Chapter 54. Life and Health Insurance Guaranty Association.
§ 31–5401. Definitions.
For the purposes of this chapter, the term:
(1) “Account” means either of the 2 accounts created under § 31-5403.
(2) “Association” means the District of Columbia Life and Health Insurance Guaranty Association created under § 31-5403.
(2A) “Benefit plan” means a specific employee, union, or association of natural persons benefit plan.
(2B) "Board" or "Board of Directors" means the Board of Directors of the Association.
(2C) “Commissioner” means the Commissioner of the Department of Insurance, Securities, and Banking.
(3) “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 § 31-5402.
(4) “Covered policy” means any policy, contract or group certificate within the scope of § 31-5402.
(4A) “Extra-contractual claims” shall include claims relating to bad faith in the payment of claims, punitive or exemplary damages, or attorneys' fees and costs.
(4B)(A) "Health benefit plan" means a hospital or medical expense policy or certificate, or health maintenance organization subscriber contract or any other similar health contract.
(B) The term "health benefit plan" does not include:
(i) Accident only insurance;
(ii) Credit insurance;
(iii) Dental only insurance;
(iv) Vision only insurance;
(v) Medicare supplement insurance;
(vi) Benefits for long-term care, home health care, community-based care, or any combination thereof;
(vii) Disability income insurance;
(viii) Coverage for on-site medical clinics; or
(ix) Specified disease, hospital confinement indemnity, or limited benefit health insurance if the types of coverage do not provide coordination of benefits and are provided under separate policies or contracts.
(5) “Impaired insurer” means a member insurer which, after July 22, 1992, is not an insolvent insurer, and (A) is deemed by the Mayor to be potentially unable to fulfill its contractual obligations, or (B) is placed under an order of rehabilitation or conservation by a court of competent jurisdiction.
(6) “Insolvent insurer” means a member insurer which, after July 22, 1992, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.
(7) “Mayor” means the Mayor of the District of Columbia or the Mayor’s designee.
(8)(A) "Member insurer" means:
(i) An insurer or health maintenance organization licensed or holding a certificate of authority in the District of Columbia to sell any kind of insurance or health maintenance organization business for which coverage is provided under § 31-5402;
(ii) An insurer or health maintenance organization whose license or certificate of authority in the District has been suspended, revoked, not renewed, or voluntarily withdrawn; and
(iii) The Group Hospital and Medical Services, Inc.
(B) The term "member insurer" does not include:
(i) A fraternal benefit society;
(ii) A mandatory state pooling plan;
(iii) A mutual assessment company or any entity that operates on an assessment basis;
(iv) A risk retention group;
(v) An insurance exchange;
(vi) An organization that has a certificate or license limited to the issuance of charitable gift annuities; or
(vii) Any entity similar to any of the above.
(9) “Moody’s Corporate Bond Yield Average” means the Monthly Average Corporates as published by Moody’s Investors Services, Inc., or any successor thereto.
(9A) “Owner” of a policy or contract and “policy owner” and “contract owner” mean 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, and does not include persons with a mere beneficial interest in a policy or contract.
(10) “Person” means any individual, corporation, partnership, association, or voluntary organization.
(10A) “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 2 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.
(11) “Premiums” means amounts (or consideration by whatever name called) received on covered policies or contracts, or for the portions of policies or contracts, less premiums, considerations, deposits returned, dividends, and experience credits. The term “premiums” shall not include:
(A) Any amounts received for policies or contracts for which coverage is not provided under § 31-5402(b), except that assessable premiums shall not be reduced on account of § 31-5402(b)(2)(C) relating to interest limitations, and § 31-5402(c)(2) relating to limitations with respect to any one individual, any one participant, and any one contract holder; or
(B) With respect to multiple non-group 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 $ 5,000,000 with respect to these policies or contracts, regardless of the number of policies or contracts held by the owner.
(11A)(A) “Principal place of business” means the single state in which the natural persons who establish the policy for the direction, control, and coordination of the operations of the entity as a whole primarily exercise that function, determined by the Association in its reasonable judgment by considering the following factors:
(i) The state in which the primary executive and administrative headquarters of the entity is located;
(ii) The state in which the principal office of the chief executive officer of the entity is located;
(iii) The state in which the entity’s board of directors (or similar governing person or persons) conducts the majority of its meetings;
(iv) The state in which the executive or management committee of the entity’s board of directors (or similar governing person or persons) conducts the majority of its meetings;
(v) The state from which the management of the overall operations of the entity is directed; and
(vi) 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 sub-subparagraphs (i) through (v) of this subparagraph; provided, that in the case of a plan sponsor, if more than 50% 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.
(B) The principal place of business of a plan sponsor of a benefit plan described in paragraph (10A)(C) 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.
(11B) “Receivership court” means the court in the insolvent or impaired insurer’s state having jurisdiction over the conservation, rehabilitation, or liquidation of the insurer.
(12) “Resident” means any person who resides in the District of Columbia on the date of the entry of a court order determining a member insurer to be an impaired insurer or an insolvent insurer, and to whom the member insurer owes a contractual obligation. A person may reside in only one state, which, in the case of a person other than a natural person, shall be its principal place of business. Citizens of the United States that are either residents of foreign countries, or residents of United States possessions, territories, or protectorates that do not have an association similar to the Association established by this chapter, shall be deemed residents of the state of domicile of the insurer that issued the policies or contracts.
(12A) “State” means a state, the District of Columbia, Puerto Rico, or a United States possession, territory, or protectorate.
(12B) “Structured settlement annuity” means an annuity purchased in order 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.
(13) Repealed.
(14) “Supplemental contract” means any agreement entered into for the distribution of policy or proceeds.
(15) “Unallocated annuity contract” means an annuity contract or group annuity certificate which 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 the contract or certificate.
§ 31–5402. Coverage and limitations.
(a) Coverage shall be provided for the policies and contracts issued to:
(1) Persons who, regardless of where they reside (except for nonresident certificate holders under group policies or contracts), are the beneficiaries, assignees or payees, including health care providers rendering services covered under health insurance policies or certificates, of the persons covered under paragraph (2) of this subsection;
(2) Persons who are owners of, or certificate holders under, such policies or contracts (other than structured settlement annuities), and who:
(A) Are residents; or
(B) Are not residents, subject to the following conditions:
(i) The insurers which issued and delivered the policies or contracts are domiciled in the District of Columbia;
(ii) The state in which the persons reside have associations similar to the Association created by this chapter; and
(iii) The persons are not eligible for coverage by an association in any other state due to the fact that the insurer was not licensed in the state at the time specified in the state's guaranty association law.
