Rhode Island 2023 Regular Session

Rhode Island House Bill H5832 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1
2	2
3	3
4	4
5	5	2023 -- H 5832
6	6	========
7	7	LC002082
8	8	========
9	9	S TATE OF RHODE IS LAND
10	10	IN GENERAL ASSEMBLY
11	11	JANUARY SESSION, A.D. 2023
12	12	____________
13	13
14	14	A N A C T
15	15	RELATING TO INSURANCE -- PRODUCER LICENSING ACT
16	16	Introduced By: Representatives Kennedy, Azzinaro, Diaz, Ackerman, Casimiro, and
17	17	Bennett
18	18	Date Introduced: March 01, 2023
19	19	Referred To: House Corporations
20	20
21	21
22	22	It is enacted by the General Assembly as follows:
23	23	SECTION 1. Sections 27-2.4-2 and 27-2.4-16 of the General Laws in Chapter 27-2.4 1
24	24	entitled "Producer Licensing Act" are hereby amended to read as follows: 2
25	25	27-2.4-2. Definitions. 3
26	26	The following definitions apply to this chapter: 4
27	27	(1) "Business entity” means a corporation, association, partnership, limited liability 5
28	28	company, limited liability partnership, or other legal entity; 6
29	29	(2) "Contracted producer report” means the annual report that all insurers contracting with 7
30	30	insurance producers must provide to the department on or by March 1 listing each insurance 8
31	31	producer to whom the insurer paid one hundred dollars ($100) or more in commissions for the 9
32	32	preceding calendar year of January 1 to December 31. The department shall prescribe the form and 10
33	33	manner of reporting. 11
34	34	(3) "Department” means the department of business regulation; 12
35	35	(4) "Home state” means any state or territory of the United States, or the District of 13
36	36	Columbia, in which an insurance producer maintains his or her principal place of residence or 14
37	37	principal place of business and is licensed to act as an insurance producer; 15
38	38	(5) "Insurance” means any of the lines of authority set forth in this title; 16
39	39	(6) "Insurance commissioner” means the director of the department of business regulation 17
40	40	or his or her designee; 18
41	41	(7) "Insurance producer” means a person required to be licensed under the laws of this state 19
42	42
43	43
44	44	LC002082 - Page 2 of 61
45	45	to sell, solicit or negotiate insurance; 1
46	46	(8) "Insurer” means: (i) any person, reciprocal exchange, interinsurer, Lloyds insurer, 2
47	47	fraternal benefit society, and any other legal entity engaged in the business of insurance, including 3
48	48	insurance producers; (ii) notwithstanding §§ 27-19-2, 27-20-2, 27-20.1-2, 27-20.2-2, 27-20.3-2, 4
49	49	and 27-41-22, all of whom shall be engaged in the business of insurance for the purpose of this 5
50	50	chapter, nonprofit hospital and/or medical service corporation, a nonprofit dental service 6
51	51	corporation, a nonprofit optometric service corporation, a nonprofit legal service corporation, a 7
52	52	health maintenance organization as defined in chapter 41 of this title or as defined in chapter 62 of 8
53	53	title 42, or any other entity providing a plan of health benefits subject to state insurance regulation; 9
54	54	and (iii) an organization that for consideration assumes certain risks for an insured. Insurer 10
55	55	organizations may include corporations, stock companies, mutual companies, risk retention groups, 11
56	56	reciprocals, captives, Lloyds associations, and government residual plans. 12
57	57	(9) "License” means a document issued by this state's insurance commissioner authorizing 13
58	58	a person to act as an insurance producer for the lines of authority specified in the document. The 14
59	59	license itself does not create any authority, actual, apparent or inherent, in the holder to represent 15
60	60	or commit an insurance carrier; 16
61	61	(10) "Limited line credit insurance” includes credit life, credit disability, credit property, 17
62	62	credit unemployment, involuntary unemployment, mortgage life, mortgage guaranty, mortgage 18
63	63	disability, guaranteed automobile protection (gap) insurance, and any other form of insurance 19
64	64	offered in connection with an extension of credit that is limited to partially or wholly extinguishing 20
65	65	that credit obligation that the insurance commissioner determines should be designated a form of 21
66	66	limited line credit insurance; 22
67	67	(11) "Limited line credit insurance producer” means a person who sells, solicits or 23
68	68	negotiates one or more forms of limited line credit insurance coverage to individuals through a 24
69	69	master, corporate, group or individual policy; 25
70	70	(12) "Limited lines insurance” means those lines of insurance that the insurance 26
71	71	commissioner deems necessary to recognize for purposes of complying with subsection 27-2.4-27
72	72	10(e); 28
73	73	(13) "Limited lines producer” means a person authorized by the insurance commissioner 29
74	74	to sell, solicit or negotiate limited lines insurance; 30
75	75	(14) "NAIC” means National Association of Insurance Commissioners; 31
76	76	(15) "Negotiate” means the act of conferring directly with or offering advice directly to a 32
77	77	purchaser or prospective purchaser of a particular contract of insurance concerning any of the 33
78	78	substantive benefits, terms or conditions of the contract, provided that the person engaged in that 34
79	79
80	80
81	81	LC002082 - Page 3 of 61
82	82	act either sells insurance or obtains insurance from insurers for purchasers; 1
83	83	(16) "Person” means an individual; 2
84	84	(17) "Resident” means a person who either resides in Rhode Island or maintains an office 3
85	85	in Rhode Island where the business of producing insurance is transacted and designates Rhode 4
86	86	Island as the residence for purposes of licensure; 5
87	87	(18) "Sell” means to exchange a contract of insurance by any means, for money or its 6
88	88	equivalent, on behalf of an insurance company; 7
89	89	(19) "Solicit” means attempting to sell insurance or asking or urging a person to apply for 8
90	90	a particular kind of insurance from a particular company; 9
91	91	(20) "Terminate” means the cancellation of the relationship between an insurance producer 10
92	92	and the insurer or the termination of an insurance producer's authority to transact insurance; 11
93	93	(21) "Uniform application” means the current version of the NAIC uniform application for 12
94	94	resident and nonresident insurance producer licensing. 13
95	95	27-2.4-16. Notification to insurance commissioner of termination. 14
96	96	(a) Termination for cause. An insurer or authorized representative of the insurer that 15
97	97	terminates the appointment, employment contract or other insurance business relationship with an 16
98	98	insurance producer shall notify the insurance commissioner within thirty (30) days following the 17
99	99	effective date of the termination, using a format prescribed by the insurance commissioner, if the 18
100	100	reason for termination is one of the reasons set forth in § 27-2.4-14 or the insurer has knowledge 19
101	101	the insurance producer was found by a court, government body, or self-regulatory organization 20
102	102	authorized by law to have engaged in any of the activities in § 27-2.4-14. Upon the written request 21
103	103	of the insurance commissioner, the insurer shall provide additional information, documents, records 22
104	104	or other data pertaining to the termination or activity of the insurance producer. 23
105	105	(b) Termination without cause. An insurer or authorized representative of the insurer that 24
106	106	terminates the appointment, employment, or contract with a producer for any reason not set forth 25
107	107	in § 27-2.4-14, shall notify the insurance commissioner within thirty (30) days following the 26
108	108	effective date of the termination, using a format prescribed by the insurance commissioner. Upon 27
109	109	written request of the insurance commissioner, the insurer shall provide additional information, 28
110	110	documents, records or other data pertaining to the termination. 29
111	111	(b)(c) Ongoing notification requirement. The insurer or the authorized representative of 30
112	112	the insurer shall promptly notify the insurance commissioner in a format acceptable to the insurance 31
113	113	commissioner if, upon further review or investigation, the insurer discovers additional information 32
114	114	that would have been reportable to the insurance commissioner in accordance with subsection (a) 33
115	115	of this section had the insurer then known of its existence. 34
116	116
117	117
118	118	LC002082 - Page 4 of 61
119	119	(c)(d) Copy of notification to be provided to the insurance producer. 1
120	120	(1) Within fifteen (15) days after making the notification required by subsections (a) and 2
121	121	(b)(c) of this section, the insurer shall mail a copy of the notification to the insurance producer at 3
122	122	his or her last known address. If the insurance producer is terminated for cause for any of the 4
123	123	reasons listed in § 27-2.4-14, the insurer shall provide a copy of the notification to the insurance 5
124	124	producer at his or her last known address by certified mail, return receipt requested, postage prepaid 6
125	125	or by overnight delivery using a nationally recognized carrier. 7
126	126	(2) Within thirty (30) days after the insurance producer has received the original or 8
127	127	additional notification, the insurance producer may file written comments concerning the substance 9
128	128	of the notification with the insurance commissioner. The insurance producer shall, by the same 10
129	129	means, simultaneously send a copy of the comments to the reporting insurer, and the comments 11
130	130	shall become a part of the insurance commissioner's file and accompany every copy of a report 12
131	131	distributed or disclosed for any reason about the insurance producer as permitted under subsection 13
132	132	(e)(f) of this section. 14
133	133	(d)(e) Immunities. 15
134	134	(1) In the absence of actual malice, an insurer, the authorized representative of the insurer, 16
135	135	an insurance producer, the insurance commissioner, or an organization of which the insurance 17
136	136	commissioner is a member and that compiles the information and makes it available to other 18
137	137	insurance commissioners or regulatory or law enforcement agencies shall not be subject to civil 19
138	138	liability, except as provided in this section, and a civil cause of action of any nature shall not arise 20
139	139	against these entities or their respective agents or employees, except as provided in this section, as 21
140	140	a result of any statement or information required by or provided pursuant to this section or any 22
141	141	information relating to any statement that may be requested in writing by the insurance 23
142	142	commissioner, from an insurer or insurance producer; or a statement by a terminating insurer or 24
143	143	insurance producer to an insurer or insurance producer limited solely and exclusively to whether a 25
144	144	termination for cause under subsection (a) of this section was reported to the insurance 26
145	145	commissioner, provided that the propriety of any termination for cause under subsection (a) of this 27
146	146	section is certified in writing by an officer or authorized representative of the insurer or insurance 28
147	147	producer terminating the relationship. 29
148	148	(2) In any action brought against a person that may have immunity under this chapter for 30
149	149	making any statement required by this section or providing any information relating to any 31
150	150	statement that may be requested by the insurance commissioner, the party bringing the action shall 32
151	151	plead specifically in any allegation that subdivision (d)(e)(1) of this section does not apply because 33
152	152	the person making the statement or providing the information did so with actual malice. 34
153	153
154	154
155	155	LC002082 - Page 5 of 61
156	156	(3) This chapter shall not abrogate or modify any existing statutory or common law 1
157	157	privileges or immunities. 2
158	158	(e)(f) Confidentiality. 3
159	159	(1) Any documents, materials or other information in the control or possession of the 4
160	160	department that is furnished by an insurer, insurance producer or an employee or agent of the 5
161	161	insurer or insurance producer acting on behalf of the insurer or insurance producer, or obtained by 6
162	162	the insurance commissioner in an investigation pursuant to this section, shall be confidential by law 7
163	163	and privileged, shall not be subject to chapter 2 of title 38, shall not be subject to subpoena, and 8
164	164	shall not be subject to discovery or admissible in evidence in any private civil action. The insurance 9
165	165	commissioner is authorized to use the documents, materials or other information in the furtherance 10
166	166	of any regulatory or legal action brought as a part of the insurance commissioner's duties. 11
167	167	(2) Neither the insurance commissioner nor any person who received documents, materials 12
