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-277. (Formerly Sec. 38-271). Insureds involved with unauthorized insurers. Premium receipts tax. Penalty. Nonadmitted insurance. Enforcement for payment of tax. Agreement re allocation of nonadmitted insurance premiums taxes.

      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 or her 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 in this section shall relieve an industrial insured from the taxation imposed upon independently procured insurance in 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 or her 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 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; P.A. 11-61, S. 35.)

      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; P.A. 11-61 amended Subsecs. (b) and (c) to replace references to Sec. 38a-277(c) with references to Sec. 38a-277, and make technical changes, effective June 21, 2011.

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      Sec. 38a-277. (Formerly Sec. 38-271). Insureds involved with unauthorized insurers. Premium receipts tax. Penalty. Nonadmitted insurance. Enforcement for payment of tax. Agreement re allocation of nonadmitted insurance premiums taxes. (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. The provisions of this subsection shall not apply to nonadmitted insurance, as defined in subsection (f) of this section, that is procured, continued or renewed on or after July 1, 2011.

      (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 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. The provisions of this subsection shall not apply to nonadmitted insurance, as defined in subsection (f) of this section, that is procured, continued or renewed on or after July 1, 2011.

      (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. The provisions of this subsection shall not apply to nonadmitted insurance, as defined in subsection (f) of this section, that is procured, continued or renewed on or after July 1, 2011.

      (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. The provisions of this subsection shall not apply to nonadmitted insurance, as defined in subsection (f) of this section, that is procured, continued or renewed on or after July 1, 2011.

      (f) For purposes of this subsection and subsections (g) to (l), inclusive, of this section:

      (1) "Home state" means home state, as defined in Section 527 of the Nonadmitted and Reinsurance Reform Act of 2010;

      (2) "Independently procured insurance" means independently procured insurance, as defined in Section 527 of the Nonadmitted and Reinsurance Reform Act of 2010;

      (3) "Nonadmitted and Reinsurance Reform Act of 2010" means Sections 511 to 542, inclusive, of the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203, as amended from time to time;

      (4) "Nonadmitted insurance" means nonadmitted insurance, as defined in Section 527 of the Nonadmitted and Reinsurance Reform Act of 2010; and

      (5) "Nonadmitted insurer" means a nonadmitted insurer, as defined in Section 527 of the Nonadmitted and Reinsurance Reform Act of 2010.

      (g) (1) With respect to independently procured insurance, where such coverage is procured, continued or renewed on or after July 1, 2011, and where this state is an insured's home state, there is levied upon the obligation, chose in action or right represented by the premium charged for independently procured insurance an independently procured insurance premiums tax of four per cent of the gross premiums charged for such insurance, irrespective of the fact that the independently procured insurance policy may cover properties, risks or exposures located or to be performed both within and without this state. The term "premium" shall include all premiums, membership fees, assessments, dues and any other consideration for insurance. Such tax shall be due and payable to this state by the insured and shall be in lieu of all other taxes on such nonadmitted insurance.

      (2) (A) With respect to independently procured insurance, for the period beginning on July 1, 2011, and ending September 30, 2011, the insured shall pay to the Commissioner of Revenue Services, on or before November 15, 2011, in accordance with procedures established and on forms provided by said commissioner, a sum equal to four per cent of the gross premiums charged the insured by a nonadmitted insurer during such period.

      (B) With respect to independently procured insurance, for the period beginning on October 1, 2011, and ending December 31, 2011, the insured shall pay to the Commissioner of Revenue Services, on or before February 15, 2012, in accordance with procedures established and on forms provided by said commissioner, a sum equal to four per cent of the gross premiums charged the insured by a nonadmitted insurer during such period.

      (3) For calendar years beginning on or after January 1, 2012, the insured shall pay to the Commissioner of Revenue Services, on independently procured insurance, in accordance with procedures established and on forms provided by said commissioner, (A) on or before May fifteenth of each year in which nonadmitted insurance was procured, continued or renewed, a sum equal to four per cent of the gross premiums charged the insured by a nonadmitted insurer during the period from January first to March thirty-first of that year; (B) on or before August fifteenth of each year in which nonadmitted insurance was procured, continued or renewed, a sum equal to four per cent of the gross premiums charged the insured by a nonadmitted insurer during the period from April first to June thirtieth of that year; (C) on or before November fifteenth of each year in which nonadmitted insurance was procured, continued or renewed, a sum equal to four per cent of the gross premiums charged the insured by a nonadmitted insurer during the period from July first to September thirtieth of that year; and (D) on or before February fifteenth of each year succeeding a year in which nonadmitted insurance was procured, continued or renewed, a sum equal to four per cent of the gross premiums charged the insured by a nonadmitted insurer during the period from October first to December thirty-first of the preceding year.

