§ 58-62-36. Powers and duties of the Association. - North Carolina Statutes

§58‑62‑36.  Powers and duties of the Association.

(a)        If a member insureris an impaired domestic insurer, the Association may, subject to any conditionsimposed by the Association and approved by the Commissioner that do not impairthe contractual obligations of the impaired insurer and that are, except incases of court‑ordered conservation or rehabilitation, also approved bythe impaired insurer:

(1)        Guarantee, assume,or reinsure, or cause to be guaranteed, assumed, or reinsured, any or all ofthe policies of the impaired insurer;

(2)        Provide such monies,pledges, notes, guarantees, or other means as are proper to carry outsubdivision (1) of this subsection and assure payment of the contractualobligations of the impaired insurer pending action under subdivision (1) ofthis subsection; or

(3)        Lend money to theimpaired insurer.

(b)        If a member insureris an impaired insurer, whether domestic, foreign, or alien, and the insurer isnot paying claims in a timely manner, then subject to the preconditions specifiedin subsection (c) of this section, the Association shall, in its discretion,either:

(1)        Take any of theactions specified in subsection (a) of this section, subject to the conditionstherein; or

(2)        Provide substitutebenefits in lieu of the contractual obligations of the impaired insurer solelyfor health claims, periodic annuity benefit payments, death benefits,supplemental benefits, and cash withdrawals for policyowners who petitiontherefor under claims of emergency or hardship in accordance with standardsproposed by the Association and approved by the Commissioner.

(c)        The Association issubject to the requirements of subsection (b) of this section only if:

(1)        The laws of theimpaired insurer's state of domicile provide that until all payments of or onaccount of the impaired insurer's contractual obligations by all guarantyassociations, along with all expenses thereof and interest on all the paymentsand expenses, have been repaid to the guaranty associations or a plan ofrepayment by the impaired insurer has been approved by the guarantyassociations, the delinquency proceeding shall not be dismissed; neither theimpaired insurer nor its assets may be returned to the control of itsshareholders or private management; and the impaired insurer may not solicit oraccept new business or have any suspended or revoked license restored; and

(2)        The impaired insureris a domestic insurer that has been placed under an order of rehabilitation bya court of competent jurisdiction in this State; or the impaired insurer is aforeign or alien insurer that has been prohibited from soliciting or acceptingnew business in this State, its license has been suspended or revoked in thisState, and a petition for rehabilitation or liquidation has been filed in a courtof competent jurisdiction in its state of domicile by that state's insuranceregulator.

(d)        If a member insureris an insolvent insurer, the Association shall, in its discretion, either:

(1)        Guarantee, assume orreinsure, or cause to be guaranteed, assumed, or reinsured, the policies of theinsolvent insurer; or

(2)        Assure payment ofthe contractual obligations of the insolvent insurer; and

(3)        Provide such monies,pledges, guarantees, or other means as are reasonably necessary to dischargethose duties; or

(4)        With respect only tolife and health insurance policies, provide benefits and coverages inaccordance with subsection (e) of this section.

(e)        When proceedingunder subdivision (b)(2) or (d)(4) of this section, the Association shall, withrespect to only life and health insurance policies:

(1)        Assure payment ofbenefits for premiums identical to the premiums and benefits (except for termsof conversion and renewability) that would have been payable under the policiesof the insolvent insurer, for claims incurred:

a.         With respect togroup policies, not later than the earlier of the next renewal date under thepolicies or 45 days, but in no event less than 30 days after the date on whichthe Association becomes obligated with respect to the policies;

b.         With respect toindividual policies, not later than the earlier of the next renewal date (ifany) under the policies or one year, but in no event less than 30 days from thedate on which the Association becomes obligated with respect to the policies;

(2)        Make diligentefforts to provide all known insureds or group policyholders with respect togroup policies 30 days' notice of the termination of the benefits provided; and

(3)        With respect toindividual policies, make available to each known insured, or owner if otherthan the insured, and with respect to an individual formerly insured under agroup policy who is not eligible for replacement group coverage, make availablesubstitute coverage on an individual basis in accordance with the provisions ofsubsection (f) of this section, if the insured had a right under law or theterminated policy to convert coverage to individual coverage or to continue anindividual policy in force until a specified age or for a specified time,during which the insurer had no right unilaterally to make changes in anyprovision of the policy or had a right only to make changes in premium byclass.

(f)         In providing thesubstitute coverage required under subdivision (e)(3) of this section, theAssociation may offer either to reissue the terminated coverage or to issue analternative policy.  An alternative or reissued policy shall be offered withoutrequiring evidence of insurability, and shall not provide for any waitingperiod or exclusion that would not have applied under the terminated policy. The Association may reinsure any alternative or reissued policy.

(g)        Alternative life orhealth insurance policies adopted by the Association are subject to theCommissioner's approval.  The Association may adopt alternative policies of varioustypes for future issuance without regard to any particular delinquency. Alternative policies shall contain at least the minimum statutory provisionsrequired in this State and provide benefits that are not unreasonable inrelation to the premium charged.  The Association shall set the premium inaccordance with a table of rates, which it shall adopt.  The premium shallreflect the amount of insurance to be provided and the age and class of risk ofeach insured, but it shall not reflect any changes in the health of the insuredafter the original policy was last underwritten.  Any alternative policy issuedby the Association shall provide coverage of a type similar to that of thepolicy issued by the delinquent insurer, as determined by the Association.