168	168	or other information while acting under the authority of the insurance commissioner shall be 13
169	169	permitted or required to testify in any private civil action concerning any confidential documents, 14
170	170	materials, or information subject to this chapter. 15
171	171	(3) In order to assist in the performance of the insurance commissioner's duties under this 16
172	172	chapter, the insurance commissioner: 17
173	173	(i) May share documents, materials or other information, including the confidential and 18
174	174	privileged documents, materials or information subject to this chapter, with other state, federal, and 19
175	175	international regulatory agencies, with the NAIC, its affiliates or subsidiaries, and with state, 20
176	176	federal, and international law enforcement authorities, provided that the recipient agrees to 21
177	177	maintain the confidentiality and privileged status of the document, material or other information; 22
178	178	(ii) May receive documents, materials or information, including confidential and privileged 23
179	179	documents, materials or information, from the NAIC, its affiliates or subsidiaries and from 24
180	180	regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall 25
181	181	maintain as confidential or privileged any document, material or information received with notice 26
182	182	or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the 27
183	183	source of the document, material or information; 28
184	184	(iii) May enter into agreements governing sharing and use of information consistent with 29
185	185	this subsection; 30
186	186	(iv) No waiver of any applicable privilege or claim of confidentiality in the documents, 31
187	187	materials, or information shall occur as a result of disclosure to the commissioner under this section 32
188	188	or as a result of sharing as authorized in this chapter; 33
189	189	(v) Nothing in this chapter shall prohibit the insurance commissioner from releasing final, 34
190	190
191	191
192	192	LC002082 - Page 6 of 61
193	193	adjudicated actions including for cause terminations that are open to public inspection pursuant to 1
194	194	chapter 2 of title 38 to a database or other clearinghouse service maintained by the NAIC, its 2
195	195	affiliates or subsidiaries; and 3
196	196	(vi) If the department releases to an unauthorized third party any documents, materials or 4
197	197	other information provided to the department pursuant to this section, then the department shall be 5
198	198	subject to a fine not to exceed one thousand dollars ($1,000) after a hearing on this violation brought 6
199	199	in the Superior Court. 7
200	200	(f)(g) Penalties for failing to report. An insurer, the authorized representative of the 8
201	201	insurer, or insurance producer that fails to report as required under the provisions of this section or 9
202	202	that is found to have reported with actual malice by a court of competent jurisdiction may, after 10
203	203	notice and hearing, have its license or certificate of authority suspended or revoked and may be 11
204	204	fined in accordance with § 42-14-16. 12
205	205	SECTION 2. Section 27-10-1.1 of the General Laws in Chapter 27-10 entitled "Claim 13
206	206	Adjusters" is hereby amended to read as follows: 14
207	207	27-10-1.1. Definitions. 15
208	208	(a) "Adjuster” means an individual licensed as either a public company or independent 16
209	209	adjuster. 17
210	210	(b) "Catastrophic disaster” according to the Federal Response Plan, means an event that 18
211	211	results in large numbers of deaths and injuries; causes extensive damage or destruction of facilities 19
212	212	that provide and sustain human needs; produces an overwhelming demand on state and local 20
213	213	response resources and mechanisms; causes a severe long-term effect on general economic activity; 21
214	214	and severely affects state, local, and private sector capabilities to begin and sustain response 22
215	215	activities. A catastrophic disaster shall be declared by the President of the United States, the 23
216	216	governor of the state, or the insurance commissioner. 24
217	217	(c) "Company adjuster” means a person who: 25
218	218	(1) Is an individual who contracts for compensation with insurers or self-insurers as an 26
219	219	employee; and 27
220	220	(2) Investigates, negotiates, or settles property, casualty, or workers' compensation claims 28
221	221	for insurers or for self-insurers as an employee. 29
222	222	(d) "Department” means the insurance division of the department of business regulation. 30
223	223	(e) "Home state” means the District of Columbia and any state or territory of the United 31
224	224	States in which the adjuster's principal place of residence or principal place of business is located. 32
225	225	If neither the state in which the public independent or company adjuster maintains the principal 33
226	226	place of residence, nor the state in which the adjuster maintains the principal place of business, has 34
227	227
228	228
229	229	LC002082 - Page 7 of 61
230	230	a substantially similar law governing adjusters, the adjuster may declare another state in which it 1
231	231	becomes licensed and acts as a public an independent or company adjuster to be the "home state.” 2
232	232	Designated home state is not available for public adjusters. 3
233	233	(f) "Independent adjuster” means a person who: 4
234	234	(1) Is an individual who contracts for compensation with insurers or self-insurers as an 5
235	235	independent contractor; or 6
236	236	(2) Investigates, negotiates, or settles property, casualty, or workers' compensation claims 7
237	237	for insurers or for self-insurers as an independent contractor. 8
238	238	(g) "Insurance commissioner” means the director of the department of business regulation 9
239	239	or his or her designee. 10
240	240	(h) "NAIC” means the National Association of Insurance Commissioners. 11
241	241	(i) "Public adjuster” means any person who, for compensation or any other thing of value 12
242	242	on behalf of the insured: 13
243	243	(1) Acts or aids, solely in relation to first-party claims arising under insurance contracts 14
244	244	that insure the real or personal property of the insured, other than automobile, on behalf of an 15
245	245	insured in negotiating for, or effecting the settlement of, a claim for loss or damage covered by an 16
246	246	insurance contract; 17
247	247	(2) Advertises for employment as a public adjuster of insurance claims or solicits business 18
248	248	or represents himself themself or herself to the public as a public adjuster of first-party insurance 19
249	249	claims for losses or damages arising out of policies of insurance that insure real or personal 20
250	250	property; or 21
251	251	(3) Directly or indirectly solicits business, investigates or adjusts losses, or advises an 22
252	252	insured about first-party claims for losses or damages arising out of policies of insurance that insure 23
253	253	real or personal property for another person engaged in the business of adjusting losses or damages 24
254	254	covered by an insurance policy, for the insured. 25
255	255	(j) "Uniform individual application” means the current version of the National Association 26
256	256	of Insurance Commissioners (NAIC) Uniform Individual Application for resident and nonresident 27
257	257	individuals. 28
258	258	SECTION 3. Section 27-13.1-7 of the General Laws in Chapter 27-13.1 entitled 29
259	259	"Examinations" is hereby amended to read as follows: 30
260	260	27-13.1-7. Cost of examinations. 31
261	261	(a) The total cost of the examinations shall be borne by the examined companies and shall 32
262	262	include the following expenses: 33
263	263	(1) One hundred fifty percent (150%) of the total salaries and benefits paid to the examining 34
264	264
265	265
266	266	LC002082 - Page 8 of 61
267	267	personnel of the banking and insurance division engaged in those examinations less any salary 1
268	268	reimbursements; 2
269	269	(2) All reasonable technology costs related to the examination process. Technology costs 3
270	270	shall include the actual cost of software and hardware utilized in the examination process and the 4
271	271	cost of training examination insurance personnel in the proper use of the software or hardware; 5
272	272	(3) All necessary and reasonable education and training costs incurred by the state to 6
273	273	maintain the proficiency and competence of the examining insurance personnel. All these costs 7
274	274	shall be incurred in accordance with appropriate state of Rhode Island regulations, guidelines and 8
275	275	procedures. 9
276	276	(b) Expenses incurred pursuant to subsections (a)(2) and (a)(3) of this section shall be 10
277	277	allocated equally to each company domiciled in Rhode Island no more frequently than annually 11
278	278	and shall not exceed an annual average assessment of three thousand five hundred dollars ($3,500) 12
279	279	five thousand dollars ($5,000) per company for any given three (3) calendar year period. All 13
280	280	revenues collected pursuant to this section shall be deposited as general revenues. That assessment 14
281	281	shall be in addition to any taxes and fees payable to the state. 15
282	282	SECTION 4. Sections 27-34.3-2, 27-34.3-3, 27-34.3-5, 27-34.3-6, 27-34.3-7, 27-34.3-8, 16
283	283	27-34.3-9, 27-34.3-11, 27-34.3-12, 27-34.3-13, 27-34.3-14, 27-34.3-19 and 27-34.3-20 of the 17
284	284	General Laws in Chapter 27-34.3 entitled "Rhode Island Life and Health Insurance Guaranty 18
285	285	Association Act" are hereby amended to read as follows: 19
286	286	27-34.3-2. Purpose. 20
287	287	(a) The purpose of this chapter is to protect, subject to certain limitations, the persons 21
288	288	specified in § 27-34.3-3(a) against failure in the performance of contractual obligations, under life, 22
289	289	and health insurance policies and annuity policies, plans or contracts specified in § 27-34.3-3(b), 23
290	290	because of the impairment or insolvency of the member insurer that issued the policies, plans, or 24
291	291	contracts. 25
292	292	(b) To provide this protection, an association of member insurers is created to pay benefits 26
293	293	and to continue coverages as limited in this chapter, and members of the association are subject to 27
294	294	assessment to provide funds to carry out the purpose of this chapter. 28
295	295	(c) In accordance with this purpose, in determining the coverage limits to be applied in § 29
296	296	27-34.3-3 in cases in which there were different statutory limits at the time the insurer was declared 30
297	297	impaired and the time the insurer was declared insolvent, the statute with the higher limits shall be 31
298	298	applied to the claim. 32
299	299	27-34.3-3. Coverage and limitations. 33
300	300	(a) This chapter shall provide coverage for the policies and contracts specified in subsection 34
301	301
302	302
303	303	LC002082 - Page 9 of 61
304	304	(b) of this section: 1
305	305	(1) To persons who, regardless of where they reside (except for nonresident certificate 2
306	306	holders under group policies or contracts), are the beneficiaries, assignees or payees, including 3
307	307	health care providers rendering services covered under health insurance policies or certificates, of 4
308	308	the persons covered under subsection (2); and 5
309	309	(2) To persons who are owners of or certificate holders or enrollees under the policies or 6
310	310	contracts (other than unallocated annuity contracts, and structured settlement annuities) and in each 7
311	311	case who: 8
312	312	(i) Are residents; or 9
313	313	(ii) Are not residents, but only under all of the following conditions: 10
314	314	(A) The member insurer that issued the policies or contracts is domiciled in this state; 11
315	315	(B) The states in which the persons reside have associations similar to the association 12
316	316	created by this chapter; and 13
317	317	(C) The persons are not eligible for coverage by an association in any other state due to the 14
318	318	fact that the insurer or the health maintenance organization was not licensed in the state at the time 15
319	319	specified in the state's guaranty association law. 16
320	320	(3) For unallocated annuity contracts set forth in subsection (b) of this section, paragraphs 17
321	321	(1) and (2) of this subsection shall not apply, and this chapter shall (except as provided in 18
322	322	paragraphs (5) and (a)(6) of this subsection) provide coverage to: 19
323	323	(i) Persons who are owners of the unallocated annuity contracts if the contracts are issued 20
324	324	to or in connection with a specific benefit plan whose plan sponsor has its principal place of 21
325	325	business in this state; and 22
326	326	(ii) Persons who are owners of unallocated annuity contracts issued to or in connection 23
327	327	with government lotteries if the owners are residents. 24
328	328	(4) For structured settlement annuities specified in subsection (b)(1), paragraphs (1) and 25