      (4) In the event of cancellation and rewriting of any nonadmitted insurance contract, the premium for purposes of this section shall be the premium in excess of the unearned premium of the cancelled insurance contract.

      (5) If, pursuant to subsection (l) of this section, the Commissioner of Revenue Services enters into a cooperative or reciprocal agreement with another state or states, and if the provisions set forth in such agreement are different from provisions prescribed by this subsection, then the provisions set forth in such agreement shall prevail.

      (h) Any insured, who fails to pay the tax within the time stated in subsection (g) of this section, shall pay a penalty of ten per cent of the tax not paid within the time so stated. Interest shall be added to the tax at the rate of one per cent per month or fraction of such month from the date such tax 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 if 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.

      (i) 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, and any interest and penalty related to such tax.

      (j) This section shall not be construed or deemed to abrogate or modify any provision of section 38a-27 or 38a-271 to 38a-276, inclusive, or section 38a-278, but shall be construed in such a manner as to avoid preemption under the Nonadmitted and Reinsurance Reform Act of 2010. This section does not apply to individual life or individual disability insurance or to wet marine or transportation insurance.

      (k) 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.

      (l) (1) The Commissioner of Revenue Services may enter into a cooperative or reciprocal agreement with another state or states to allocate among the states the nonadmitted insurance premiums taxes paid to an insured's home state, as provided by Section 521 of the Nonadmitted and Reinsurance Reform Act of 2010.

      (2) The agreement that the Commissioner of Revenue Services is authorized to enter into under this subsection shall include, but shall not be limited to, the National Association of Insurance Commissioners' Nonadmitted Insurance Multistate Agreement.

      (3) The agreement that the Commissioner of Revenue Services is authorized to enter into under this subsection may provide that, where this state is an insured's home state and where the independently procured insurance covers properties, risks or exposures located or to be performed both within and without this state, (A) the sum payable by the insured to this state under subsection (g) of this section shall be computed based on that portion of the gross premiums allocated to this state, based on a standardized premium allocation adopted by the states under such agreement, multiplied by four per cent, (B) the sum payable by the insured to another state shall be computed based on that portion of the gross premiums allocated to such state, based on a standardized premium allocation adopted by the states under such agreement, multiplied by such state's tax rate, and (C) to the extent that another state where properties, risks or exposures are located has failed to enter into an agreement with this state, the portion of the gross premiums otherwise allocable to such other state shall be allocated to this state.

      (4) The agreement that the Commissioner of Revenue Services is authorized to enter into under this subsection may provide for (A) recordkeeping requirements, (B) audit procedures, (C) exchange of information, (D) collection of taxes not paid by insureds within the time required under subsection (g) of this section, (E) disbursements of funds to other states that are parties to such agreement, and (F) any additional provisions which will facilitate the administration of the agreement.

      (5) Notwithstanding the provisions of section 12-15, the Commissioner of Revenue Services may, under the terms of the agreement entered into under this subsection, disclose return information, as defined in section 12-15, relating to insureds to any official of another state that is a party to such agreement whose official duties require such disclosure.

      (6) The Commissioner of Revenue Services may enter into cooperative agreements with processing entities located in this state or other states related to the capturing and processing of nonadmitted insurance premiums and nonadmitted insurance premiums tax data. Notwithstanding the provisions of section 12-15, the Commissioner of Revenue Services may, under the terms of any such cooperative agreement, disclose return information, as defined in section 12-15, relating to insureds to any official of the processing entity whose duties require such disclosure.

      (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; P.A. 11-61, S. 33.)

      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; P.A. 11-61 amended Subsecs. (a) to (e) to add provision re nonapplicability of same to nonadmitted insurance, added Subsec. (f) re nonadmitted insurance definitions, Subsec. (g) re independently procured insurance premiums tax and Subsec. (h) re penalty for nonpayment of tax, redesignated existing Subsecs. (f) to (h) as Subsecs. (i) to (k), amended Subsec. (i) to add provision re recovery of interest and penalty related to tax, amended Subsec. (j) to add language re preemption avoidance and exclusion of wet marine or transportation insurance, and added Subsec. (l) re agreement to allocate nonadmitted insurance premiums taxes paid, effective June 21, 2011, and applicable to nonadmitted insurance coverage procured, continued or renewed on or after July 1, 2011.

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