(3) For structured settlement annuities specified in subsection (b) of this section, with the exception of subsection (a) of this section, which shall not apply, a person who is a payee under a structured settlement annuity or beneficiary of a payee if the payee is deceased, if the payee:
(A) Is a resident, regardless of where the contract owner resides; or
(B) Is not a resident, but only under the following conditions:
(i) 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 the insurer that issued the structured settlement annuity is domiciled in the District and the state in which the contract owner resides has an association similar to the Association established by this chapter; and
(ii) Neither the payee, beneficiary, or contract owner is eligible for coverage by the association of the state in which the payee or contract owner resides;
(4) A person who is a payee or beneficiary of a contract owner that is a resident of the District so long as the payee or beneficiary is not afforded any coverage by the association of another state; and
(5) Any person for whom coverage has been determined, when the application of this chapter could result in coverage by the association of more than one state, whether as an owner, payee, beneficiary, or assignee, and this chapter has been construed in conjunction with the other state’s laws to result in coverage by only one association.
(b)(1) Coverage shall be provided to the persons specified in subsection (a) of this section for policies or contracts of direct, non-group life insurance, health insurance (which for purposes of this chapter shall include health maintenance organization subscriber contracts and certificates) issued by a member insurer, annuities for certificates under direct group policies or contracts issued by a member insurer, and for supplemental contracts issued by a member insurer to any of the foregoing, except as limited by this chapter. Annuity contracts and certificates under group annuity contracts include allocated funding agreements, structured settlement annuities, lottery contracts, and any immediate or deferred annuity contracts.
(2) Coverage shall not be provided for:
(A) Any portion of a policy or contract not guaranteed by the insurer, or under which the risk is borne by the owner of the policy, contract, or certificate;
(B) Any policy or contract of reinsurance, unless assumption certificates have been issued and delivered pursuant to the reinsurance policy or contract;
(C) Any portion of a policy, contract, or certificate, to the extent of the rate of interest on which it is based, or the interest rate, crediting rate, or similar factor determined by the 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 4-year period prior to the date on which the Association becomes obligated with respect to the policy, contract, or certificate, exceeds a rate of interest determined by subtracting 2 percentage points from Moody’s Corporate Bond Yield Average averaged for that same 4-year period or for a lesser period if the policy, contract, or certificate was issued and delivered less than 4 years before the Association became obligated; and
(ii) On and after the date on which the Association becomes obligated with respect to the policy, contract, or certificate, exceeds the rate of interest determined by subtracting 3 percentage points from the most recent Moody’s Corporate Bond Yield Average;
(D) Any portion of a policy or contract issued to a 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 the 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 Employee Retirement Income Security Act of 1974 (29 U.S.C. § 1144), as amended;
(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 that provides for:
(i) Dividends or experience rating credits;
(ii) Voting rights; or
(iii) Payment of fees or allowances to any person, including the policy or contract owner, in connection with the service or administration of the policy or contract;
(F) Any policy, contract, or certificate issued and delivered in the District of Columbia by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue and deliver the policy, contract, or certificates in the District of Columbia;
(G) Any unallocated annuity contract;
(H) Any portion of a policy or contract to the extent the assessments required by § 31-5406 with respect to the policy or contract are preempted by federal or state law;
(I) Any 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:
(i) Claims based on marketing materials;
(ii) Claims based on side letters, riders, or other documents that were issued by the insurer without meeting applicable policy form filing or approval requirements;
(iii) Misrepresentations of or regarding policy benefits;
(iv) Extra-contractual claims; or
(v) A claim for penalties or consequential or incidental damages;
(J) 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 the benefit plan or its trustee, which in each case is not an affiliate of the member insurer;
(K) Any portion of a policy or contract that 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 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 this chapter, whichever is earlier. If a policy or contract’s interest or changes in value are credited less frequently than annually, then for purposes of determining the values that has been credited and are not subject to forfeiture under this subsection, 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 will not be subject to forfeiture;
(L) Any policy or contract providing any hospital, medical, prescription drug, or other health care benefits pursuant to the Balanced Budget Act of 1997, approved August 11, 1997 (111 Stat. 251; 42 U.S.C. §§ 1395w-21 et seq.), and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, approved December 8, 2003 (117 Stat. 2066; 42 U.S.C. §§ 1395w-101 et seq.) (commonly known as Medicare Parts C and D), or Title XIX of the Social Security Act, approved February 4, 2009 (123 Stat. 91; 42 U.S.C. § 1396 et seq.) (commonly known as Medicaid), or any regulations issued pursuant to those titles; or
(M) Structured settlement annuity benefits to which a payee (or beneficiary) has transferred his or her rights in a structured settlement factoring transaction as defined in section 115(a) of the Victims of Terrorism Tax Relief Act of 2001, approved January 23, 2002 (115 Stat. 2436; 26 U.S.C. 5891(c)(3)), regardless of whether the transaction occurred before or after such section became effective.
(3) The exclusion from coverage referenced in paragraph (2)(C) of this subsection shall not apply to any portion of a policy or contract, including a rider, that provides long-term care or any other health insurance benefits.
(c) 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 or insolvent insurer; or
(2)(A) With respect to any 1 life, regardless of the number of policies, contracts, or certificates:
(i) $300,000 in life insurance death benefits, but not more than $100,000 in net cash surrender and net cash withdrawal values for life insurance;
(ii) In health insurance benefits:
(I) $ 100,000 for coverage not defined as disability insurance or health benefit plan or long- term care insurance, including any net cash surrender and net cash withdrawal values;
(II) $ 300,000 for disability insurance;
(III) $ 300,000 for long-term care insurance; and
(IV) $ 500,000 for health benefit plans; or
(iii) $300,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values.
(A-i) With respect to each payee of a structured settlement annuity (or beneficiary or beneficiaries of the payee if deceased), $ 300,000 in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any.
(A-ii) The Association shall not be obligated to cover:
(i) More than an aggregate of $ 300,000 in benefits with respect to any one life under subparagraphs (A) and (A-i) of this paragraph except with respect to benefits for health benefit plans under subparagraph (A)(ii) of this paragraph, in which case the aggregate liability of the Association shall not exceed $ 500,000 with respect to any one individual; or
(ii) With respect to one owner of multiple non-group 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 $ 5,000,000 in benefits, regardless of the number of policies and contracts held by the owner;
(A-iii)(i) The limitations set forth in this subsection 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.
(ii) The costs of the Association’s obligations under this chapter may be met by the use of assets attributable to covered policies or reimbursed to the Association pursuant to its subrogation and assignment rights.