329	329	(2) of this subsection shall not apply, and this chapter shall (except as provided in paragraphs (5) 26
330	330	and (6) of this subsection) provide coverage to a person who is a payee under a structured settlement 27
331	331	annuity (or beneficiary of a payee if the payee is deceased), if the payee: 28
332	332	(i) Is a resident, regardless of where the contract owner resides; or 29
333	333	(ii) Is not a resident, but only under both of the following conditions: 30
334	334	(A)(I) The contract owner of the structured settlement annuity is a resident; or 31
335	335	(II) The contract owner of the structured settlement annuity is not a resident but the insurer 32
336	336	that issued the structured settlement annuity is domiciled in this state; and 33
337	337	The state in which the contract owner resides has an association similar to the association 34
338	338
339	339
340	340	LC002082 - Page 10 of 61
341	341	created by this chapter; and 1
342	342	(B) Neither the payee or beneficiary, nor the contract owner is eligible for coverage by the 2
343	343	association of the state in which the payee or contract owner resides. 3
344	344	(5) This chapter shall not provide coverage to: 4
345	345	(i) A person who is a payee or beneficiary of a contract owner resident of this state, if the 5
346	346	payee or beneficiary is afforded any coverage by the association of another state; or 6
347	347	(ii) A person covered under paragraph (3) of this subsection, if any coverage is provided 7
348	348	by the association of another state to the person.; or 8
349	349	(iii) A person who acquires rights to receive payments through a structured settlement 9
350	350	factoring transaction as defined in 26 U.S.C. 5891(c)(3)(A), regardless of whether the transaction 10
351	351	occurred before or after such section became effective. 11
352	352	(6) This chapter is intended to provide coverage to a person who is a resident of this state 12
353	353	and, in special circumstances, to a nonresident. In order to avoid duplicate coverage, if a person 13
354	354	who would otherwise receive coverage under this chapter is provided coverage under the laws of 14
355	355	any other state, the person shall not be provided coverage under this chapter. In determining the 15
356	356	application of the provisions of this paragraph in situations where a person could be covered by the 16
357	357	association of more than one state, whether as an owner, payee, enrollee, beneficiary, or assignee, 17
358	358	this chapter shall be construed in conjunction with other state laws to result in coverage by only 18
359	359	one association. 19
360	360	(b)(1) This chapter shall provide coverage to the persons specified in subsection (a) of this 20
361	361	section for policies or contracts for direct, non-group life insurance, health, or annuity policies or 21
362	362	contracts including health maintenance organization subscriber contracts and certificates, or 22
363	363	annuities and supplemental policies or contracts to any of these, for certificates under direct group 23
364	364	policies and contracts, and for unallocated annuity contracts issued by member insurers, except as 24
365	365	limited by this chapter. Annuity contracts and certificates under group annuity contracts include, 25
366	366	but are not limited to, guaranteed investment contracts, deposit administration contracts, 26
367	367	unallocated funding agreements, allocated funding agreements, structured settlement annuities, 27
368	368	annuities issued to or in connection with government lotteries and any immediate or deferred 28
369	369	annuity contracts. 29
370	370	(2) This Except as otherwise provided in subsection (b)(3) of this section, this chapter shall 30
371	371	not provide coverage for: 31
372	372	(i) A portion of a policy or contract not guaranteed by the member insurer, or under which 32
373	373	the risk is borne by the policy or contract owner; 33
374	374	(ii) A policy or contract of reinsurance, unless assumption certificates have been issued 34
375	375
376	376
377	377	LC002082 - Page 11 of 61
378	378	pursuant to the reinsurance policy or contract; 1
379	379	(iii) A portion of a policy or contract to the extent that the rate of interest on which it is 2
380	380	based, or the interest rate, crediting rate or similar factor determined by use of an index or other 3
381	381	external reference stated in the policy or contract employed in calculating returns or changes in 4
382	382	value: 5
383	383	(A) Averaged over the period of four (4) years prior to the date on which the member 6
384	384	insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds 7
385	385	the rate of interest determined by subtracting two (2) percentage points from Moody's corporate 8
386	386	bond yield average averaged for that same four-year (4) period or for such lesser period if the policy 9
387	387	or contract was issued less than four (4) years before the member insurer becomes an impaired or 10
388	388	insolvent insurer under this chapter, whichever is earlier; and 11
389	389	(B) On and after the date on which the member insurer becomes an impaired or insolvent 12
390	390	insurer under this chapter, whichever is earlier, exceeds the rate of interest determined by 13
391	391	subtracting three (3) percentage points from Moody's corporate bond yield average as most recently 14
392	392	available; 15
393	393	(iv) A portion of a policy or contract issued to a plan or program of an employer, association 16
394	394	or other person to provide life, health or annuity benefits to its employees, members or others to 17
395	395	the extent that the plan or program is self-funded or uninsured, including but not limited to benefits 18
396	396	payable by an employer, association or other person under: 19
397	397	(A) A multiple employer welfare arrangement as defined in 29 U.S.C. § 1144; 20
398	398	(B) A minimum premium group insurance plan; 21
399	399	(C) A stop-loss group insurance plan; or 22
400	400	(D) An administrative services only contract; 23
401	401	(v) A portion of a policy or contract to the extent that it provides for: 24
402	402	(A) Dividends or experience rating credits; 25
403	403	(B) Voting rights; or 26
404	404	(C) Payment of any fees or allowances to any person, including the policy or contract 27
405	405	owner, in connection with the service to or administration of the policy or contract. 28
406	406	(vi) A policy or contract issued in this state by a member insurer at a time when it was not 29
407	407	licensed or did not have a certificate of authority to issue the policy or contract in this state; 30
408	408	(vii) An unallocated annuity contract issued to or in connection with a benefit plan 31
409	409	protected under the federal pension benefit guaranty corporation, regardless of whether the federal 32
410	410	pension benefit guaranty corporation has yet become liable to make any payments with respect to 33
411	411	the benefit plan; 34
412	412
413	413
414	414	LC002082 - Page 12 of 61
415	415	(viii) A portion of unallocated annuity contract that is not issued to or in connection with a 1
416	416	specific employee, union or association of natural persons benefit plan or a government lottery; 2
417	417	(ix) A portion of a policy or contract to the extent that the assessments required by § 27-3
418	418	34.3-9 with respect to the policy or contract are preempted by federal or state law; and 4
419	419	(x) An obligation that does not arise under the express written terms of the policy or 5
420	420	contract issued by the member insurer to the enrollee, certificate holder, contract owner or policy 6
421	421	owner, including, without limitation: 7
422	422	(A) Claims based on marketing materials; 8
423	423	(B) Claims based on side letters, riders or other documents that were issued by the member 9
424	424	insurer without meeting applicable policy or contract form filing or approval requirements; 10
425	425	(C) Misrepresentations of or regarding policy or contract benefits; 11
426	426	(D) Extracontractual claims; or 12
427	427	(E) A claim for penalties or consequential or incidental damages; 13
428	428	(xi) A contractual agreement that establishes the member insurer's obligations to provide a 14
429	429	book value accounting guaranty for defined contribution benefit plan participants by reference to a 15
430	430	portfolio of assets that is owned by the benefit plan or its trustee, which in each case is not an 16
431	431	affiliate of the member insurer; 17
432	432	(xii) A portion of a policy or contract to the extent it provides for interest or other changes 18
433	433	in value to be determined by the use of an index or other external reference stated in the policy or 19
434	434	contract, but which have not been credited to the policy or contract, or as to which the policy or 20
435	435	contract owner's rights are subject to forfeiture, as of the date the member insurer becomes an 21
436	436	impaired or insolvent insurer under this chapter, whichever is earlier. If a policy's or contract's 22
437	437	interest or changes in value are credited less frequently than annually, then, for purposes of 23
438	438	determining the values that have been credited and are not subject to forfeiture under this paragraph, 24
439	439	the interest or change in value determined by using the procedures defined in the policy or contract 25
440	440	will be credited as if the contractual date of crediting interest or changing values was the date of 26
441	441	impairment or insolvency, whichever is earlier, and will not be subject to forfeiture; 27
442	442	(xiii) Any transaction or combination of transactions between a protected cell and the 28
443	443	general account or another protected cell of a protected cell company organized under chapter 64 29
444	444	of this title; or 30
445	445	(xiv) A policy or contract providing any hospital, medical, prescription drug or other 31
446	446	healthcare benefits pursuant to Part C or Part D of subchapter XVIII, chapter 7 of title 42 of the 32
447	447	United States Code (commonly known as Medicare part C & D), or subchapter XIX, chapter 7 of 33
448	448	title 42 of the United States Code (commonly known as Medicaid), or any regulations issued 34
449	449
450	450
451	451	LC002082 - Page 13 of 61
452	452	pursuant thereto.; or 1
453	453	(xvii) Structured settlement annuity benefits to which a payee (or beneficiary) has 2
454	454	transferred their rights in a structured settlement factoring transaction as defined in 26 U.S.C. 3
455	455	5891(c)(3)(A), regardless of whether the transaction occurred before or after such section became 4
456	456	effective. 5
457	457	(3) The exclusion from coverage referenced in subsection (b)(2)(iii) of this section shall 6
458	458	not apply to any portion of a policy or contract, including a rider, that provides long-term care or 7
459	459	any other health insurance benefits. 8
460	460	(c) The benefits that the association may become obligated to cover shall in no event exceed 9
461	461	the lesser of: 10
462	462	(1) The contractual obligations for which the member insurer is liable or would have been 11
463	463	liable if it were not an impaired or insolvent insurer; or 12
464	464	(2)(i) With respect to any one life, regardless of the number of policies or contracts: 13
465	465	(A) Three hundred thousand dollars ($300,000) in life insurance death benefits, but not 14
466	466	more than one hundred thousand dollars ($100,000) in net cash surrender and net cash withdrawal 15
467	467	values for life insurance; 16
468	468	(B) In For health insurance benefits: 17
469	469	(I) One hundred thousand dollars ($100,000) for coverages not considered as disability 18
470	470	income insurance or basic hospital, medical and surgical insurance health benefit plans or major 19
471	471	medical insurance or long-term care insurance, including any net cash surrender and net cash 20
472	472	withdrawal values; 21
473	473	(II) Three hundred thousand dollars ($300,000) for disability income insurance and three 22
474	474	hundred thousand dollars ($300,000) for long-term care insurance; 23
475	475	(III) Five hundred thousand dollars ($500,000) for basic hospital, medical and surgical 24
476	476	insurance health benefit plans; or 25
477	477	(C) Two hundred fifty thousand dollars ($250,000) in the present value of annuity benefits, 26
478	478	including net cash surrender and net cash withdrawal values; 27
479	479	(ii) With respect to each individual participating in a governmental retirement plan 28
480	480	established under § 401, 403(b) or 457 of the U.S. Internal Revenue Code, 26 U.S.C. § 401, 403(b) 29
481	481	or 457, covered by an unallocated annuity contract or the beneficiaries of each such individual if 30
482	482	deceased, in the aggregate, two hundred fifty thousand dollars ($250,000) in present value annuity 31
483	483	benefits, including net cash surrender and net cash withdrawal values; 32
484	484	(iii) With respect to each payee of a structured settlement annuity or beneficiary or 33
485	485	beneficiaries, of the payee if deceased, two hundred fifty thousand dollars ($250,000) in present 34
