(1) This article shall provide coverage for the policies and contracts specified in subsection (2) of this section and to persons:
(a) Who are owners of or certificate holders under such policies or contracts, other than structured settlement annuities, and who:
Are residents; or
Are not residents, but only under all of the following conditions:
The insurer which issued such policies or contracts is domiciled in this state;
Such insurer never held a license or certificate of authority in the states in whichsuch persons reside;
Such states have associations similar to the association created by this article; and
Such persons are not eligible for any amount of coverage by such associations;
(b) Regardless of where they reside, except for nonresident certificate holders under group policies or contracts, who are the beneficiaries, assignees, or payees of the persons covered under paragraph (a) of this subsection (1).
(1.3) Subsection (1) of this section shall not apply to structured settlement annuities. Except as otherwise provided in subsections (1.5) and (1.7) of this section, this article shall provide coverage to a person who is a payee under a structured settlement annuity or to a beneficiary of a deceased payee if the payee:
(a) Is a resident, regardless of where the contract owner resides; or (b) Is not a resident, but only under both of the following conditions:
(I) Either:
The contract owner of the structured settlement annuity is a resident; or
The contract owner of the structured settlement annuity is not a resident, but theinsurer that issued the structured settlement annuity is domiciled in this state and the state in which the contract owner resides has an association similar to the association created by this article; and
(II) Neither the payee, the beneficiary, nor the contract owner is eligible for coverage by the association of the state in which the payee or contract owner resides.
(1.5) This article shall not provide coverage to a person who is a payee or beneficiary of a contract owner who is a resident of this state if the payee or beneficiary is afforded any coverage by the association of another state.
(1.7) This article is intended to provide coverage to a person who is a resident of this state and, in special circumstances, to a nonresident. In order to avoid duplicate coverage, if a person who would otherwise receive coverage under this article is provided coverage under the laws of any other state, the person shall not be provided coverage under this article. In determining the application of the provisions of this subsection (1.7) in situations where a person could be covered by the association of more than one state, whether as an owner, payee, beneficiary, or assignee, this article shall be construed in conjunction with other state laws to result in coverage by only one association.
(2) (a) This article provides coverage to the persons specified in subsections (1) and (1.3) of this section for direct, nongroup life, health, annuity, and supplemental policies or contracts and for certificates under direct group life, health, annuity policies or contracts, and supplemental contracts to any of these issued by member insurers pursuant to articles 7 and 8 and parts 1 and 2 of article 16 of this title, except as limited by this article. Annuity contracts and certificates under group annuity contracts include allocated funding agreements, structured settlement annuities, and any immediate or deferred annuity contracts.
(b) This article does not provide coverage for:
Any portion of a policy or contract not guaranteed by the member insurer, or underwhich the risk is borne by the policy or contract owner;
Any policy or contract of reinsurance, unless assumption certificates have been issued under the reinsurance policy or contract;
Any portion of a policy or contract to the extent that the rate of interest on which itis based, or the interest rate, crediting rate, or other factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns and changes in value:
When averaged over the period of four years prior to the date on which the association became obligated with respect to the policy or contract, exceeds a rate of interest determined by subtracting two percentage points from Moody's corporate bond yield average, averaged for that same four-year period, or for such lesser period if the policy or contract was issued less than four years before the association became obligated; and
On and after the date on which the association became obligated with respect to thepolicy or contract, exceeds the rate of interest determined by subtracting three percentage points from Moody's corporate bond yield average as most recently available;
(IV) Any portion of a policy, contract, plan, or program of an employer, association, or other person to provide life, health, or annuity benefits to its employees, members, or others, 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 other person under:
A multiple employer welfare arrangement, as defined in section 1002 of title 29 ofthe United States Code;
A minimum premium group insurance plan;
A stop-loss group insurance plan; or
An administrative services only contract;
Any portion of a policy or contract to the extent that it provides dividends or experience rating credits, voting rights, or that any fees or allowances be paid to any person, including the policy or contract holder, in connection with the service to or administration of such policy or contract;
Any policy or contract issued in this state by a member insurer at a time when itwas not licensed or did not have a certificate of authority to issue such policy or contract in this state;
Any unallocated annuity contract;
Any annuity contract or group annuity certificate which is used by a nonprofitinsurance company exclusively for the benefit of nonprofit educational institutions and their employees for the purpose of providing retirement benefits;
Any policy, contract, certificate, or subscriber agreement issued by a prepaid dentalcare plan as defined in parts 1 and 5 of article 16 of this title;
Services covered under a policy of sickness and accident insurance as defined insection 10-16-102 (50) when written by a property and casualty insurer as part of an automobile insurance contract;
Repealed.
Any insurer which was insolvent or unable to fulfill its contractual obligations asof July 1, 1991; except that an annuity contract issued or assumed by such an insurer shall be covered under this article if such insurer was ordered into liquidation between July 1, 1991, and August 31, 1991; (XIII) Repealed.