(B) The liability of the Association shall be limited strictly by the express terms of the policies or contracts and by this chapter, and shall not be affected by the contents of any brochures, illustrations, advertisements in print or electronic media, or other advertising material used in connection with the sale of the policies or contracts, or by oral statements made by agents or other sales representatives in connection with the sale of the policies or contracts. The Association shall not be liable for extra-contractual damages, punitive damages, attorney fees, or interest other than as provided for by the terms of the policies or contracts as limited by this chapter, that might be awarded by any court or governmental agency in connection with the policies or contracts.
(C) For the purposes of this chapter, benefits provided by a long-term care rider to a life insurance policy or annuity contract shall be considered the same type of benefits as the base life insurance policy or annuity contract to which it relates.
(c-1) In performing its obligations to provide coverage under § 31-5405, 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 do not materially affect the economic values or economic benefits of the covered policy or contract.
(d) Repealed.
§ 31–5403. Creation of the Association.
(a)(1) There is created a nonprofit legal entity to be known as the District of Columbia Life and Health Insurance Guaranty Association.
(2) All member insurers shall be and shall continually remain members of the Association as a condition of their authority to transact insurance business in the District of Columbia.
(3) The Association shall perform its functions under the plan of operation established and approved under § 31-5407 and shall exercise its powers through a board of directors established under § 31-5404.
(4) For purposes of administration and assessment the Association shall maintain 2 accounts:
(A) The life insurance and annuity account which shall include the following subaccounts:
(i) Life insurance account; and
(ii) Annuity account; and
(B) The health insurance account.
(b) The Association shall come under the immediate supervision of the Mayor and shall be subject to the applicable provisions of the insurance laws of the District of Columbia.
§ 31–5404. Board of Directors.
(a)(1) The Board shall consist of no fewer than 7 and no more than 11 member insurers serving terms as established in the plan of operations.
(2) The members of the Board shall be selected by member insurers subject to the approval of the Mayor.
(3) Vacancies on the Board shall be filled for the remaining period of the term by a majority vote of the remaining Board members, subject to the approval of the Mayor.
(b) The Mayor shall give notice to all member insurers of the time and place of the organizational meeting to select the initial Board of Directors, and to initially organize the Association.
(c) In determining voting rights at the organizational meeting, each member insurer shall be entitled to 1 vote in person or by proxy.
(d) If the Board of Directors is not selected within 60 days after notice of the organizational meeting, the Mayor may appoint the initial members.
(e) In approving selections or in appointing members to the Board, the Mayor shall consider, among other things, whether all member insurers are fairly represented.
(f) 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 shall not otherwise be compensated by the Association for their services.
§ 31–5405. Powers and duties of the Association.
(a) If a member insurer is an impaired domestic 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 that are approved by the Mayor, and that are, except in cases of court-ordered conservation or rehabilitation, also approved by the impaired insurer:
(1) Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, any or all of the policies, contracts, or certificates of the impaired insurer;
(2) Provide monies, pledges, notes, guarantees, or other proper means to effectuate paragraph (1) of this subsection and assure payment of the contractual obligations of the impaired insurer pending action under paragraph (1) of this subsection; or
(3) Loan money to the impaired insurer.
(b)(1) If a member insurer is an impaired insurer, whether domestic, foreign, or alien, and the insurer is not paying claims timely, then subject to the preconditions specified in paragraph (2) of this subsection, the Association shall, in its discretion, either:
(A) Take any of the actions specified in subsection (a) of this section, subject to the conditions therein; or
(B) Provide substitute benefits in lieu of the contractual obligations of the impaired insurer solely for health claims, periodic annuity benefit payments, death benefits, supplemental benefits, and cash withdrawals for policy or contract owners who petition for them under claims of emergency or hardship in accordance with standards proposed by the Association and approved by the Mayor.
(2) The Association shall be subject to the requirements of paragraph (1) of this subsection only:
(A) If the laws of the member insurer’s state of domicile provide that until all payments of or on account of the impaired insurer’s contractual obligation by all guaranty associations, along with all expenses and interest on all payments and expenses, shall have been repaid to the guaranty associations or a plan of repayment by the impaired insurer shall have been approved by the guaranty associations:
(i) The delinquency proceeding shall not be dismissed;
(ii) Neither the impaired insurer nor its assets shall be returned to the control of its shareholders or private management; and
(iii) It shall not be permitted to solicit or accept new business or have any suspended or revoked license restored; and
(B) If the impaired insurer is a domestic insurer, it has been placed under an order of rehabilitation by a court of competent jurisdiction in the District of Columbia; or
(C) If the impaired insurer is a foreign or alien insurer:
(i) It has been prohibited from soliciting or accepting new business in the District of Columbia;
(ii) Its certificate of authority has been suspended or revoked in the District of Columbia; and
(iii) A petition for rehabilitation or liquidation has been filed in a court of competent jurisdiction in its state of domicile by the commissioner of insurance of the state.
(c) If a member insurer is an insolvent insurer, the Association shall, in its discretion:
(1)(A) Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, the policies, contracts, and certificates of the insolvent insurer; or
(B) Assure payment of the contractual obligations of the insolvent insurer; and
(C) Provide the monies, pledges, guarantees, or other means as are reasonably necessary to discharge the duties; or
(2) With respect only to life and health insurance policies and certificates, provide benefits and coverages in accordance with subsection (d) of this section.
(d) When proceeding under subsection (b)(1)(B) or (c)(2) of this section, the Association shall, with respect only to life and health insurance policies and certificates:
(1) 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 of the insolvent insurer for claims incurred. The payment of benefits required by this paragraph shall be made:
(A) With respect to group policies, not later than the earlier of the next renewal date under the policies or 45 days, but in no event less than 30 days after the date on which the Association becomes obligated with respect to the policies; or
(B) With respect to individual policies, not later than the earlier of the next renewal date, if any, under the policies or 1 year, but in no event less than 30 days from the date on which the Association becomes obligated with respect to the policies;
(2) Make diligent efforts to provide all known insureds group policy and certificate holders with respect to group policies 30-days notice of the termination of the benefits provided; and
(3) Make available, with respect to individual policies, to each known insured, or owner if other than the insured; with respect to an individual formerly insured 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 subsection (e) of this section, if the insureds had a right under law or the terminated policy to convert coverage to individual coverage or to continue an individual policy in force until a specified age or for a specified time during which the insurer had no right unilaterally to make changes in any provision of the policy or had a right only to make changes in premium by class.
(e)(1) In providing the substitute coverage required under subsection (d)(3) of this section, the Association may offer to reissue the terminated coverage or to issue an alternative policy.
(2) 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 policies.
(3) The Association may reinsure any alternative or reissued policy.
(f)(1) Alternative policies adopted by the Association shall be subject to the approval of the Mayor. The Association may adopt alternative policies of various types for future issuance without regard to any particular impairment or insolvency.
(2) Alternative policies shall contain at least the minimum statutory provisions required in the District of Columbia 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 which 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.