486	486
487	487
488	488	LC002082 - Page 14 of 61
489	489	value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal 1
490	490	values if any; 2
491	491	(iv) However in no event shall the association be obligated to cover more than: (A) an 3
492	492	aggregate of three hundred thousand dollars ($300,000) in benefits with respect to any one life 4
493	493	under this paragraph and paragraphs (i), (ii) and (iii) of this subdivision except with respect to 5
494	494	benefits for basic hospital, medical and surgical insurance and major medical insurance health 6
495	495	benefit plans under subparagraph 2(i)(B) of this subsection, in which case the aggregate liability of 7
496	496	the association shall not exceed five hundred thousand dollars ($500,000) with respect to any one 8
497	497	individual; or (B) with respect to one owner of multiple non-group policies of life insurance, 9
498	498	whether the policy or contract owner is an individual, firm, corporation or other person, and whether 10
499	499	the persons insured are officers, managers, employees or other persons, more than five million 11
500	500	dollars ($5,000,000) in benefits, regardless of the number of policies and contracts held by the 12
501	501	owner; 13
502	502	(v) With respect to either: (A) one contract owner provided coverage under subsection 14
503	503	(a)(3)(i); or (B) one plan sponsor whose plans own directly or in trust any one or more unallocated 15
504	504	annuity contracts not included in paragraph (ii) of this subdivision, five million dollars ($5,000,000) 16
505	505	in benefits, irrespective of the number of contracts with respect to the contract owner or plan 17
506	506	sponsor. Provided, however, in the case where one or more unallocated annuity contracts that are 18
507	507	covered contracts under this chapter and are owned by a trust or other entity for the benefit of two 19
508	508	(2) or more plan sponsors, coverage shall be afforded by the association if the largest interest in the 20
509	509	trust or entity owning the contract or contracts is held by a plan sponsor whose principal place of 21
510	510	business is in this state and in no event shall the association be obligated to cover more than five 22
511	511	million dollars ($5,000,000) in benefits with respect to all such unallocated contracts; 23
512	512	(vi) The limitations set forth in this subsection are limitations on the benefits for which the 24
513	513	association is obligated before taking into account either its subrogation and assignment rights or 25
514	514	the extent to which those benefits could be provided out of the assets of the impaired or insolvent 26
515	515	insurer attributable to covered policies. The costs of the association's obligations under this chapter 27
516	516	may be met by the use of assets attributable to covered policies or reimbursed to the association 28
517	517	pursuant to its subrogation and assignment rights. 29
518	518	(vii) For purposes of this chapter, benefits provided by a long-term care rider to a life 30
519	519	insurance policy or annuity contract shall be considered the same type of benefits as the base life 31
520	520	insurance policy or annuity contract to which it relates. 32
521	521	(d) In performing its obligations to provide coverage under § 27-34.3-8, the association 33
522	522	shall not be required to guarantee, assume, reinsure, reissue or perform, or cause to be guaranteed, 34
523	523
524	524
525	525	LC002082 - Page 15 of 61
526	526	assumed, reinsured, reissued or performed, contractual obligations of the insolvent or impaired 1
527	527	insurer under a covered policy or contract that do not materially affect the economic values or 2
528	528	economic benefits of the covered policy or contract. 3
529	529	27-34.3-5. Definitions. 4
530	530	As used in this chapter: 5
531	531	(1) "Account” means either of the two accounts created under § 27-34.3-6. 6
532	532	(2) "Association” means the Rhode Island life and health insurance guaranty association 7
533	533	created under § 27-34.3-6. 8
534	534	(3) "Authorized assessment” or the term "authorized” when used in the context of 9
535	535	assessments means a resolution by the board of directors has been passed whereby an assessment 10
536	536	will be called immediately or in the future from member insurers for a specified amount. An 11
537	537	assessment is authorized when the resolution is passed. 12
538	538	(4) "Benefit plan” means a specific employee, union or association of natural persons 13
539	539	benefit plan. 14
540	540	(5) "Called assessment” or the term "called” when used in the context of assessments means 15
541	541	that a notice has been issued by the association to member insurers requiring that an authorized 16
542	542	assessment be paid within the time frame set forth within the notice. An authorized assessment 17
543	543	becomes a called assessment when notice is mailed by the association to member insurers. 18
544	544	(6) "Commissioner” means the commissioner of insurance within the department of 19
545	545	business regulation of this state definition prescribed by § 42-14-5. 20
546	546	(7) "Contractual obligation” means any obligation under a policy or contract or certificate 21
547	547	under a group policy or contract, or portion of a group policy or contract for which coverage is 22
548	548	provided under § 27-34.3-3. 23
549	549	(8) "Covered contract or covered policy” means any policy or contract or portion of a policy 24
550	550	or contract for which coverage is provided under § 27-34.3-3. 25
551	551	(9) "Extra-contractual claims” means claims not arising directly out of contract provisions, 26
552	552	including, for example, claims relating to bad faith in the payment of claims, punitive or exemplary 27
553	553	damages or attorneys' fees and costs. 28
554	554	(10) "Health benefit plan" means any hospital or medical expense policy or certificate, or 29
555	555	health maintenance organization subscriber contract or any other similar health contract. "Health 30
556	556	benefit plan" does not include: 31
557	557	(i) Accident only insurance: 32
558	558	(ii) Credit insurance; 33
559	559	(iii) Dental only insurance; 34
560	560
561	561
562	562	LC002082 - Page 16 of 61
563	563	(iv) Vision only insurance; 1
564	564	(v) Medicare Supplement insurance; 2
565	565	(vi) Benefits for long-term care, home health care, community-based care, or any 3
566	566	combination thereof; 4
567	567	(vii) Disability income insurance; 5
568	568	(viii) Coverage for on-site medical clinics; or 6
569	569	(ix) Specified disease, hospital confinement indemnity, or limited benefit health insurance 7
570	570	if the types of coverage do not provide coordination of benefits and are provided under separate 8
571	571	policies or certificates. 9
572	572	(10)(11) "Impaired insurer” means a member insurer which is not an insolvent insurer, and 10
573	573	(i) Is placed under an order of rehabilitation or conservation by a court of competent 11
574	574	jurisdiction. 12
575	575	(11)(12) "Insolvent insurer” means a member insurer which after January 1, 1996, is placed 13
576	576	under an order of liquidation by a court of competent jurisdiction with a finding of insolvency. 14
577	577	(12)(13) "Member insurer” means any insurer or health maintenance organization licensed 15
578	578	or which holds a certificate of authority to transact in this state any kind of insurance or health 16
579	579	maintenance organization business for which coverage is provided under § 27-34.3-3, and includes 17
580	580	any insurer or health maintenance organization whose license or certificate of authority in this state 18
581	581	may have been suspended, revoked, not renewed or voluntarily withdrawn, but does not include: 19
582	582	(i) A hospital or medical service organization, whether profit or nonprofit; or 20
583	583	(ii) A health maintenance organization; or 21
584	584	(iii) A fraternal benefit society; or 22
585	585	(iv) A mandatory state pooling plan; or 23
586	586	(v) A mutual assessment company or other person that operates on an assessment basis; or 24
587	587	(vi) An insurance exchange; or 25
588	588	(vii) An organization that has a certificate or license limited to the issuance of charitable 26
589	589	gift annuities; or 27
590	590	(viii) An entity similar to any of the above. 28
591	591	(13)(14) "Moody's corporate bond yield average” means the monthly average corporates 29
592	592	as published by Moody's investors service, inc. Investors Service, Inc., or any successor to it. 30
593	593	(14)(15) "Owner” of a policy or contract and "policyholder," "policy owner” and or 31
594	594	"contract owner” means the person who is identified as the legal owner under the terms of the 32
595	595	policy or contract or who is otherwise vested with legal title to the policy or contract through a 33
596	596	valid assignment completed in accordance with the terms of the policy or contract and properly 34
597	597
598	598
599	599	LC002082 - Page 17 of 61
600	600	recorded as the owner on the books of the member insurer. The terms owner, contract owner, 1
601	601	policyholder and policy owner do not include persons with a mere beneficial interest in a policy or 2
602	602	contract. 3
603	603	(15)(16) "Person” means any individual, corporation, limited liability company, 4
604	604	partnership, association, governmental body or entity or voluntary organization. 5
605	605	(16)(17) "Plan sponsor” means: 6
606	606	(i) The employer in case of a benefit plan established or maintained by a single employer; 7
607	607	(ii) The employee organization in the case of a benefit plan established or maintained by 8
608	608	an employee organization; or 9
609	609	(iii) In the case of a benefit plan established or maintained by two (2) or more employers 10
610	610	or jointly by one or more employers and one or more employee organizations, the association, 11
611	611	committee, joint board of trustees, or other similar group of representatives of the parties who 12
612	612	establish or maintain the benefit plan. 13
613	613	(17)(18) "Premiums” means amounts or considerations (by whatever name called) received 14
614	614	on covered policies or contracts less returned premiums, considerations and deposits, and less 15
615	615	dividends and experience credits. "Premiums” does not include any amounts or consideration 16
616	616	received for any policies or contracts or for the portions of policies or contracts for which coverage 17
617	617	is not provided under § 27-34.3-3(b) except that assessable premium shall not be reduced on 18
618	618	account of § 27-34.3-3(b)(2)(iii) relating to interest limitations and § 27-34.3-3(c)(2) relating to 19
619	619	limitations with respect to one individual, one participant and one owner. "Premiums” shall not 20
620	620	include: 21
621	621	(i) Premiums in excess of five million dollars ($5,000,000) on an unallocated annuity 22
622	622	contract not issued under a governmental retirement benefit plan (or its trustee) established under 23
623	623	§ 401, 403(b) or 457 of the United States Internal Revenue Code, 26 U.S.C. § 401, 403(b) or 457. 24
624	624	(ii) With respect to multiple nongroup policies of life insurance owned by one owner, 25
625	625	whether the policy or contract owner is an individual, firm, corporation or other person, and whether 26
626	626	the persons insured are officers, managers, employees or other persons, premiums in excess of five 27
627	627	million dollars ($5,000,000) with respect to these policies or contracts, regardless of the number of 28
628	628	policies or contracts held by the owner. 29
629	629	(18)(19)(i) "Principal place of business” of a plan sponsor or a person other than a natural 30
630	630	person means the single state in which the natural persons who establish policy for the direction, 31
631	631	control and coordination of the operations of the entity as a whole primarily exercise that function, 32
632	632	determined by the association in its reasonable judgment by considering the following factors: 33
633	633	(A) The state in which the primary executive and administrative headquarters of the entity 34
634	634
635	635
636	636	LC002082 - Page 18 of 61
637	637	is located; 1
638	638	(B) The state in which the principal office of the chief executive officer of the entity is 2
639	639	located; 3
640	640	(C) The state in which the board of directors (or similar governing person or persons) of 4
641	641	the entity conducts the majority of its meetings; 5
642	642	(D) The state in which the executive or management committee of the board of directors 6
643	643	(or a similar governing person or persons) of the entity, conducts the majority of its meetings; 7
644	644	(E) The state from which the management of the overall operations of the entity is directed; 8
645	645	and 9
646	646	(F) In the case of a benefit plan sponsored by affiliated companies comprising a 10
647	647	consolidated corporation, the state in which the holding company or controlling affiliate has its 11
