima facie evidence that its failure to make payment was vexatious and without reasonable cause.

      (1969, P.A. 561, S. 6.)

      History: Sec. 38-268 transferred to Sec. 38a-274 in 1991.

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      Sec. 38a-275. (Formerly Sec. 38-269). Contracts entered into by unauthorized insurers are unenforceable. Any contract effective in this state and entered into by an unauthorized insurer in violation of sections 38a-27 and 38a-271 to 38a-278, inclusive, shall be unenforceable by such insurer. If any such unauthorized insurer fails to pay any claim or loss within the provisions of such insurance contract, any person who assisted or in any manner aided directly or indirectly in the procurement of such insurance contract shall be liable to the insured for the full amount of such claim or loss pursuant to the provisions of such insurance contract.

      (1969, P.A. 561, S. 7.)

      History: Sec. 38-269 transferred to Sec. 38a-275 in 1991.

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      Sec. 38a-276. (Formerly Sec. 38-270). Investigators and adjusters to report unauthorized insurers. Every person investigating or adjusting any loss or claim on a subject of insurance in this state shall immediately report to the commissioner every insurance policy or contract which has been entered into by any insurer not authorized to transact such insurance in this state. This section does not apply to transactions in this state involving a policy lawfully solicited, written and delivered outside of this state covering only subjects of insurance not resident, located or expressly to be performed in this state at the time of issuance, and which transactions are subsequent to the issuance of such policy.

      (1969, P.A. 561, S. 8.)

      History: Sec. 38-270 transferred to Sec. 38a-276 in 1991.

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      Sec. 38a-277. (Formerly Sec. 38-271). Insureds involved with unauthorized insurers. Report to commissioner. Premium receipts tax. Penalty. Exceptions. Administration of tax. (a) Every insured who in this state procures or causes to be procured or continues or renews insurance with any unauthorized insurer, or any insured or self-insurer who so procures or continues excess loss, catastrophe or other insurance, upon a subject of insurance resident, located or to be performed within this state, other than insurance procured through a surplus lines broker pursuant to the surplus lines law of this state, shall, within sixty days after the date such insurance was so procured, continued or renewed, file a report of the same with the Commissioner of Revenue Services in writing and upon forms designated by the Commissioner of Revenue Services and furnished to such insured upon request. The report shall show the name and address of the insured or insureds, the name and address of the insurer, the subject of the insurance, a general description of the coverage, the amount of premium currently charged therefor and such additional pertinent information as is reasonably requested by the Commissioner of Revenue Services.

      (b) Any insurance by an unauthorized insurer of a subject of insurance resident, located or to be performed within this state procured through negotiations or an application, in whole or in part occurring or made within or from within or outside of this state, or for which premiums in whole or in part are remitted directly or indirectly from within or outside of this state, shall be deemed to be insurance procured, or continued or renewed in this state within the intent of subsection (a) of this section.

      (c) There is hereby levied upon the obligation, chose in action or right represented by the premium charged for such insurance a premium receipts tax of four per cent of gross premiums charged for such insurance other than wet marine and transportation insurance. The term "premium" shall include all premiums, membership fees, assessments, dues and any other consideration for insurance. Such tax shall be in lieu of all other taxes. The insured shall, on or before March first next succeeding the calendar year in which the insurance was so procured, continued or renewed, pay the amount of the tax to the Commissioner of Revenue Services in accordance with procedures established and on forms provided by said Commissioner of Revenue Services. In the event of cancellation and rewriting of any such insurance contract the premium for premium receipts tax purposes shall be the premium in excess of the unearned premium of the cancelled insurance contract.

      (d) If a policy covers risks or exposures only partially in this state, the tax payable shall be computed on the portions of the premium which are properly allocable to the risks or exposures located in this state.