(3) Alternative policies issued and delivered by the Association shall provide coverage of a type similar to that of the policies issued and delivered by the impaired or insolvent insurer, as determined by the Association.
(g) 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 prior approval of the Mayor or by a court of competent jurisdiction.
(h) The Association’s obligations with respect to coverage under policies of the impaired or insolvent insurer or under any reissued or alternative policies shall cease on the date the policies are replaced by other similar policies by either the policyholder, the insured, or the Association.
(i) When proceeding under subsection (b)(1)(B) or (c) of this section with respect to any policy or contract carrying guaranteed minimum interest rates, the Association shall assure the payment or crediting of a rate of interest consistent with § 31-5402(b)(2)(C).
(j) Nonpayment of premiums within 31 days 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, except with respect to any claims incurred or any net cash surrender value which may be due in accordance with the provisions of this chapter.
(k) 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.
(l) The protection provided by this chapter shall not apply where any guaranty protection is provided to residents of the District of Columbia by the laws of the domiciliary state or jurisdiction of the impaired or insolvent insurer, other than the District of Columbia.
(m) In carrying out its duties under subsections (b) and (c) of this section, the Association may, subject to approval by the court:
(1) Impose permanent policy or contract liens in connection with any guarantee, assumption, or reinsurance agreement, if the Association finds that the amounts which can be assessed under this chapter are less than the amount needed to assure full and prompt performance of the Association’s duties under this chapter, or that the economic or financial conditions as they affect member insurers are sufficiently adverse to render the imposition of a permanent policy or contract lien, to be in the public interest; or
(2) Impose temporary moratoriums on 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 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.
(m-1) A deposit in the District held pursuant to law or required by the Commissioner for the benefit of creditors, including policy owners, not turned over to the domiciliary liquidator upon the entry of a final order of liquidation or order approving a rehabilitation plan of an insurer domiciled in the District or in a reciprocal state, pursuant to Chapter 13 of this title [§ 31-1301 et seq.], shall be promptly paid to the Association. The Association shall be entitled to retain a portion of any amount so paid to it equal to the percentage determined by dividing the aggregate amount of policy owners claims related to that insolvency for which the Association has provided statutory benefits by the aggregate amount of all policy owners’ claims in this state related to that insolvency and shall remit to the domiciliary receiver the amount so paid to the Association less the amount retained pursuant to this subsection. Any amount so paid to the Association and retained by it shall be treated as a distribution of the liquidator’s assets pursuant to Chapter 13 of this title [§ 31-1301 et seq.], dealing with early access disbursements.
(n) If the Association fails to act within a reasonable period of time under subsections (b)(1)(B), (c), and (d) of this section, the Mayor shall assume the powers and duties of the Association under this chapter with respect to impaired or insolvent insurers.
(o) The Association may render assistance and advice to the Mayor, upon request, concerning rehabilitation, payment of claims, continuance of coverage, or the performance of other contractual obligations of any impaired or insolvent insurer.
(p) The Association shall have standing to appear or intervene before any court in the District of Columbia with jurisdiction over an impaired or insolvent insurer for which the Association is or may become obligated under this chapter or with jurisdiction over any person or property against which the Association may have rights through subrogation or otherwise. 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 of the impaired or insolvent insurer and the determination of the policies or contracts and contractual obligations. The Association shall also have the right to appear or intervene before a court in another state with jurisdiction over an impaired or insolvent insurer for which the Association is or may become obligated or a court with jurisdiction over any person or property against whom the Association may have rights through subrogation or otherwise of the insurer’s policyholders.
(q)(1) Any person receiving benefits under this chapter shall be deemed to have assigned the rights under, and any causes of action against any person for losses arising under, resulting from, or otherwise relating to, the covered policy or contract to the Association, whether the benefits are payments of, or on account of, contractual obligations, continuation of coverage, or provision of substitute or alternative coverages. The Association may require an assignment to it of the rights and causes of action by any payee, policy or contract owner, beneficiary, insured, or annuitant as a condition precedent to the receipt of any rights or benefits conferred by this chapter upon such a person.
(2) The subrogation rights of the Association under this subsection shall have the same priority against the assets of the impaired or insolvent insurer as that possessed by the person entitled to receive benefits under this chapter.
(3) In addition to paragraphs (1) and (2) of this subsection, the Association shall have all common law rights of subrogation and any other equitable or legal remedy which would have been available to the impaired or insolvent insurer or holder of a policy or contract with respect to the policy or contracts.
(4) If the preceding provisions of this subsection are invalid or ineffective with respect to any person or claim for any reason, the amount payable by the Association with respect to the related covered obligations shall be reduced by the amount realized by any other person with respect to the person or claim that is attributable to the policies (or portion thereof) covered by the Association.
(5) If the Association has provided benefits with respect to a covered obligation and a person recovers amounts as to which the Association has rights as described in the preceding paragraphs of this subsection, the person shall pay to the Association the portion of the recovery attributable to the policies (or portion thereof) covered by the Association.
(r) The Association may:
(1) Enter into contracts necessary or proper to carry out the provisions and purposes of this chapter;
(2) Sue or be sued, including taking any legal actions necessary or proper to recover any unpaid assessments under § 31-5406 and to settle claims or potential claims against it;
(3) Borrow money to carry out the purposes of this chapter; any notes or other evidence of indebtedness of the Association not in default shall be legal investments for domestic insurers and may be carried as admitted assets;
(4) Employ or retain persons necessary to handle the financial transactions of the Association, and to perform other functions necessary or proper under this chapter;
(5) Take legal action necessary to avoid payment of improper claims;
(6) Exercise, for the purposes of this chapter and to the extent approved by the Mayor, the powers of a domestic life or health insurer, but in no case may the Association issue insurance policies or annuity contracts other than those issued to perform its obligations under this chapter;
(6A) Unless prohibited by law, in accordance with the terms and conditions of the policy or contract, file for actuarily justified rate or premium increases for any policy or contract for which it provides coverage under this chapter; and
(7) Take other necessary or appropriate action to discharge its duties and obligations under this chapter or to exercise its powers under this chapter.
(s) The Association may join an organization of 1 or more other state associations of similar purposes to further the purposes and administration of the powers and duties of the Association.
(t)(1)(A) At any time within 180 days of the date of the order of liquidation, the Association may elect to succeed to the rights and obligations of the ceding member insurer that relate to policies or annuities covered, in whole or in part, by the Association, in each case under any one or more reinsurance contracts entered into by the insolvent insurer and its reinsurers and selected by the Association. Any such assumption shall be effective as of the date of the order of liquidation. The election shall be effected by the Association or the National Organization of Life and Health Insurance Guaranty Associations (“NOLHGA”) on its behalf sending written notice, return receipt requested, to the affected reinsurers.