648	648	principal place of business as determined using the above factors. However, in the case of a plan 12
649	649	sponsor, if more than fifty percent (50%) of the participants in the benefit plan are employed in a 13
650	650	single state, that state shall be deemed to be the principal place of business of the plan sponsor. 14
651	651	(ii) The principal place of business of a plan sponsor of a benefit plan described in 15
652	652	subsection (16)(17)(iii) of this section shall be deemed to be the principal place of business of the 16
653	653	association, committee, joint board of trustees or other similar group of representatives of the 17
654	654	parties who establish or maintain the benefit plan that, in lieu of a specific or clear designation of 18
655	655	a principal place of business, shall be deemed to be the principal place of business of the employer 19
656	656	or employee organization that has the largest investment in the benefit plan in question. 20
657	657	(19)(20) "Receivership court” means the court in the insolvent or impaired insurer's state 21
658	658	having jurisdiction over the conservation, rehabilitation or liquidation of the member insurer. 22
659	659	(20)(21) "Resident” means a person to whom a contractual obligation is owed and who 23
660	660	resides in this state on the date of entry of court order that determines a member insurer to be an 24
661	661	impaired insurer or a court order that determines a member insured to be an insolvent insurer, 25
662	662	whichever occurs first. A person may be a resident of only one state, which in the case of a person 26
663	663	other than a natural person shall be its principal place of business. Citizens of the United States that 27
664	664	are either: (i) residents of foreign countries; or (ii) residents of United States possessions, territories 28
665	665	or protectorates that do not have an association similar to the association created by this chapter, 29
666	666	shall be deemed residents of the state of domicile of the member insurer that issued the polices or 30
667	667	contracts. 31
668	668	(21)(22) "Structured settlement annuity” means an annuity purchased in order to fund 32
669	669	periodic payments for a claimant in payment for or with respect to personal injuries suffered by the 33
670	670	claimant. 34
671	671
672	672
673	673	LC002082 - Page 19 of 61
674	674	(22)(23) "State” means a state, the District of Columbia, Puerto Rico, or a United States 1
675	675	possession, territory or protectorate. 2
676	676	(23)(24) "Supplemental contract” means a written agreement entered into for the 3
677	677	distribution of proceeds under a life, health or annuity policy or contract. 4
678	678	(24)(25) "Unallocated annuity contract” means any annuity contract or group annuity 5
679	679	certificate which is not issued to and owned by an individual, except to the extent of any annuity 6
680	680	benefits guaranteed to an individual by an insurer under the contract or certificate. 7
681	681	27-34.3-6. Creation of the association. 8
682	682	(a) There is created a nonprofit legal entity to be known as the Rhode Island life and health 9
683	683	insurance guaranty association. All member insurers shall be and remain members of the 10
684	684	association as a condition of their authority to transact insurance or health maintenance organization 11
685	685	business in this state. The association shall perform its functions under the plan of operation 12
686	686	established and approved under § 27-34.3-10, or as previously established and approved under § 13
687	687	27-34.1-11 [Repealed] and shall exercise its powers through a board of directors established under 14
688	688	§ 27-34.3-7 or as previously established under § 27-34.1-8 [Repealed]. For purposes of 15
689	689	administration and assessment, the association shall maintain two (2) accounts: 16
690	690	(1) The life insurance and annuity account which includes the following subaccounts: 17
691	691	(i) Life insurance account; 18
692	692	(ii) Annuity account; which shall include annuity contracts owned by a governmental 19
693	693	retirement plan (or its trustee) established under section 401, 403(b) or 457 of the United States 20
694	694	Internal Revenue Code, 26 U.S.C. § 401, 403(b) or 457, but shall otherwise exclude unallocated 21
695	695	annuities; and 22
696	696	(iii) Unallocated annuity account which shall exclude contracts owned by a governmental 23
697	697	retirement benefit plan (or its trustee) established under § 401, 403(b) or 457 of the United States 24
698	698	Internal Revenue Code, 26 U.S.C. § 401, 403(b) or 457. 25
699	699	(2) The health insurance account. 26
700	700	(b) The association shall come under the immediate supervision of the commissioner and 27
701	701	shall be subject to the applicable provisions of the insurance laws of this state. Meetings or records 28
702	702	of the association may be open to the public upon majority vote of the board of directors. The 29
703	703	commissioner or his or her designee shall have full and complete access to all documents received 30
704	704	by, created by or otherwise obtained by the association and shall be invited to be present at all 31
705	705	association meetings. The disclosure of confidential or privileged association information, 32
706	706	documents, or records to the commissioner shall not change the confidential or privileged status of 33
707	707	the information, documents or records. 34
708	708
709	709
710	710	LC002082 - Page 20 of 61
711	711	27-34.3-7. Board of directors. 1
712	712	(a) The board of directors of the association shall consist of: 2
713	713	(1) Not less than five (5) seven (7) nor more than nine (9) eleven (11) member insurers 3
714	714	serving terms as established in the plan of operation; and 4
715	715	(2) The commissioner or the commissioner's designee. Only member insurers or a health 5
716	716	maintenance organization shall be eligible to vote. The members of the board shall be selected by 6
717	717	member insurers subject to the approval of the commissioner. The board of directors, previously 7
718	718	established under § 27-34.1-8 [Repealed], shall continue to operate in accordance with the 8
719	719	provision of this section. Vacancies on the board shall be filled for the remaining period of the term 9
720	720	by a majority vote of the remaining board members, subject to the approval of the commissioner. 10
721	721	(b) In approving selections to the board, the commissioner shall consider, among other 11
722	722	things, whether all member insurers are fairly represented. 12
723	723	(c) Members of the board may be reimbursed from the assets of the association for expenses 13
724	724	incurred by them as members of the board of directors but members of the board shall not be 14
725	725	compensated by the association for their services. 15
726	726	27-34.3-8. Powers and duties of the association. 16
727	727	(a) If a member insurer is an impaired insurer, the association may, in its discretion, and 17
728	728	subject to any conditions imposed by the association that do not impair the contractual obligations 18
729	729	of the impaired insurer, and that are approved by the commissioner: 19
730	730	(1) Guarantee, assume, reissue or reinsure, or cause to be guaranteed, assumed, reissued or 20
731	731	reinsured, any or all of the policies or contracts of the impaired insurer; 21
732	732	(2) Provide the monies, pledges, loans, notes, guarantees or other means that are proper to 22
733	733	effectuate subdivision (1) of this subsection and assure payment of the contractual obligations of 23
734	734	the impaired insurer pending action under subdivision (1) of this subsection. 24
735	735	(b) If a member insurer is an insolvent insurer, the association shall, in its discretion, either: 25
736	736	(1)(i)(A) Guaranty, assume, reissue or reinsure, or cause to be guaranteed, assumed, 26
737	737	reissued or reinsured, the policies or contracts of the insolvent insurer; or 27
738	738	(B) Assure payment of the contractual obligations of the insolvent insurer; and 28
739	739	(ii) Provide monies, pledges, loans, notes, guarantees, or other means that are reasonably 29
740	740	necessary to discharge the association's duties; or 30
741	741	(2) Provide benefits and coverages in accordance with the following provisions: 31
742	742	(i) With respect to life and health insurance policies and annuities policies and contracts, 32
743	743	assure payment of benefits for premiums identical to the premiums and benefits (except for terms 33
744	744	of conversion and renewability) that would have been payable under the policies or contracts of the 34
745	745
746	746
747	747	LC002082 - Page 21 of 61
748	748	insolvent insurer, for claims incurred: 1
749	749	(A) With respect to group policies and contracts, not later than the earlier of the next 2
750	750	renewal date under such policies or contracts or forty-five (45) days, but in no event less than thirty 3
751	751	(30) days after the date on which the association becomes obligated with respect to the policies or 4
752	752	contracts; 5
753	753	(B) With respect to nongroup policies, contracts and annuities not later than the earlier of 6
754	754	the next renewal date (if any) under the policies or contracts or one year, but in no event less than 7
755	755	thirty (30) days from the date on which the association becomes obligated with respect to the 8
756	756	policies and contracts; 9
757	757	(ii) Make diligent efforts to provide all known insured insureds, enrollees or annuitants (for 10
758	758	non-group policies and contracts) or group policy or contract owners with respect to group policies 11
759	759	or contracts thirty (30) days' notice of the termination (pursuant to subparagraph (i) of this 12
760	760	paragraph) of the benefits provided; 13
761	761	(iii) With respect to nongroup life and health insurance policies and annuities policies and 14
762	762	contracts covered by the association, make available to each known insured, enrollee or annuitant, 15
763	763	or owner if other than the insured, enrollee, or annuitant and with respect to an individual formerly 16
764	764	an insured, enrollee or formerly an annuitant under a group policy or contract who is not eligible 17
765	765	for replacement group coverage, make available substitute coverage on an individual basis in 18
766	766	accordance with the provisions of subdivision (iv) of this subsection, if the insureds, enrollees or 19
767	767	annuitants had a right under law or the terminated policy, contract or annuity to convert coverage 20
768	768	to individual coverage or to continue an individual policy, contract or annuity in force until a 21
769	769	specified age or for a specified time, during which the insurer or health maintenance organization 22
770	770	had no right unilaterally to make changes in any provision of the policy, contract or annuity or had 23
771	771	a right only to make changes in premium by class; 24
772	772	(iv)(A) In providing the substitute coverage required under subdivision (iii) of this 25
773	773	subsection, the association may offer either to reissue the terminated coverage or to issue an 26
774	774	alternative policy or contract at actuarially justified rates subject to the prior approval of the 27
775	775	commissioner. 28
776	776	(B) Alternative or reissued policies or contracts shall be offered without requiring evidence 29
777	777	of insurability, and shall not provide for any waiting period or exclusion that would not have applied 30
778	778	under the terminated policy or contracts. 31
779	779	(C) The association may reinsure any alternative or reissued policy or contract. 32
780	780	(v)(A) Alternative policies or contracts adopted by the association shall be subject to the 33
781	781	approval of the domiciliary insurance commissioner and the receivership court. The association 34
782	782
783	783
784	784	LC002082 - Page 22 of 61
785	785	may adopt alternative policies or contracts of various types for future issuance without regard to 1
786	786	any particular impairment or insolvency. 2
787	787	(B) Alternative policies or contracts shall contain at least the minimum statutory provisions 3
788	788	required in this state and provide benefits that shall not be unreasonable in relation to the premium 4
789	789	charged. The association shall set the premium in accordance with a table of rates which it shall 5
790	790	adopt. The premium shall reflect the amount of insurance to be provided and the age and class of 6
791	791	risk of each insured, but shall not reflect any changes in the health of the insured after the original 7
792	792	policy or contract was last underwritten. 8
793	793	(C) Any alternative policy or contract issued by the association shall provide coverage of 9
794	794	a type similar to that of the policy or contract issued by the impaired or insolvent insurer, as 10
795	795	determined by the association. 11
796	796	(vi) If the association elects to reissue terminated coverage at a premium rate different from 12
797	797	that charged under the terminated policy or contract, the premium shall be actuarially justified and 13