      (e) If the insured fails to withhold from the premium the amount of tax herein levied, the insured shall be liable for the amount thereof and shall pay the same to the Commissioner of Revenue Services within the time stated in subsection (c) of this section. Any person who fails to pay the tax within the time stated in subsection (c) of this section shall pay a penalty of ten per cent thereof or seventy-five dollars, whichever is greater, which penalty shall be paid at the time of paying such tax. Interest shall be added to the tax at the rate of one per cent per month or fraction thereof from the date such payment was due to the date paid. Subject to the provisions of section 12-3a, the Commissioner of Revenue Services may waive all or part of the penalties provided under this section when it is proven to said commissioner's satisfaction that the failure to pay any tax was due to reasonable cause and was not intentional or due to neglect.

      (f) The Attorney General, upon request of the Commissioner of Revenue Services, shall proceed in the courts of this or any other state or in any federal court or agency to recover such tax not paid within the time prescribed in this section.

      (g) This section shall not be construed or deemed to abrogate or modify any provision of section 38a-27 or 38a-271 to 38a-278, inclusive. This section does not apply to individual life or individual disability insurance.

      (h) The provisions of sections 12-548 to 12-554, inclusive, and section 12-555a shall apply to the provisions of this section in the same manner and with the same force and effect as if the language of said sections had been incorporated in full into this section and had expressly referred to the tax under this section, except to the extent that any such provision is inconsistent with a provision in this section.

      (1969, P.A. 561, S. 9; 1971, P.A. 686, S. 1-3; P.A. 76-193; P.A. 79-320, S. 1; P.A. 89-150, S. 1, 3; P.A. 91-236, S. 22, 25; P.A. 92-60, S. 7; P.A. 95-26, S. 48, 52; P.A. 97-243, S. 46, 67; P.A. 08-178, S. 10.)

      History: 1971 act deleted word "tax" preceding "commissioner" in Subsecs. (c), (e) and (f), thereby changing references to mean insurance commissioner (See definitions in Sec. 38-263), effective July 7, 1971, with respect to obligations, choses in action or rights represented by the premiums charged on or after January 1, 1971, in respect to insurance subject to the premium receipts tax imposed under Sec. 38-271 of the 1969 supplement to the general statutes; P.A. 76-193 raised tax from 3% to 4% of gross premiums charged in Subsec. (c); P.A. 79-320 specified commissioner's duties under section pertaining to commissioner of revenue services; P.A. 89-150 amended Subsec. (e) by adding penalty and waiver of penalty provisions conforming with those in effect for other state taxes and applicable to any person failing to pay the tax within the time required; Sec. 38-271 transferred to Sec. 38a-277 in 1991; P.A. 91-236 added Subsec. (h) to include administrative, penalty, hearing and appeal provisions, effective July 1, 1991, and applicable to taxes due on or after that date; P.A. 92-60 amended Subsec. (a), making technical corrections for statutory consistency by substituting "surplus lines" for "excess lines"; P.A. 95-26 amended Subsec. (e) to lower interest rate from 1.66% to 1% and made technical changes, effective July 1, 1995, and applicable to taxes due and owing on or after July 1, 1995, whether or not those taxes first became due before said date; P.A. 97-243 amended Subsec. (c) to require payment of tax on or before March first instead of before March first, effective June 24, 1997, and applicable to calendar years commencing on or after January 1, 1997; P.A. 08-178 amended Subsec. (e) by making technical changes and increasing penalty from $50 to $75.

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      Sec. 38a-278. (Formerly Sec. 38-272). Penalties. (a) Any unauthorized insurer who does any act of an insurance business as set forth in section 38a-271 shall be fined not more than fifty thousand dollars.

      (b) In addition to the penalty provided in subsection (a) of this section or otherwise provided by law, any person or insurer violating section 38a-27 or 38a-271 to 38a-278, inclusive, shall be fined two thousand five hundred dollars for the first offense and an additional two thousand five hundred dollars for each month during which any such person or insurer continues such violation.

      (1969, P.A. 561, S. 10; P.A. 08-178, S. 11.)

      History: Sec. 38-272 transferred to Sec. 38a-278 in 1991; P.A. 08-178 amended Subsec. (a) by increasing maximum fine from $10,000 to $50,000, and amended Subsec. (b) by increasing fines from $500 to $2,500 for a first offense and from $500 to $2,500 for each month the violation is continued.

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      Secs. 38a-279 to 38a-282. Reserved for future use.

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