(B) To facilitate the earliest practicable decision about whether to assume any of the contracts of reinsurance, and in order to protect the financial position of the estate, the receiver and each reinsurer of the ceding member insurer shall make available upon request to the Association or to NOLHGA on its behalf as soon as possible after commencement of formal delinquency proceedings:
(i) Copies of in-force contracts of reinsurance and all related files and records relevant to the determination of whether such contracts should be assumed; and
(ii) Notices of any defaults under the reinsurance contracts or any known event or condition which with the passage of time could become a default under the reinsurance contracts.
(C) The following provisions shall apply to reinsurance contracts so assumed by the Association:
(i) The Association shall be responsible for all unpaid premiums due under the reinsurance contracts for periods both before and after the date of the order of liquidation, and shall be responsible for the performance of all other obligations to be performed after the date of the order of liquidation, which relate to policies or annuities covered, in whole or in part, by the Association. The Association may charge policies or annuities covered in part by the Association, through reasonable allocation methods, the costs for reinsurance in excess of the obligations of the Association and shall provide notice and an accounting of these charges to the liquidator.
(ii) The Association shall be entitled to any amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods after the date of the order of liquidation and that relate to policies or annuities covered, in whole or in part, by the Association; provided, that upon receipt of any such amounts, the Association shall be obliged to pay to the beneficiary under the policy or annuity on account of which the amounts were paid a portion of the amount equal to the lesser of:
(I) The amount received by the Association; and
(II) The excess of the amount received by the Association over the amount equal to the benefits paid by the Association on account of the policy or annuity, less the retention of the insurer applicable to the loss or event.
(iii) Within 30 days following the Association’s election (“election date”), the Association and each reinsurer under contracts assumed by the Association shall calculate the net balance due to or from the Association under each reinsurance contract as of the election date with respect to policies or annuities covered, in whole or in part, by the Association, which calculation shall give full credit to all items paid by either the insurer or its receiver or the reinsurer before the election date. The reinsurer shall pay the receiver any amounts due for losses or events before the date of the order of liquidation, subject to any set-off for premiums unpaid for periods before the date, and the Association or reinsurer shall pay any remaining balance due the other, within 5 days of the completion of the aforementioned calculation. Any disputes over the amounts due to either the Association or the reinsurer shall be resolved by arbitration pursuant to the terms of the affected reinsurance contracts or, if the contract contains no arbitration clause, as otherwise provided by law. If the receiver has received any amounts due the Association pursuant to sub-subparagraph (ii) of this subparagraph, the receiver shall remit the same to the Association as promptly as practicable.
(iv) If the Association or receiver, on the Association’s behalf, within 60 days of the election date, pays the unpaid premiums due for periods both before and after the election date that relate to policies or annuities covered, in whole or in part, by the Association, the reinsurer shall not be entitled to terminate the reinsurance contracts for failure to pay the premium insofar as the reinsurance contracts relate to policies or annuities covered, in whole or in part, by the Association, and shall not be entitled to set off any unpaid amounts due under other contracts, or unpaid amounts due from parties other than the Association, against amounts due the Association.
(2) During the period from the date of the order of liquidation until the election date or, if the election date does not occur, until 180 days after the date of the order of liquidation:
(A) Neither the Association nor the reinsurer shall have any rights or obligations under reinsurance contracts that the Association has the right to assume under paragraph (1) of this subsection, whether for periods before or after the date of the order of liquidation; provided, that once the Association has elected to assume a reinsurance contract, the parties’ rights and obligations shall be governed by paragraph (1) of this subsection; and
(B) The reinsurer, the receiver, and the Association shall, to the extent practicable, provide each other data and records reasonably requested.
(3) If the Association does not elect to assume a reinsurance contract by the election date pursuant to paragraph (1) of this subsection, the Association shall have no rights or obligations, in each case for periods both before and after the date of the order of liquidation, with respect to the reinsurance contract.
(4) When policies or annuities, or covered obligations with respect thereto, are transferred to an assuming insurer, reinsurance on the policies or annuities may also be transferred by the Association, in the case of contracts assumed under paragraph (1) of this subsection, subject to the following:
(A) Unless the reinsurer and the assuming insurer agree otherwise, the reinsurance contract transferred shall not cover any new policies of insurance or annuities in addition to those transferred;
(B) The obligations described in paragraph (1) of this subsection shall no longer apply with respect to matters arising after the effective date of the transfer; and
(C) Notice shall be given in writing, return receipt requested, by the transferring party to the affected reinsurer not less than 30 days before the effective date of the transfer.
(5) The provisions of subsection (t) of this section shall supersede the provisions of any District law and any affected reinsurance contract that provides for or requires any payment of reinsurance proceeds, on account of losses or events that occur in periods after the date of the order of liquidation, to the receiver of the insolvent insurer or any other person. The receiver shall remain entitled to any amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods before the date of the order of liquidation, subject to applicable setoff provisions.
(6) Except as otherwise provided, nothing in this subsection shall:
(A) Alter or modify the terms and conditions of any reinsurance contract;
(B) Abrogate or limit any rights of any reinsurer to claim that it is entitled to rescind a reinsurance contract;
(C) Give a policyholder or beneficiary an independent cause of action against a reinsurer that is not otherwise set forth in the reinsurance contract;
(D) Limit or affect the Association’s rights as a creditor of the estate against the assets of the estate; or
(E) Apply to reinsurance agreements covering property or casualty risks.
(u) The Board of Directors of the Association shall have discretion and may exercise reasonable business judgment to determine the means by which the Association is to provide the benefits of this chapter in an economical and efficient manner.
(v) Where the Association has arranged or offered to provide the benefits of this chapter to a covered person under a plan or arrangement that fulfills the Association’s obligations under this chapter, the person shall not be entitled to benefits from the Association in addition to or other than those provided under the plan or arrangement.
(w) Venue in a suit against the Association arising under the chapter shall be in the District. The Association shall not be required to give an appeal bond in an appeal that relates to a cause of action arising under this chapter.
§ 31–5406. Assessments.
(a) The Board of Directors shall assess the member insurers for the amounts necessary to carry out the powers and duties of the Association. Assessments shall be made separately for the life insurance and annuity account and for the health insurance account and shall be maintained in a District of Columbia bank, which is subject to the District of Columbia Community Development Program under the supervision of the District of Columbia Office of Banking and Financial Institutions. Assessments shall be due not less than 30 days after prior written notice to the member insurers and shall accrue interest monthly until paid.
(b) There shall be 2 assessments, as follows:
(1) Class A assessments shall be made for the purposes of meeting administrative and legal costs and other expenses and examinations conducted under the authority of § 31-5409(e). Class A assessments may be made whether or not related to a particular impaired or insolvent insurer.