798	798	be set by the association in accordance with the amount of insurance or coverage provided and the 14
799	799	age and class of risk, subject to approval of the domiciliary insurance commissioner and the 15
800	800	receivership court. 16
801	801	(vii) The association's obligations with respect to coverage under any policy or contract of 17
802	802	the impaired or insolvent insurer or under any reissued or alternative policy or contract shall cease 18
803	803	on the date such coverage or policy or contract is replaced by another similar policy or contract by 19
804	804	the policy or contract owner, the insured, the enrollee, or the association. 20
805	805	(viii) When proceeding under paragraph (b)(2) of this section with respect to any policy or 21
806	806	contract carrying guaranteed minimum interest rates, the association shall assure the payment or 22
807	807	crediting of a rate of interest consistent with § 27-34.3-3(b)(2)(iii). 23
808	808	(c) Nonpayment of premiums within thirty-one (31) days after the date required under the 24
809	809	terms of any guaranteed, assumed, alternative or reissued policy or contract or substitute coverage 25
810	810	shall terminate the association's obligations under the policy, contract or coverage under this 26
811	811	chapter with respect to the policy, contract or coverage, except with respect to any claims incurred 27
812	812	or any net cash surrender value which may be due in accordance with the provisions of this chapter. 28
813	813	(d) Premiums due for coverage after entry of an order of liquidation of an insolvent insurer 29
814	814	shall belong to and be payable at the direction of the association. If the liquidator of an insolvent 30
815	815	insurer requests, the association shall provide a report to the liquidator regarding such premium 31
816	816	collected by the association. The association shall be liable for unearned premiums due to policy 32
817	817	or contract owners arising after the entry of the order. 33
818	818	(e) The protection provided by this chapter shall not apply where any guaranty protection 34
819	819
820	820
821	821	LC002082 - Page 23 of 61
822	822	is provided to residents of this state by laws of the domiciliary state or jurisdiction of the impaired 1
823	823	or insolvent insurer other than this state. 2
824	824	(f) In carrying out its duties under subsection (b), the association may: 3
825	825	(1) Subject to approval by a court of competent jurisdiction in this state, impose permanent 4
826	826	policy or contract liens in connection with any guarantee, assumption or reinsurance agreement, if 5
827	827	the association finds that the amounts which can be assessed under this chapter are less than the 6
828	828	amounts needed to assure full and prompt performance of the association's duties under this chapter, 7
829	829	or that the economic or financial conditions as they affect member insurers are sufficiently adverse 8
830	830	to render the imposition of such permanent policy or contract liens, to be in the public interest; 9
831	831	(2) Subject to approval by a court of competent jurisdiction in this state, impose temporary 10
832	832	moratoriums or liens on payments of cash values and policy loans, or any other right to withdraw 11
833	833	funds held in conjunction with policies or contracts, in addition to any contractual provisions for 12
834	834	deferral of cash or policy loan value. In addition, in the event of a temporary moratorium or 13
835	835	moratorium charge imposed by the receivership court on payment of cash values or policy loans, 14
836	836	or on any other right to withdraw funds held in conjunction with policies or contracts, out of the 15
837	837	assets of the impaired or insolvent insurer, the association may defer the payment of such cash 16
838	838	values, policy loans or other rights by the association for the period of the moratorium or 17
839	839	moratorium charge imposed by the receivership court, except for claims covered by the association 18
840	840	to be paid in accordance with a hardship procedure established by the liquidator or rehabilitator and 19
841	841	approved by the receivership court. 20
842	842	(g) A deposit in this state, held pursuant to law or required by the commissioner for the 21
843	843	benefit of creditors, including policy or contract owners, not turned over to the domiciliary 22
844	844	liquidator upon the entry of a final order of liquidation or order approving a rehabilitation plan of 23
845	845	an a member insurer domiciled in this state or in a reciprocal state, pursuant to § 27-14.3-56, shall 24
846	846	be promptly paid to the association. The association shall be entitled to retain a portion of any 25
847	847	amounts so paid to it equal to the percentage determined by dividing the aggregate amount of policy 26
848	848	or contract owners' claims related to that insolvency for which the association has provided 27
849	849	statutory benefits by the aggregate amount of all policy or contract owners' claims in this state 28
850	850	related to that insolvency and shall remit to the domiciliary receiver the amount so paid to the 29
851	851	association less the amount retained pursuant to this subsection. Any amount so paid to the 30
852	852	association and retained by it shall be treated as a distribution of estate assets pursuant to applicable 31
853	853	state insurance law dealing with early access disbursements. 32
854	854	(h) If the association fails to act within a reasonable period of time with respect to an 33
855	855	insolvent insurer, as provided in subsection (b) of this section, the commissioner shall have the 34
856	856
857	857
858	858	LC002082 - Page 24 of 61
859	859	powers and duties of the association under this chapter with respect to the insolvent insurers. 1
860	860	(i) The association may render assistance and advice to the commissioner, upon the 2
861	861	commissioner's request, concerning rehabilitation, payment of claims, continuance of coverage, or 3
862	862	the performance of other contractual obligations of any impaired or insolvent insurer. 4
863	863	(j) The association shall have standing to appear or intervene before any court or agency in 5
864	864	this state with jurisdiction over an impaired or insolvent insurer concerning which the association 6
865	865	is or may become obligated under this chapter or with jurisdiction over any person or property 7
866	866	against whom the association may have rights through subrogation or otherwise. Standing shall 8
867	867	extend to all matters germane to the powers and duties of the association, including, but not limited 9
868	868	to, proposals for reinsuring, reissuing, modifying or guaranteeing the policies or contracts of the 10
869	869	impaired or insolvent insurer and the determination of the polices or contracts and contractual 11
870	870	obligations. The association shall also have the right to appear or intervene before a court or agency 12
871	871	in another state with jurisdiction over an impaired or insolvent insurer for which the association is 13
872	872	or may become obligated or with jurisdiction over any person or property against whom the 14
873	873	association may have rights through subrogation or otherwise. 15
874	874	(k)(1) A person receiving benefits under this chapter shall be deemed to have assigned the 16
875	875	rights under, and any causes of action against any person for losses arising under, resulting from or 17
876	876	otherwise relating to, the covered policy or contract to the association to the extent of the benefits 18
877	877	received because of this chapter, whether the benefits are payments of or on account of contractual 19
878	878	obligations, continuation of coverage or provision of substitute or alternative policies, contracts or 20
879	879	coverage. The association may require an assignment to it of these rights and causes of action by 21
880	880	any enrollee, payee, policy or contract owner, beneficiary, insured or annuitant as a condition 22
881	881	precedent to the receipt of any right or benefits conferred by this chapter upon the person. 23
882	882	(2) The subrogation rights of the association under this subsection shall have the same 24
883	883	priority against the assets of the impaired or insolvent insurer as that possessed by the person 25
884	884	entitled to receive benefits under this chapter. 26
885	885	(3) In addition to subdivisions (1) and (2) of this subsection, the association shall have all 27
886	886	common law rights of subrogation and any other equitable or legal remedy that would have been 28
887	887	available to the impaired or insolvent insurer or owner, beneficiary, enrollee or payee, of a policy 29
888	888	or contract with respect to the policy or contracts including without limitation, in the case of a 30
889	889	structured settlement annuity, any rights of the owner, beneficiary or payee of the annuity, to the 31
890	890	extent of benefits received pursuant to this chapter, against a person originally or by succession 32
891	891	responsible for the losses arising from the personal injury relating to the annuity or payment 33
892	892	therefore, excepting any such person responsible solely by reason of serving as an assignee in 34
893	893
894	894
895	895	LC002082 - Page 25 of 61
896	896	respect of a qualified assignment under § 130 of the United States Internal Revenue Code, 26 1
897	897	U.S.C. § 130. 2
898	898	(4) If the preceding provisions of this subsection are invalid or ineffective with respect to 3
899	899	any person or claim for any reason, the amount payable by the association with respect to the related 4
900	900	covered obligations shall be reduced by the amount realized by any other person with respect to the 5
901	901	person or claim that is attributable to the policies or contracts, or portion thereof, covered by the 6
902	902	association. 7
903	903	(5) If the association has provided benefits with respect to a covered obligation and a person 8
904	904	recovers amounts to which the association has rights as described in the preceding paragraphs of 9
905	905	this subsection, the person shall pay to the association the portion of the recovery attributable to 10
906	906	the policies or contracts, or portions thereof, covered by the association. 11
907	907	(l) In addition to the rights and powers provided in this chapter, the association may: 12
908	908	(1) Enter into any contracts as are necessary or proper to carry out the provisions and 13
909	909	purposes of this chapter; 14
910	910	(2) Sue or be sued, including taking any legal actions necessary or proper to recover any 15
911	911	unpaid assessments under § 27-34.3-9 and to settle claims or potential claims against it; 16
912	912	(3) Borrow money to effect the purposes of this chapter; any notes or other evidence of 17
913	913	indebtedness of the association not in default shall be legal investments for domestic member 18
914	914	insurers and may be carried as admitted assets; 19
915	915	(4) Employ or retain persons as are necessary or appropriate to handle the financial 20
916	916	transactions of the association, and to perform any other functions as become necessary or proper 21
917	917	under this chapter; 22
918	918	(5) Take such legal action that may be necessary or appropriate to avoid or recover payment 23
919	919	of improper claims; 24
920	920	(6) Exercise, for the purposes of this chapter and to the extent approved by the 25
921	921	commissioner, the powers of a domestic life or insurer, health insurer, or health maintenance 26
922	922	organization, but in no case may the association issue insurance policies or annuity contracts other 27
923	923	than those issued to perform its obligations under this chapter; 28
924	924	(7) Organize itself as a corporation or another legal form permitted by the laws of this state; 29
925	925	(8) Request information from a person seeking coverage from the association in order to 30
926	926	aid the association in determining its obligations under this chapter with respect to the person, and 31
927	927	the person shall promptly comply with the request; and 32
928	928	(9) Unless prohibited by law, in accordance with the terms and conditions of the policy or 33
929	929	contract, file for actuarially justified rate or premium increases for any policy or contract for which 34
930	930
931	931
932	932	LC002082 - Page 26 of 61
933	933	it provides coverage under this chapter; and 1
934	934	(9)(10) Take other necessary or appropriate action to discharge its duties and obligations 2
935	935	under this chapter or to exercise its powers under this chapter. 3
936	936	(m) The association may join an organization of one or more other state associations of 4
937	937	similar purposes, to further the purposes and administer the powers and duties of the association. 5
938	938	(n)(1)(a) At any time within one hundred eighty (180) days of the date of the order of 6
939	939	liquidation, the association may elect to succeed to the rights and obligations of the ceding member 7