(h)        If the Associationelects to reissue terminated coverage at a premium rate different from thatcharged under the terminated life or health insurance policy, the premium shallbe set by the Association in accordance with the amount of insurance providedand the age and class of risk, subject to the approval of the Commissioner orby a court of competent jurisdiction.

(i)         The Association'sobligations with respect to coverage under any life or health insurance policyof the delinquent insurer or under any reissued or alternative policy cease onthe date the coverage or policy is replaced by another similar policy by thepolicyholder, the insured, or the Association.

(j)         When proceedingunder subdivision (b)(2) of this section or under subsection (c) of thissection with respect to any policy carrying guaranteed minimum interest rates,the Association shall assure the payment or crediting of a rate of interestconsistent with G.S. 58‑62‑21(c)(3).

(k)        Nonpayment ofpremiums within 31 days after the date required under the terms of anyguaranteed, assumed, alternative, or reissued policy or substitute coverageterminates the Association's obligations under the policy or coverage underthis Article with respect to the policy or coverage, except with respect to anyclaims incurred or any net cash surrender value that may be due under thisArticle.

(l)         Premiums due forcoverage after an entry of an order of liquidation of an insolvent insurerbelong to and are payable at the direction of the Association; and theAssociation is liable for unearned premiums owed to policyowners arising afterthe entry of the order.

(m)       The protectionprovided by this Article does not apply where any similar guaranty protectionis provided to residents of this State by the laws of the domiciliary state orjurisdiction of a delinquent foreign or alien insurer.

(n)        In carrying out itsduties under subsections (b) through (d) of this section, the Association may,subject to approval by the court:

(1)        Impose permanentpolicy liens in connection with any guarantee, assumption, or reinsuranceagreement, if the Association finds that the amounts that can be assessed underthis Article are less than the amounts needed to assure full and promptperformance of the Association's duties under this Article, or that theeconomic or financial conditions as they affect member insurers aresufficiently adverse to render the imposition of the permanent policy liens tobe in the public interest;

(2)        Impose temporarymoratoria or liens on payments of cash values and policy loans, or any otherright to withdraw funds held in conjunction with policies, in addition to anycontractual provisions for deferral of cash or policy loan value.

(o)        If the Associationfails to act within a reasonable period of time as provided in subdivision(b)(2) of this section and subsections (d) and (e) of this section, theCommissioner has the powers and duties of the Association under this Articlewith respect to delinquent insurers.

(p)        The Association mayrender assistance and advice to the Commissioner, upon the Commissioner'srequest concerning rehabilitation, payment of claims, continuance of coverage,or the performance of other contractual obligations of any delinquent insurer.

(q)        The Association hasstanding to appear before any court in this State with jurisdiction over adelinquent insurer for which the Association is or may become obligated underthis Article.  This standing extends to all matters germane to the powers andduties of the Association, including, but not limited to, proposals forreinsuring, modifying, or guaranteeing the policies of the delinquent insurerand the determination of the policies and contractual obligations.  TheAssociation also has the right to appear or intervene before a court in anotherstate with jurisdiction over a delinquent insurer for which the Association isor may become obligated or with jurisdiction over a third party against whomthe Association may have rights through subrogation of the insurer'spolicyholders.

(r)        Any person receivingbenefits under this Article is considered to have been assigned the rightsunder, and any causes of action relating to, the covered policy to theAssociation to the extent of the benefits received because of this Article,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 such rights and cause ofaction by any payee, policyowner, beneficiary, insured or annuitant as acondition precedent to the receipt of any right or benefits conferred by thisArticle upon the person.  The subrogation rights of the Association under thissubsection have the same priority against the delinquent insurer's assets asthat possessed by the person entitled to receive benefits under this Article. In addition to other provisions of this subsection, the Association has allcommon‑law rights of subrogation and any other equitable or legal remedythat would have been available to the delinquent insurer or holder of a policywith respect to the policy.

(s)        The Associationmay:

(1)        Enter into contractsthat are necessary or proper to carry out the provisions and purposes of thisArticle;

(2)        Sue or be sued,including taking any legal actions necessary or proper to recover any unpaidassessments under G.S. 58‑62‑41 and to settle claims or potentialclaims against it;

(3)        Borrow money toeffect the purposes of this Article; any notes or other evidence ofindebtedness of the Association not in default shall be legal investments fordomestic insurers and may be carried as admitted assets;

(4)        Employ or retainpersons that are necessary to handle the financial transactions of theAssociation, and to perform other functions that become necessary or properunder this Article;

(5)        Take legal actionthat may be necessary to avoid payment of improper claims;

(6)        Exercise, for thepurposes of this Article and to the extent approved by the Commissioner, thepowers of a domestic life or health insurer, but in no case may the Associationissue insurance policies or annuity contracts other than those issued toperform its obligations under this Article.

(t)         The Associationmay join an organization of one or more other state associations of similarpurposes, in order to further the purposes of this Article and administer thepowers and duties of the Association. (1991, c. 681, s. 56, c. 720,s. 94.)