(2) Class B assessments shall be made to the extent necessary to carry out the powers and duties of the Association under § 31-5405 with regard to an impaired or insolvent insurer.
(c)(1) The amount of any Class A assessment shall be determined by the Board and may be authorized and called on a pro rata or non-pro rata basis. If the Class A assessment is called on a pro rata basis, the Board may provide that it be credited against future Class B assessments. The amount of any Class B assessment, except for assessments related to long-term care insurance, shall be allocated for assessment purposes between the accounts and among the subaccounts of the life insurance and annuity account pursuant to an allocation formula which may be based on the premiums or reserves of the impaired or insolvent insurer, or any other standard considered by the Board in its sole discretion to be fair and reasonable.
(2) The amount of the Class B assessment for long-term care insurance written by the impaired or insolvent insurer shall be allocated according to a methodology included in the plan of operations and approved by the Commissioner. The methodology shall provide for 50% of the assessment to be allocated to accident and health member insurers and 50% to be allocated to life and annuity member insurers.
(3) Assessments for funds to meet the requirements of the Association with respect to an impaired or insolvent insurer shall not be authorized or called until necessary to implement the purposes of this chapter. Classification of assessments under subsection (b) of this section and computation of assessments under this subsection shall be made with a reasonable degree of accuracy, recognizing that exact determinations may not always be possible.
(d)(1) The Association may abate or defer, in whole or in part, the assessment of a member insurer if the Board concludes that payment of the assessment would endanger the ability of the member insurer to fulfill its contractual obligations.
(2) In the event an assessment against a member insurer is abated or deferred in whole or in part, the amount by which the assessment is abated or deferred may be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this section.
(e)(1) The total of all assessments upon a member insurer for the life and annuity account and for each subaccount thereunder shall not in any 1 calendar year exceed 2% and for the health account shall not in any 1 calendar year exceed 2% of the insurer’s average premiums received in the District of Columbia on the policies and contracts covered by the account during the 3 calendar years preceding the year in which the insurer is declared impaired or insolvent. If the maximum assessment, together with the other assets of the Association in any account, does not provide in any 1 year in either account an amount sufficient to carry out the responsibilities of the Association, the necessary additional funds shall be assessed as soon thereafter as permitted by this chapter.
(2) The Board may provide in the plan of operation a method of allocating funds among claims, whether relating to 1 or more impaired or insolvent insurers, when the maximum assessment will be insufficient to cover anticipated claims.
(3) If the maximum assessment for any subaccount of the life and annuity account in any 1 year does not provide an amount sufficient to carry out the responsibilities of the Association, then pursuant to subsection (c)(2) of this section, the Board shall assess all subaccounts of the life and annuity account for the necessary additional amount, subject to the maximum stated in paragraph (1) of this subsection.
(f)(1) The Board may, by an equitable method as established in the plan of operation, refund to member insurers, in proportion to the contribution of each insurer to that account, the amount by which the assets of the account exceed the amount the Board finds is necessary to carry out, during the coming year, the obligations of the Association with regard to that account, including assets accruing from assignments, subrogation, net realized gains, and income from investments.
(2) A reasonable amount may be retained in any account in a District of Columbia bank, which is subject to the District of Columbia Community Development Program under the supervision of the District of Columbia Office of Banking and Financial Institutions, to provide funds for the continuing expenses of the Association and for future losses.
(g) It shall be proper for any member insurer, in determining its premium rates and policyholder dividends for any kind of insurance within the scope of this chapter, to consider the amount reasonably necessary to meet its assessment obligations under this chapter.
(h) The Association shall issue to each insurer paying an assessment under this chapter, other than a Class A assessment, a certificate of contribution, in a form prescribed by the Mayor, for the amount of the assessment so paid. All outstanding certificates shall be of equal value, dignity, and priority without references to amounts or dates of issue. A certificate of contribution may be shown by the insurer in its financial statement as an asset in the form and for the amount, if any, and period of time as the Mayor may approve.
(i) For the purposes of this section, the term:
(1) “Authorized” means, when used in the context of assessments, a resolution by the Board of Directors that has been passed by which 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.
(2) “Called” means, when used in the context of assessments, 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 within the notice. An authorized assessment becomes a called assessment when notice is mailed by the Association to member insurers.
§ 31–5407. Plan of operation.
(a)(1) The Association shall submit to the Mayor a plan of operation, and any subsequent amendments that are necessary or suitable, to assure the fair, reasonable, and equitable administration of the Association. The plan of operation, and any amendments, shall become effective 30 days following its submission to the Mayor, unless the Mayor has issued written disapproval of the plan within the 30 days.
(2) If the Association fails to submit a suitable plan of operation within 120 days following July 22, 1992, or if at any time thereafter the Association fails to submit suitable amendments to the plan, the Mayor shall, after notice and hearing, adopt and promulgate reasonable rules as necessary or advisable to carry out the provisions of this chapter. These rules shall continue in force until modified by the Mayor or superseded by a plan submitted by the Association and approved by the Mayor.
(b) All member insurers shall comply with the plan of operation.
(c) The plan of operation, in addition to requirements enumerated elsewhere in this chapter, shall:
(1) Establish procedures for handling the assets of the Association;
(2) Establish the amount and method of reimbursement of members of the Board of Directors under § 31-5404;
(3) Establish regular places and times for meetings, including telephone conference calls, of the Board of Directors;
(4) Establish procedures for records to be kept of all financial transactions of the Association, its agents, and the Board of Directors;
(5) Establish the procedures whereby nominations to the Board of Directors will be made and submitted to the Mayor for approval;
(6) Establish any additional procedures necessary for assessments under § 31-5406; and
(7) Contain additional provisions necessary or proper for the execution of the powers and duties of the Association.
(d)(1) The plan of operation may provide that any or all powers and duties of the Association, except those under § 31-5405(q)(3) and § 31-5406, are delegated to a corporation, association, or other organization which performs or will perform functions similar to those of this Association, or its equivalent in 2 or more states.
(2) Such a corporation, association, or organization shall be reimbursed for any payments made on behalf of the Association and shall be paid for its performance of any function of the Association.
(3) A delegation under this subsection shall take effect only with the approval of the Board of Directors and the Mayor, and may be made only to a corporation, association, or organization which extends protection not substantially less favorable and effective than that provided by this chapter.
§ 31–5408. Duties and powers of the Mayor.
(a) In addition to the duties and powers enumerated elsewhere in this chapter, the Mayor shall:
(1) Upon request of the Board of Directors, provide the Association with a statement of the premiums in the District of Columbia and any other appropriate states for each member insurer; and
(2) When an impairment is declared and the amount of the impairment is determined, serve a demand upon the impaired insurer to make good the impairment within a reasonable time. Notice to the impaired insurer to comply promptly with such a demand shall not excuse the Association from the performance of its powers and duties under this chapter.