940	940	insurer that relate to policies, contracts or annuities covered, in whole or in part, by the association, 8
941	941	in each case under any one or more reinsurance contracts entered into by the insolvent insurer and 9
942	942	its reinsurers and selected by the association. Any such assumption shall be effective as of the date 10
943	943	of the order of liquidation. The election shall be effected by the association or the national 11
944	944	organization of life and health insurance guaranty associations (NOLHGA) on its behalf sending 12
945	945	written notice, return receipt requested to the affected reinsurers. 13
946	946	(b) To facilitate the earliest practicable decision about whether to assume any of the 14
947	947	contracts of reinsurance, and in order to protect the financial position of the estate, the receiver and 15
948	948	each reinsurer of the ceding member insurer shall make available upon request to the association 16
949	949	or to NOLHGA on its behalf as soon as possible after commencement of formal delinquency 17
950	950	proceedings: (i) Copies of in-force contracts of reinsurance and all related files and records relevant 18
951	951	to the determination of whether such contracts should be assumed, and (ii) Notices of any defaults 19
952	952	under the reinsurance contracts or any known event or condition which with the passage of time 20
953	953	could become a default under the reinsurance contracts. 21
954	954	(c) The following subparagraphs (i) through (iv) shall apply to reinsurance contracts so 22
955	955	assumed by the association. 23
956	956	(i) The association shall be responsible for all unpaid premiums due under the reinsurance 24
957	957	contracts for periods both before and after the date of the order of liquidation, and shall be 25
958	958	responsible for the performance of all other obligations to be performed after the date of the order 26
959	959	of liquidation, in each case which relate to policies, contracts and annuities covered, in whole or in 27
960	960	part, by the association. The association may charge policies, contracts and annuities covered in 28
961	961	part by the association, through reasonable allocation methods, the costs for reinsurance in excess 29
962	962	of the obligations of the association and shall provide notice and an accounting of these charges to 30
963	963	the liquidator; 31
964	964	(ii) The association shall be entitled to any amounts payable by the reinsurer under the 32
965	965	reinsurance contracts with respect to losses or events that occur in periods after the date of the order 33
966	966	of liquidation and that relate to policies or annuities covered in whole or in part, by the association 34
967	967
968	968
969	969	LC002082 - Page 27 of 61
970	970	provided, that, upon receipt of any such amounts, the association shall be obliged to pay to the 1
971	971	beneficiary under the policy, contract or annuity on account of which the amounts were paid a 2
972	972	portion of the amount equal to the lesser of: 3
973	973	(A) The amount received by the association; or 4
974	974	(B) The excess of the amount received by the association; over the amount equal to the 5
975	975	benefits paid by the association on account of the policy, contract or annuity less the retention of 6
976	976	the insurer applicable to the loss or event; 7
977	977	(iii) Within thirty (30) days following the association's election (the "election date”), the 8
978	978	association and each reinsurer under contracts assumed by the association shall calculate the net 9
979	979	balance due to or from the association under each such reinsurance contract as of the election date 10
980	980	with respect to policies, contracts or annuities covered, in whole or in part, by the association which 11
981	981	calculation shall give, full credit to all items paid by either the member insurer or its receiver or the 12
982	982	reinsurer prior to the election date. The reinsurer shall pay the receiver any amounts due for losses 13
983	983	or events prior to the date of the order of liquidation, subject to any set-off for premiums unpaid 14
984	984	for periods prior to the date, and the association or reinsurer shall pay any remaining premiums in 15
985	985	each case within five (5) days of the completion of the aforementioned calculation. Any disputes 16
986	986	over the amounts due to either the association or the reinsurer shall be resolved by arbitration 17
987	987	pursuant to the terms of the affected reinsurance contracts or, if the contract contains no arbitration 18
988	988	clause, as otherwise provided by law. If the receiver has received any amounts due the association 19
989	989	pursuant to paragraph (ii), the receiver, shall remit the same to the association as promptly as 20
990	990	practicable. 21
991	991	(iv) If the association or receiver, on the association's behalf, within sixty (60) days of the 22
992	992	election date, pays the unpaid premiums due for periods both before and after the election date, that 23
993	993	relate to policies, contracts or annuities covered in whole or in part by the association the reinsurer 24
994	994	shall not be entitled to terminate the reinsurance contracts for failure to pay premium insofar as the 25
995	995	reinsurance contracts relate to policies, contracts or annuities covered in whole or in part by the 26
996	996	association and shall not be entitled to set off any unpaid amounts due under other contracts, or 27
997	997	unpaid amounts due from parties other than the association against amounts due to the association. 28
998	998	(2) During the period from the date of the order of liquidation until the election date (or, if 29
999	999	the election date does not occur, until one hundred eighty (180) days after the date of the order of 30
1000	1000	liquidation). 31
1001	1001	(a)(i) Neither the association nor the reinsurer shall have any rights or obligations under 32
1002	1002	reinsurance contracts that the association has the right to assume under subdivision (n)(1), whether 33
1003	1003	for periods prior to or after the date of the order of liquation; and 34
1004	1004
1005	1005
1006	1006	LC002082 - Page 28 of 61
1007	1007	(ii) The reinsurer, the receiver and the association shall, to the extent practicable, provide 1
1008	1008	each other data and records reasonably requested; 2
1009	1009	(b) Provided that once the association has elected to assume a reinsurance contract, the 3
1010	1010	parties' rights and obligations shall be governed by subdivision (n)(1). 4
1011	1011	(3) If the association does not elect to assume a reinsurance contract by the election date 5
1012	1012	pursuant to subdivision (n)(1), the association shall have no rights or obligations, in each case for 6
1013	1013	periods both before and after the date of the order of liquidation, with respect to the reinsurance 7
1014	1014	contract. 8
1015	1015	(4) When policies, contracts or annuities, or covered obligations with respect thereto, are 9
1016	1016	transferred to an assuming insurer, reinsurance on the policies, contracts or annuities may also be 10
1017	1017	transferred by the association, in the case of contracts assumed under subdivision (n)(1), subject to 11
1018	1018	the following: 12
1019	1019	(a) Unless the reinsurer and the assuming insurer agree otherwise, the reinsurance contract 13
1020	1020	transferred shall not cover any new policies of insurance, contracts or annuities in addition to those 14
1021	1021	transferred; 15
1022	1022	(b) The obligations described in paragraph (n)(1) of this section shall not apply with respect 16
1023	1023	to matters arising after the effective date of the transfer; 17
1024	1024	(c) Notice shall be given in writing, return receipt requested, by the transferring party to 18
1025	1025	the affected reinsurer not less than thirty (30) days prior to the effective date of the transfer. 19
1026	1026	(5) The provisions of subsection (n) shall supersede the provisions of any state law or of 20
1027	1027	any affected reinsurance contract that provides for or requires any payment of reinsurance proceeds, 21
1028	1028	on account of losses or events that occur in periods after the date of the order of liquidation to the 22
1029	1029	receiver, of the insolvent insurer or any other person. The receiver, shall remain entitled to any 23
1030	1030	amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events 24
1031	1031	that occur in periods prior to the date of the order of liquidation subject to applicable setoff 25
1032	1032	provisions. 26
1033	1033	(6) Except as otherwise provided in this section, nothing in this section (n): 27
1034	1034	Shall alter or modify the terms and conditions of any reinsurance contract. 28
1035	1035	Nothing in this section shall abrogate or limit any rights of any reinsurer to claim that it is 29
1036	1036	entitled to rescind a reinsurance contract. 30
1037	1037	Nothing in this section shall give a policy holder, contract owner, enrollee, certificate 31
1038	1038	holder or beneficiary an independent cause of action against an indemnity reinsurer that is not 32
1039	1039	otherwise set forth in the reinsurance contract. Nothing in this section shall limit or affect the 33
1040	1040	association's rights as a creditor of the estate against the assets of the estate. Nothing in this section 34
1041	1041
1042	1042
1043	1043	LC002082 - Page 29 of 61
1044	1044	shall apply to reinsurance agreements covering property or casualty risks. 1
1045	1045	(o) The board of directors of the association shall have discretion and shall exercise 2
1046	1046	reasonable business judgment to determine the means by which the association is to provide the 3
1047	1047	benefits of this chapter in an economical and efficient manner. 4
1048	1048	(p) Where the association has arranged or offered to provide the benefits of this chapter to 5
1049	1049	a covered person under a plan or arrangement that fulfills the association's obligations under this 6
1050	1050	chapter, the person shall not be entitled to benefits from the association in addition to or other than 7
1051	1051	those provided under the plan or arrangement. 8
1052	1052	(q) Venue in a suit against the association arising under this chapter shall be in Providence 9
1053	1053	county. The association shall not be required to give an appeal bond in an appeal that relates to a 10
1054	1054	cause of action arising under this chapter. 11
1055	1055	(q)(r) In carrying out its duties in connection with guaranteeing, assuming, reissuing or 12
1056	1056	reinsuring policies or contracts under subsection (a) or (b) of this section, the association may, 13
1057	1057	subject to approval of the receivership court, issue substitute coverage for a policy or contract that 14
1058	1058	provides an interest rate, crediting rate or similar factor determined by use of an index or other 15
1059	1059	external reference stated in the policy or contract employed in calculating returns or changes in 16
1060	1060	value by issuing an alternative policy or contract in accordance with the following provisions: 17
1061	1061	(r) Venue in a suit against the association arising under this chapter shall be in Providence 18
1062	1062	County. The association shall not be required to give an appeal bond in an appeal that relates to a 19
1063	1063	cause of action arising under this chapter. 20
1064	1064	(1) In lieu of the index or other external reference provided for in the original policy or 21
1065	1065	contract, the alternative policy or contract provides for: 22
1066	1066	(i) A fixed interest rate; or 23
1067	1067	(ii) Payment of dividends with minimum guarantees; or 24
1068	1068	(iii) A different method of calculating interest or changes in value. 25
1069	1069	(2) There is no requirement for evidence of insurability, waiting period or other exclusion 26
1070	1070	that would not have applied under the replaced policy or contract; and 27
1071	1071	(3) The alternative policy or contract is substantially similar to the replaced policy or 28
1072	1072	contract in all other material terms. 29
1073	1073	27-34.3-9. Assessments. 30
1074	1074	(a) For the purpose of providing the funds necessary to carry out the powers and duties of 31
1075	1075	the association, the board of directors shall assess the member insurers, separately for each account, 32
1076	1076	at such time and for such amounts as the board finds necessary. Assessments shall be due not less 33
1077	1077	than thirty (30) days after prior written notice to the member insurers and shall accrue interest at 34
1078	1078
1079	1079
1080	1080	LC002082 - Page 30 of 61
1081	1081	nine percent (9%) per annum on and after the due date. 1
1082	1082	(b) There shall be two (2) classes of assessments, as follows: 2
1083	1083	(1) Class A assessments shall be authorized and called for the purpose of meeting 3
1084	1084	administrative and legal costs and other expenses. Class A assessments may be authorized and 4
1085	1085	called whether or not related to a particular impaired or insolvent insurer. 5
