Sec. 5. (a) If a member insurer is an impaired insurer, the association may, in the association's sole 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, reissue, reinsure, or perform, or cause to be guaranteed, assumed, reissued, reinsured, or performed, the contractual obligations of any of the covered policies of the impaired insurer or otherwise assure the discharge of the contractual obligations of the covered policies of the impaired insurer; and
(2) provide money, pledges, loans, notes, guarantees, or use other means as determined by the association in the association's sole discretion to be necessary or appropriate to effectuate subdivision (1).
(b) An obligation undertaken by the association under subsection (a) with respect to a covered policy of an impaired insurer ceases on the date the covered policy is replaced by the policy owner, insured, or association.
(c) If a member insurer is an insolvent insurer, the association shall, in the association's sole discretion, do one (1) of the following for each covered policy:
(1) Guarantee, assume, reissue, reinsure, or perform, or cause to be guaranteed, assumed, reissued, reinsured, or performed, the contractual obligations of the covered policy or otherwise assure the discharge of the contractual obligations of the covered policy.
(2) Terminate existing benefits and coverage and provide benefits and coverages in accordance with the following provisions:
(A) Assure payment of benefits arising under the contractual obligations, except for terms of conversion and nonrenewability, for:
(i) with respect to a group covered policy, claims incurred not later than the earlier of the next renewal date under the covered policy or forty-five (45) days, but not less than thirty (30) days, after the coverage date for the insolvent insurer; and
(ii) with respect to a nongroup covered policy, claims incurred not later than the earlier of the next renewal date under the covered policy or one (1) year, but in no event less than thirty (30) days, after the coverage date for the insolvent insurer.
(B) Make diligent efforts to provide each:
(i) known insured or annuitant, for a nongroup covered policy; and
(ii) owner, for a group covered policy;
at least thirty (30) days notice of the termination of the benefits provided.
(C) Make available substitute coverage, on an individual basis, to each:
(i) owner of a nongroup covered policy if the owner had a right to continue the nongroup covered policy in force until a specified age or for a specified period, during which time the insurer had no unilateral right to make changes in the nongroup covered policy's provisions or had only a unilateral right to make changes in premiums only by class; and
(ii) insured or annuitant under a group covered policy if the insured or annuitant is not eligible for any replacement group coverage and had a right, before termination of the group covered policy, to convert to individual coverage.
(D) In making available any substitute coverage under clause (C), the association may offer to reissue the terminated coverage or to issue an alternative policy or contract. If made available under clause (C), alternative or reissued policies and contracts must be offered without requiring evidence of insurability and must not impose any waiting period or coverage exclusion, other than a waiting period or coverage exclusion provided for in this chapter, that would not have applied under the terminated covered policy. The association may cause any alternative or reissued policy or contract to be assumed or reinsured.
(E) Use of alternative policies and contracts by the association is subject to the approval of the commissioner. The association may adopt alternative policies and contracts of various types for future issuance without regard to any particular impairment or insolvency. Alternative policies and contracts must contain at least the minimum statutory provisions required in Indiana and provide benefits that are reasonable in relation to the premium charged. The association shall set the premium in accordance with a table of rates adopted by the association. The premium must:
(i) reflect the amount of insurance to be provided and the age and class of risk of each insured; and
(ii) not reflect changes in the health of the insured after the terminated covered policy was last underwritten.
Subject to coverage exceptions, exclusions, and limitations provided for in this chapter, an alternative policy or contract issued by the association must provide coverage similar, in material respects, to the coverage under the terminated covered policy as determined by the association.
(F) If the association elects to reissue terminated coverage at a premium rate different from the premium rate charged under the terminated covered policy, the association shall set the premium in accordance with a table of rates adopted by the association. The premium:
(i) must reflect the amount of insurance to be provided and the age and class of risk of each insured; and
(ii) is subject to approval of the commissioner.
(G) The association's obligations with respect to coverage under a covered policy of an insolvent insurer or under a reissued or alternative policy or contract ceases on the date the coverage or covered policy is replaced by another similar policy by the policy owner, insured, or association.
(H) Subject to subsection (u), when proceeding under this subdivision with respect to a covered policy carrying guaranteed minimum interest rates, the association shall assure the payment or crediting of a rate of interest consistent with section 2.3(e)(3) of this chapter.