(b) In addition to the duties and powers enumerated elsewhere in this chapter, the Mayor may:
(1) Suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in the District of any member insurer which fails to pay an assessment when due or fails to comply with the plan of operation; or
(2) Levy a forfeiture on any member insurer that fails to pay an assessment when due; provided, that the forfeiture shall not exceed 5% of the unpaid assessment per month, and no forfeiture shall be less than $100 per month.
(c) A final action of the board of directors or the Association may be appealed to the Mayor by a member insurer if the appeal is taken within 60 days of its receipt of notice of the final action being appealed. A final action or order of the Mayor shall be subject to judicial review in a court of competent jurisdiction in accordance with District laws that apply to the actions or orders of the Mayor.
(d) The liquidator, rehabilitator, or conservator of an impaired or insolvent insurer may notify all interested persons of the effect of this chapter.
§ 31–5409. Prevention of insolvencies.
(a) To aid in the detection and prevention of insurer impairments or insolvencies, the Mayor shall:
(1) Transmit written notices to the insurance commissioners of all the other states and territories of the United States, within 30 days following the date any action is taken, when the Mayor takes any of the following actions against a member insurer:
(A) Revocation of license;
(B) Suspension of license; or
(C) Issuance of any formal order that the company restrict its premium writing, obtain additional contributions to surplus, withdraw from the District of Columbia, reinsure all or any part of its business, or increase capital, surplus, or any other account for the security of policyholders or creditors;
(2) Report to the Board of Directors when the Mayor has taken any of the actions set forth in paragraph (1) of this subsection or has received a report from any insurance commissioner indicating that any similar action has been taken in another state. The report shall contain all significant details of the action taken, or shall include the report received from another insurance commissioner;
(3) Report to the Board of Directors when the Mayor has reasonable cause to believe, from any examination, whether completed or in process, of any member insurer, that the insurer may be an impaired or insolvent insurer; and
(4) Furnish to the Board of Directors the ratios developed by the National Association of Insurance Commissioners’ Insurance Regulatory Information System, and listings of companies not included in the ratios. The Board may use the information contained therein in carrying out its duties and responsibilities under this section. The report and the information shall be kept confidential by the Board of Directors until it is made public by the Mayor or other lawful authority.
(b) The Mayor may seek the advice and recommendations of the Board of Directors concerning any matter affecting the Mayor’s duties and responsibilities regarding the financial condition of member insurers and companies seeking admission to transact insurance business in the District of Columbia.
(c) The Board of Directors may, upon majority vote, make reports and recommendations to the Mayor upon any matter germane to the solvency, liquidation, rehabilitation, or conservation of any member insurer, or germane to the solvency of any company seeking to transact insurance business in the District of Columbia. These reports and recommendations shall be internal working documents, and, consequently, shall not be considered public documents.
(d) It shall be the duty of the Board of Directors, upon majority vote, to notify the Mayor of any information indicating whether any member insurer may be an impaired or insolvent insurer.
(e)(1) The Board of Directors may, upon majority vote, request that the Mayor order an examination of any member insurer which the Board, in good faith, believes may be an impaired or insolvent insurer.
(2) Within 30 days of receipt of such a request, the Mayor shall begin the examination.
(3) The examination may be conducted as a National Association of Insurance Commissioners examination, or may be conducted by persons designated by the Mayor.
(4) The cost of the examination shall be paid by the Association and the examination report shall be treated the same as other examination reports.
(5) In no event shall the examination report be released to the Board of Directors prior to its release to the public, except in compliance with subsection (a) of this section.
(6) The Mayor shall notify the Board of Directors when the examination is completed.
(7) The request for an examination shall be kept on file by the Mayor, but it shall not be open to public inspection prior to the release of the examination report to the public.
(f) The Board of Directors may, upon majority vote, make recommendations to the Mayor for the detection and prevention of insurer insolvencies.
(g) The Board of Directors, at the conclusion of any insurer insolvency in which the Association was obligated to pay covered claims, shall:
(1) Prepare and submit a written report to the Mayor containing all information it possesses bearing on the history and causes of the insolvency; and
(2) Cooperate with the boards of directors of guaranty associations in other states in preparing reports on the history and causes of insolvency of a particular insurer. The Association may adopt by reference any report prepared by other associations.
§ 31–5410. Credits for assessments paid.
(a) A member insurer may offset against its premium taxes an assessment described in § 31-5406(h) to the extent of 10% of the amount of the assessment for each of the 10 calendar years following the year in which the assessment was paid. In the event a member insurer should cease doing business, all uncredited assessments may be credited against the premium taxes for the year it ceases doing business.
(b) Any sums which are acquired by refund, pursuant to § 31-5406(f) from the Association by member insurers, and which theretofore have been offset against premium taxes as provided in subsection (a) of this section, shall be paid by member insurers to the District of Columbia in accordance with requirements of the District of Columbia Department of Finance and Revenue. The Association shall notify the Commissioner that the refunds have been made.
§ 31–5411. Miscellaneous.
(a) Nothing in this chapter shall be construed to reduce the liability for unpaid assessments of the insureds of an impaired or insolvent insurer operating under a plan with assessment liability.
(b)(1) Records shall be kept of all negotiations and meetings in which the Association or its representatives are involved in discussing the activities of the Association in carrying out its powers and duties under § 31-5405.
(2) Records of negotiations or meetings shall be made public only upon the termination of a liquidation, rehabilitation, or conservation proceeding involving the impaired or insolvent insurer, upon the termination of the impairment or insolvency of the insurer, or upon the order of a court of competent jurisdiction.
(3) Nothing in this subsection shall limit the duty of the Association to render a report of its activities under this section.
(c)(1) For the purpose of carrying out its obligations under this chapter, the Association shall be deemed to be a creditor of the impaired or insolvent insurer to the extent of assets attributable to covered policies reduced by any amounts to which the Association is entitled as subrogee pursuant to § 31-5405(m).
(2) Assets of the impaired or insolvent insurer attributable to covered policies shall be used to continue all covered policies and pay all contractual obligations of the impaired or insolvent insurer as required by this chapter.
(3) For the purposes of this subsection, assets attributable to covered policies are that proportion of the assets which the reserves that should have been established for the policies bear to the reserves that should have been established for all policies of insurance written by the impaired or insolvent insurer.