Any portion of a policy or contract to the extent it provides for interest or otherchanges in value to be determined by the use of an index or other external reference stated in the policy or contract but such changes have not been credited to the policy or contract, or to the extent the policy or contract owner's rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this article. 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 section, 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 insolvency, and such interest or changes shall not be subject to forfeiture.
Repealed.
Any policy or contract providing hospital, medical, prescription drug, or otherhealth care benefits under part C or part D of subchapter XVIII, chapter 7 of title 42, United
States Code, or any regulation issued under these parts;
Any portion of a policy or contract to the extent that the assessment required bythis article with respect to the policy or contract are preempted or otherwise not allowed by federal or state law;
Any obligation that does not arise under the expressed written terms of the policy or contract issued by the insurer to the contract owner or to the policy owner, including and without limitation:
Claims based on marketing materials, brochures, illustrations, advertisements, or oral statements by agents, brokers, or others used or made in connection with the sale of covered policies and contracts;
Claims based on side letters, riders, or other documents that were issued by theinsurer without meeting applicable policy form filing or approval requirements;
Misrepresentations of, or regarding, policy benefits;
Extracontractual claims; and
Claims for penalties, interest, or consequential or incidental damages;
(XIX) Any 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 a benefit plan or trustee that is not an affiliate of the member insurer.
(3) The benefits for which the association may become liable shall not exceed the lesser of:
The contractual obligations for which the insurer is liable or would have been liableif it were not an impaired or insolvent insurer; or
(I) With respect to any one life, regardless of the number of policies or contracts withthat insurer:
Three hundred thousand dollars in net life insurance death benefits, and no morethan one hundred thousand dollars in net cash surrender and net cash withdrawal values for life insurance;
For health insurance benefits: One hundred thousand dollars for coverages not defined as disability, basic hospital, medical and surgical, or major medical insurance or longterm care insurance, including any net cash surrender and net cash withdrawal values; three hundred thousand dollars for disability insurance; three hundred thousand dollars for long-term care insurance; or five hundred thousand dollars for basic hospital, medical and surgical, or major medical insurance;
Two hundred fifty thousand dollars in the present value of annuity benefits, including net cash surrender and net cash withdrawal values; or
With respect to each payee of a structured settlement annuity, two hundred fiftythousand dollars in present-value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values.
(Deleted by amendment, L. 2013.)
(II) The association is not obligated to cover:
More than three hundred thousand dollars in benefits, in the aggregate, with respectto any one life under sub-subparagraphs (A) to (D) of subparagraph (I) of this paragraph (b); except that, with respect to benefits for basic hospital, medical and surgical, and major medical insurance under sub-subparagraph (B) of subparagraph (I) of this paragraph (b), the aggregate liability of the association shall not exceed five hundred thousand dollars with respect to any one individual; or
More than five million dollars in benefits with respect to an owner of multiple nongroup policies of life insurance, regardless of whether the policy owner is an individual, firm, corporation, or other person; whether the persons insured are officers, managers, employees, or other persons; or the number of policies and contracts held by the owner.
(c) The limitations set forth in this subsection (3) are limitations on the benefits for which the association is obligated before taking into account either its subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer attributable to covered policies. The costs of the association's obligations under this subsection (3) may be met by the use of assets attributable to covered policies or reimbursed to the association under its subrogation and assignment rights.
(4) In performing its obligations to provide coverage under section 10-20-108, the association is not required to guarantee, assume, reinsure, or perform, or cause to be guaranteed, assumed, reinsured, or performed, the contractual obligations of the impaired or insolvent insurer under a covered policy or contract that do not materially affect the economic values or economic benefits of the covered policy or contract.
Source: L. 91: Entire article added, p. 1258, § 1, effective July 1. L. 92: (2)(a),
(2)(b)(IX), and (2)(b)(X) amended, p. 1725, § 11, effective July 1. L. 94: (2)(b)(XII) amended, p. 614, § 1, effective April 13. L. 2000: IP(1)(a), (2)(b)(III), (2)(b)(VII), (2)(b)(XIII),
(2)(b)(XIV), and (3)(b) amended and (1.3), (1.5), and (1.7) added, p. 1018, § 2, effective July 1. L. 2010: (3)(b)(I)(C), (3)(b)(I)(D), and (3)(b)(II) amended and (3)(b)(I)(E) added, (SB 10-049), ch. 15, p. 75, § 1, effective March 5. L. 2013: (2)(a), IP(2)(b), (2)(b)(I), (2)(b)(II), (2)(b)(III), IP(2)(b)(IV), (2)(b)(IV)(A), (2)(b)(V), (2)(b)(XIV), (3), and (4) amended, (2)(b)(XI), (2)(b)(XIII), and (2)(b)(XV) repealed, and (2)(b)(XVI) to (2)(b)(XIX) added (SB 13-032), ch. 34, p. 83, § 2, effective March 15; (2)(b)(X) amended, (HB 13-1266), ch. 217, p. 990, § 56, effective May 13.