(3) Take any combination of the actions set forth in subdivisions (1) and (2).
(d) The association may provide money, pledges, loans, notes, or guarantees, or use other means that the association, in the association's sole discretion, determines are necessary or appropriate to discharge the association's duties under subsection (c).
(e) Failure to pay premiums within thirty-one (31) days after the date that payment is due under the terms of a guaranteed, assumed, alternative, or reissued policy or contract or substitute coverage terminates the association's obligations under this chapter with respect to the policy, contract, or coverage, except with respect to claims incurred or net cash surrender value due under this chapter.
(f) Premiums due for coverage after the coverage date for an impaired insurer or insolvent insurer belong to and are payable at the direction of the association, and the association is liable for unearned premiums payable to policy or contract owners with respect to premiums received by the association.
(g) The protection provided by this chapter does not apply where any guaranty protection is provided to residents of this state by the laws of the domiciliary state of the impaired insurer or insolvent insurer if the domiciliary state is a state other than Indiana.
(h) In carrying out its duties under subsection (c), the association may, subject to approval by a court in Indiana, impose:
(1) permanent policy or contract liens, if the association finds that:
(A) the amounts that can be assessed under this chapter are less than the amounts needed to assure full and prompt performance of the association's duties under this chapter; or
(B) economic or financial conditions, as they affect member insurers, are sufficiently adverse so as to render the imposition of the permanent policy or contract liens to be in the public interest; and
(2) temporary moratoriums or liens on payments of cash values and policy loans or any other right to withdraw funds held in conjunction with a covered policy, 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 payments of cash values or policy loans or any other right to withdraw funds held in conjunction with a covered policy out of the assets of the impaired insurer 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.
(i) A deposit in Indiana, held by law or required by the commissioner for the benefit of creditors, including policy owners, that is not turned over to the domiciliary receiver before or promptly after the coverage date for an impaired insurer or insolvent insurer under IC 27-9-4-3 must be promptly paid to the association. The association:
(1) may retain a part of an amount paid to the association under this subsection equal to the percentage determined by dividing the aggregate amount of policy owners' claims related to the impairment or insolvency for which the association provides statutory benefits by the aggregate amount of all policy owners' claims in Indiana related to the impairment or insolvency; and
(2) shall remit to the domiciliary receiver the difference between the amount paid to the association and the amount retained by the association under this subsection.
An amount retained by the association under this subsection must be treated as a distribution of estate assets under IC 27-9-3-32 or similar provision of the state of domicile of the impaired insurer or insolvent insurer.
(j) If the association fails to act within a reasonable period of time as provided in subsection (c) with respect to an insolvent insurer, the commissioner has the powers and duties of the association under this chapter with respect to the insolvent insurer.
(k) The association may, upon the commissioner's request, assist and advise the commissioner concerning rehabilitation, payment of claims, continuance of coverage, or the performance of other contractual obligations of an impaired insurer or insolvent insurer.
(l) The association has standing and the right to appear or intervene before a court or an agency in Indiana or elsewhere with jurisdiction over an impaired insurer or insolvent insurer for which the association is or may become obligated under this chapter or with jurisdiction over a person or property against which the association may have rights through subrogation or otherwise. Standing extends to all matters germane to the rights, powers, and duties of the association, including proposals for reinsuring, modifying, or guaranteeing the policies or contracts of the impaired insurer or insolvent insurer and the determination of the policies or contracts and contractual obligations.
(m) A person receiving benefits under this chapter is considered to have assigned:
(1) the person's rights under; and
(2) any cause of action against another person for losses arising under, resulting from, or otherwise relating to;
the covered policy to the association to the extent of the benefits received because of this chapter, whether the benefits are payments of or on account of contractual obligations or continuation of coverage or provision of substitute or alternative coverage. The association may require an assignment to it of those rights and causes of action by a payee, policy or contract owner, certificate holder, beneficiary, insured, or annuitant as a condition precedent to the receipt of any right or benefits conferred by this chapter on the person.
(n) The subrogation rights of the association under subsections (m) and (o) have the same priority against the assets of the impaired insurer or insolvent insurer as those possessed by the person entitled to receive benefits under this chapter.