(c-1) As a creditor of the impaired or insolvent insurer as established in subsection (c) of this section and consistent with Chapter 13 of this title [§ 31-1301 et seq.], the Association and other similar associations shall be entitled to receive a disbursement of assets out of the marshaled assets, as the assets become available to reimburse it, as a credit against contractual obligations under this chapter. If the liquidator has not, within 120 days of a final determination of insolvency of an insurer by the receivership court, made an application to the court for the approval of a proposal to disburse assets out of marshaled assets to guaranty associations having obligations because of the insolvency, then the Association shall be entitled to make application to the receivership court for approval of its own proposal to disburse the assets.
(d)(1) Prior to the termination of any liquidation, rehabilitation, or conservation proceeding, the court may take into consideration the contribution of the respective parties, including the Association, the shareholders, and policyholders of the insolvent insurer, and any other party with a bona fide interest, in making an equitable distribution of the ownership rights of the insolvent insurer. In such a determination, consideration shall be given to the welfare of the policyholders of the continuing or successor insurer.
(2) No distribution to stockholders, if any, of an impaired or insolvent insurer shall be made until the total amount of valid claims of the Association, with interest, for funds expended in carrying out its powers and duties under § 31-5405 with respect to the insurer have been fully recovered by the Association.
(e)(1) If an order for liquidation or rehabilitation of an insurer domiciled in the District of Columbia has been entered, the receiver appointed under the order shall have a right to recover on behalf of the insurer, from any affiliate that controlled it, the amount of distributions, other than stock dividends paid by the insurer on its capital stock, made at any time during 5 years preceding the petition for liquidation or rehabilitation subject to the limitations of paragraphs (2) through (4) of this subsection.
(2) No distribution shall be recoverable if the insurer shows that, when paid, the distribution was lawful and reasonable, and that the insurer did not know, and could not reasonably have known, that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.
(3)(A) Any person who was an affiliate that controlled the insurer at the time the distributions were paid shall be liable up to the amount of distributions he or she received.
(B) Any person who was an affiliate that controlled the insurer at the time the distributions were declared shall be liable up to the amount of distributions he or she would have received if they had been paid immediately.
(C) If 2 or more persons are liable with respect to the same distributions, they shall be jointly and severally liable.
(4) The maximum amount recoverable under this subsection shall be the amount needed in excess of all other available assets of the insolvent insurer to pay the contractual obligations of the insolvent insurer.
(5) If any person liable under paragraph (3) of this subsection is insolvent, all its affiliates that controlled it at the time the distribution was paid shall be jointly and severally liable for any resulting deficiency in the amount recoverable from the insolvent affiliate.
§ 31–5412. Examination of the Association; annual report.
(a) The Association shall be subject to examination and regulation by the Mayor.
(b) The Board of Directors shall submit to the Mayor each year, not later than 120 days after the end of the Association’s fiscal year, a financial report in a form approved by the Mayor and a report of its activities during the preceding fiscal year.
§ 31–5413. Tax exemptions.
The Association shall be exempt from payment of all fees and all taxes levied by the District of Columbia.
§ 31–5414. Immunity.
(a) There shall be no liability on the part of, and no cause of action shall arise against, any member insurer or its agents or employees, the Association or its agents or employees, members of the Board of Directors, or the Mayor or the Mayor’s representatives, for any action or omission by them in performance of their powers and duties under this chapter, except in the case of willful misconduct, gross negligence, or criminal activity on the part of these persons.
(b) The immunity established by subsection (a) of this section shall extend to the participation in any organization of 1 or more state associations of similar purposes and to any organization and its agents or employees.
§ 31–5415. Stay of proceedings; reopening default judgments.
(a) All proceedings in which the insolvent insurer is a party in any court in the District of Columbia shall be stayed 180 days from the date an order of liquidation, rehabilitation, or conservation is final to permit proper legal action by the Association on any matters germane to its powers or duties.
(b) As to judgment under any decision, order, verdict, or finding based on default, the Association may apply to have the judgment set aside by the same court that made the judgment and shall be permitted to defend against the suit on the merits.
§ 31–5416. Prohibited advertisement of Association act in insurance sale; notice to policyholders.
(a)(1) No person, including an insurer, agent, or affiliate of an insurer shall make, publish, disseminate, circulate, or place before the public, or cause directly or indirectly, to be made, published, disseminated, circulated or placed before the public, in any newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio station or television station, or in any other way, any advertisement, announcement or statement, written or oral, which uses the existence of the District of Columbia Life and Health Insurance Guaranty Association for the purpose of sales, solicitation, or inducement to purchase any form of insurance covered by this chapter.
(2) This subsection shall not apply to the Association or any other entity which does not sell or solicit insurance.
(b)(1) Within 180 days of July 22, 1992, the Association shall prepare a summary document describing the general purposes and current limitations of this chapter, which document shall be submitted to the Mayor for approval.
(2) Sixty days after the summary document is approved by the Mayor, no insurer may deliver a policy or contract described in § 31-5402(b)(1) to a policy or contract holder unless the summary document is delivered to the policy or contract holder prior to or at the time of delivery of the policy or contract except as provided in subsection (d) of this section.
(3) The delivery or contents or interpretation of the summary document shall not mean that either the policy or the contract or the holder of either would be covered in the event of the impairment or insolvency of a member insurer.
(4) The summary document shall be revised by the Association as amendments to this chapter may require.
(5) Failure to receive this document does not give the policy holder, contract holder, certificate holder, or insured any greater rights than the rights stated in this chapter.
(c) The summary document prepared under subsection (b) of this section shall contain a clear and conspicuous disclaimer on its face. The Mayor shall promulgate rules establishing the form and content of the disclaimer, which at a minimum shall:
(1) State the name and address of the Association and the Commissioner of Insurance and Securities [Commissioner of the Department of Insurance, Securities, and Banking];
(2) Prominently warn the policy or contract holder that the Association may not cover the policy, or, if coverage is available, it will be subject to substantial limitations and exclusions and conditioned on continued residence in the District of Columbia;
(3) State that the insurer and its agents are prohibited by law from using the existence of the Association for the purpose of sales, solicitation, or inducement to purchase any form of insurance;
(4) Emphasize that the policy or contract holder should not rely on coverage under the Life and Health Insurance Guaranty Association when selecting an insurer; and
(5) Provide additional information as directed by the Mayor.
(d) No insurer or agent may deliver a policy or contract described in § 31-5402(b)(1) and excluded under § 31-5402(b)(2)(A) from coverage under this chapter unless the insurer or agent, prior to or at the time of delivery, gives the policy or contract holder a separate written notice which clearly and conspicuously discloses that the policy or contract is not covered by the Life and Health Insurance Guaranty Association. The Mayor, by rule, shall specify the form and content of the notice.
§ 31–5417. Applicability.
This chapter shall apply to all matters relating to an impaired insurer or insolvent insurer for which the Association first becomes obligated on or after February 15, 2024.