(o) In addition to the rights conferred by subsections (m) and (n), the association has all common law rights of subrogation and any other equitable or legal remedy with respect to a covered policy that would have been available to the:
(1) impaired insurer or insolvent insurer;
(2) owner, beneficiary, enrollee, health care provider, or payee of a policy or contract with respect to the policy or contract, including, in the case of a structured settlement annuity, rights of the owner, beneficiary, or payee of the annuity, to the extent of benefits received under this chapter, against a person:
(A) who is originally or by succession responsible for the losses arising from the personal injury relating to the annuity or payment for the annuity; and
(B) whose responsibility is not solely because of the person serving as an assignee in respect of a qualified assignment under Section 130 of the Internal Revenue Code; and
(3) certificate holder, or the beneficiary or payee of the certificate holder, with respect to a certificate.
(p) If subsection (m), (n), or (o) is invalid or ineffective with respect to a person or claim, the amount payable by the association with respect to the related covered policies must be reduced by the amount realized by another person with respect to the person or claim that is attributable to the covered policies.
(q) If the association provides benefits with respect to a covered policy and a person recovers amounts to which the association has rights as described in subsection (m), (n), or (o), the person shall pay to the association the part of the recovery attributable to the covered policies.
(r) The association may do the following:
(1) Enter into contracts necessary or appropriate to carry out the provisions and purposes of this chapter.
(2) Sue or, subject to section 14 of this chapter, be sued, including taking legal actions necessary or appropriate to recover unpaid assessments under section 6 of this chapter and to resolve claims or potential claims against or on behalf of the association.
(3) Borrow money to effect the purposes of this chapter and issue notes or other evidences of indebtedness of the association with respect to borrowings. Notes or other evidences of indebtedness described in this subdivision that are not in default are legal investments for domestic member insurers and may be carried as admitted assets.
(4) Employ or retain persons necessary or appropriate to handle the financial transactions of the association and to perform other functions necessary or appropriate under this chapter.
(5) Take legal action necessary or appropriate to avoid or recover payment of improper claims.
(6) Exercise, for the purposes of this chapter and to the extent approved by the commissioner, the powers of a domestic life or health insurer. However, in no case may the association issue policies or contracts other than those issued to perform the association's obligations under this chapter.
(7) Request information from a person seeking coverage from the association to aid the association in determining and discharging the association's obligations under this chapter with respect to the person. The person shall promptly comply with the request.
(8) Settle claims and potential claims by or against the association.
(9) Exercise all rights, privileges, and powers granted to the association by any other laws of Indiana or another jurisdiction.
(10) In accordance with the terms of the policy or contract, file for an actuarially justified rate or premium increase for a covered policy.
(11) Take other necessary or appropriate action to discharge the association's duties and obligations under this chapter or to exercise the association's rights and powers under this chapter.
(s) The association may belong to one (1) or more organizations of one (1) or more other state associations of similar purpose to further the purpose and administer the powers and duties of the association.
(t) The association has discretion and may exercise reasonable business judgment to determine the means by which the association is to discharge, in an economical and efficient manner, the association's obligations under this chapter.
(u) In discharging the association's obligations and exercising the association's rights and powers under subsections (a) and (c), the association may, subject to approval of the receivership court, provide substitute coverage for a covered policy that provides for the covered policy's interest rate, crediting rate, or similar factor employed in calculating returns or changes in value to be determined by use of an index or other external referent stated in the covered policy by issuing an alternative policy or contract in accordance with the following provisions:
(1) Instead of the index or other external referent stated in the covered policy, the alternative policy or contract may provide for:
(A) a fixed interest rate;
(B) payment of dividends with minimum guarantees; or
(C) a different method for calculating returns or changes in value.
(2) A:
(A) requirement for evidence of insurability; or
(B) waiting period or an exclusion, other than a waiting period or an exclusion provided for in this chapter;
that would not have applied under the covered policy may not be imposed.
(3) The alternative policy or contract must provide coverage similar, in material respects, to the coverage under the covered policy, after taking into account the exceptions, exclusions, and limitations provided for in this chapter, as determined by the association.
As added by Acts 1978, P.L.129, SEC.3. Amended by P.L.166-1986, SEC.1; P.L.130-1994, SEC.44; P.L.116-1994, SEC.62; P.L.251-1995, SEC.21; P.L.193-2006, SEC.14; P.L.208-2018, SEC.17.