1086	1086	(2) Class B assessments shall be authorized and called to the extent necessary to carry out 6
1087	1087	the powers and duties of the association under § 27-34.3-8 with regard to an impaired or an 7
1088	1088	insolvent insurer. 8
1089	1089	(c)(1) The amount of any Class A assessment shall be determined by the board and may be 9
1090	1090	authorized and called on a pro rata or non-pro rata basis. If pro rata, the board may provide that it 10
1091	1091	be credited against future Class B assessments. The total of all non-pro rata assessment shall not 11
1092	1092	exceed three hundred dollars ($300) per member insurer in any one calendar year. The amount of 12
1093	1093	any Class B assessment shall be allocated for assessment purposes among the accounts pursuant to 13
1094	1094	an allocation formula that may be based on the premiums or reserves of the impaired or insolvent 14
1095	1095	insurer or any other standard deemed by the board in its sole discretion as being fair and reasonable 15
1096	1096	under the circumstances. 16
1097	1097	(2) The amount of a Class B assessment, except for assessments related to long-term care 17
1098	1098	insurance, shall be allocated for assessment purposes between the accounts and among the 18
1099	1099	subaccounts of the life insurance and annuity account, pursuant to an allocation formula which may 19
1100	1100	be based on the premiums or reserves of the impaired or insolvent insurer, or any other standard 20
1101	1101	deemed by the board in its sole discretion as being fair and reasonable under the circumstances. 21
1102	1102	(3) The amount of the Class B assessment for long-term care insurance written by the 22
1103	1103	impaired or insolvent insurer shall be allocated according to a methodology included in the plan of 23
1104	1104	operation and approved by the commissioner. The methodology shall provide for fifty percent 24
1105	1105	(50%) of the assessment to be allocated to accident and health member insurers and fifty percent 25
1106	1106	(50%) to be allocated to life and annuity member insurers. 26
1107	1107	(2)(4) Class B assessments against member insurers for each account and subaccount shall 27
1108	1108	be in the proportion that the premiums received on business in this state by each assessed member 28
1109	1109	insurer or policies or contracts covered by each account for the three (3) most recent calendar years 29
1110	1110	for which information is available preceding the year in which the insurer became insolvent, (or, in 30
1111	1111	the case of an assessment with respect to an impaired member insurer, the three (3) most recent 31
1112	1112	calendar years for which information is available preceding the year in which the member insurer 32
1113	1113	became impaired) bears to premiums received on business in this state for such calendar years by 33
1114	1114	all assessed member insurers. 34
1115	1115
1116	1116
1117	1117	LC002082 - Page 31 of 61
1118	1118	(3)(5) Assessments for funds to meet the requirements of the Association with respect to 1
1119	1119	an impaired or insolvent insurer shall not be authorized or called until necessary to implement the 2
1120	1120	purposes of this chapter. Classification of assessments under subsection (b) of this section and 3
1121	1121	computation of assessments under this subsection shall be made with a reasonable degree of 4
1122	1122	accuracy, recognizing that exact determinations may not always be possible. The association shall 5
1123	1123	notify each member insurer of its anticipated pro rata share of an authorized assessment not yet 6
1124	1124	called within one hundred eighty (180) days after the assessment is authorized. 7
1125	1125	(d) The association may abate or defer, in whole or in part, the assessment of a member 8
1126	1126	insurer if, in the opinion of the board, payment of the assessment would endanger the ability of the 9
1127	1127	member insurer to fulfill its contractual obligations. In the event an assessment against a member 10
1128	1128	insurer is abated, or deferred in whole or in part, the amount by which the assessment is abated or 11
1129	1129	deferred may be assessed against the other member insurers in a manner consistent with the basis 12
1130	1130	for assessments set forth in this section. Once the conditions which have caused a deferral have 13
1131	1131	been removed or rectified, the member insurer shall pay all assessments that were deferred pursuant 14
1132	1132	to a repayment plan approved by the association. 15
1133	1133	(e)(1)(i) Subject to the provisions of subparagraph (ii) of this paragraph, the total of all 16
1134	1134	assessments authorized by the association with respect to a member insurer for each subaccount of 17
1135	1135	the life insurance and annuity account and for the health account shall not in any one calendar year 18
1136	1136	exceed three percent (3%) of that member insurer's average annual premiums received in this state 19
1137	1137	on the policies and contracts covered by the subaccount or account during the three (3) calendar 20
1138	1138	years preceding the year in which the member insurer became an impaired or insolvent insurer. 21
1139	1139	(ii) If two (2) or more assessments are authorized in one calendar year with respect to 22
1140	1140	member insurers that become impaired or insolvent in different calendar years, the average annual 23
1141	1141	premiums for purposes of the aggregate assessment percentage limitation referenced in 24
1142	1142	subparagraph (i) of this paragraph shall be equal and limited to the higher of the three (3) year 25
1143	1143	average annual premiums for the applicable subaccount or account as calculated pursuant to this 26
1144	1144	section. 27
1145	1145	(iii) If the maximum assessment, together with the other assets of the association in any 28
1146	1146	account, does not provide in any one year in either account an amount sufficient to carry out the 29
1147	1147	responsibilities of the association, the necessary additional funds shall be assessed as soon after this 30
1148	1148	as permitted by this chapter. 31
1149	1149	(2) The board may provide in the plan of operation a method of allocating funds among 32
1150	1150	claims, whether relating to one or more impaired or insolvent insurers, when the maximum 33
1151	1151	assessment will be insufficient to cover anticipated claims. 34
1152	1152
1153	1153
1154	1154	LC002082 - Page 32 of 61
1155	1155	(3) If the maximum assessment for a subaccount of the life and annuity account in any one 1
1156	1156	year does not provide an amount sufficient to carry out the responsibilities of the association, then 2
1157	1157	pursuant to subdivision (c)(2) of this section, the board shall assess the other subaccounts of the 3
1158	1158	life and annuity account for the necessary additional amount, subject to the maximum stated in 4
1159	1159	subdivision (1) of this subsection. 5
1160	1160	(f) The board may, by an equitable method as established in the plan of operation, refund 6
1161	1161	to member insurers, in proportion to the contribution of each member insurer to that account, the 7
1162	1162	amount by which the assets of the account exceed the amount the board finds is necessary to carry 8
1163	1163	out during the coming year the obligations of the association with regard to that account, including 9
1164	1164	assets accruing from assignment, subrogation, net realized gains and income from investments. A 10
1165	1165	reasonable amount may be retained in any account to provide funds for the continuing expenses of 11
1166	1166	the association and for future claims. 12
1167	1167	(g) It shall be proper for any member insurer, in determining its premium rates and policy 13
1168	1168	owner dividends as to any kind of insurance or health maintenance organization business within 14
1169	1169	the scope of this chapter, to consider the amount reasonably necessary to meet its assessment 15
1170	1170	obligations under this chapter. 16
1171	1171	(h) The association shall issue to each member insurer paying an assessment under this 17
1172	1172	chapter, other than Class A assessment, a certificate of contribution, in a form prescribed by the 18
1173	1173	commissioner, for the amount of the assessment so paid. All outstanding certificates shall be of 19
1174	1174	equal dignity and priority without reference to amounts or dates of issue. A certificate of 20
1175	1175	contribution may be shown by the member insurer in its financial statement as an asset in such form 21
1176	1176	and for such amount, if any, and period of time as the commissioner may approve. 22
1177	1177	(i)(1) A member insurer that wishes to protest all or part of an assessment shall pay when 23
1178	1178	due the full amount of the assessment as set forth in the notice provided by the association. The 24
1179	1179	payment shall be available to meet association obligations during the pendency of the protest or 25
1180	1180	any subsequent appeal. Payment shall be accompanied by a statement in writing that the payment 26
1181	1181	is made under protest and setting forth a brief statement of the grounds for the protest. 27
1182	1182	(2) Within sixty (60) days following the payment of an assessment under protest by a 28
1183	1183	member insurer, the association shall notify the member insurer in writing of its determination with 29
1184	1184	respect to the protest unless the association notifies the member insurer that additional time is 30
1185	1185	required to resolve the issues raised by the protest. 31
1186	1186	(3) Within thirty (30) days after a final decision has been made, the association shall notify 32
1187	1187	the protesting member insurer in writing of that final decision. Within sixty (60) days of receipt of 33
1188	1188	notice of the final decision, the protesting member insurer may appeal that final action to the 34
1189	1189
1190	1190
1191	1191	LC002082 - Page 33 of 61
1192	1192	commissioner. 1
1193	1193	(4) In the alternative to rendering a final decision with respect to a protest based on a 2
1194	1194	question regarding the assessment base, the association may refer the protest to the commissioner 3
1195	1195	for a final decision, with or without a recommendation from the association. 4
1196	1196	(5) If the protest or appeal on the assessment is upheld, the amount paid in error or excess 5
1197	1197	shall be returned to the member company insurer. Interest on a refund due a protesting member 6
1198	1198	insurer shall be paid at the rate actually earned by the association. 7
1199	1199	(j) The association may request information of member insurers in order to aid in the 8
1200	1200	exercise of its power under this section and member insurers shall promptly comply with a request. 9
1201	1201	27-34.3-11. Duties and powers of the commissioner. 10
1202	1202	In addition to the duties and powers enumerated in this chapter, 11
1203	1203	(a) The commissioner shall: 12
1204	1204	(1) Upon request of the board of directors, provide the association with a statement of the 13
1205	1205	premiums in this and any other appropriate states for each member insurer; 14
1206	1206	(2) When an impairment is declared and the amount of the impairment is determined, serve 15
1207	1207	a demand upon the impaired insurer to make good the impairment within a reasonable time; notice 16
1208	1208	to the impaired insurer shall constitute notice to its shareholders, if any; the failure of the impaired 17
1209	1209	insurer to promptly comply with a demand shall not excuse the association from the performance 18
1210	1210	of its powers and duties under this chapter. 19
1211	1211	(3) [Deleted by P.L. 2009, ch. 158, § 1 and by P.L. 2009, ch. 169, § 1]. 20
1212	1212	(4) Maintain the confidentiality and privileged status of confidential association 21
1213	1213	information provided to the commissioner or department of business regulation. 22
1214	1214	(b) The commissioner may suspend or revoke, after notice and hearing, the certificate of 23
1215	1215	authority to transact insurance business in this state of any member insurer which fails to pay an 24
1216	1216	assessment when due or fails to comply with the plan of operation. As an alternative the 25
1217	1217	commissioner may levy a forfeiture on any member insurer which fails to pay an assessment when 26
1218	1218	due. The forfeiture shall not exceed five percent (5%) of the unpaid assessment per month, but no 27
1219	1219	forfeiture shall be less than one hundred dollars ($100) per month. 28
1220	1220	(c) A final action of the board of directors or the association may be appealed to the 29
1221	1221	commissioner by any member insurer if the appeal is taken within sixty (60) days of its receipt of 30
1222	1222	notice of the final action being appealed. A final action or order of the commissioner shall be subject 31
1223	1223	to judicial review. 32
1224	1224	(d) The liquidator, rehabilitator, or conservator of any impaired or insolvent insurer may 33
1225	1225	notify all interested persons of the effect of this chapter. 34
1226	1226
1227	1227
1228	1228	LC002082 - Page 34 of 61
1229	1229	(e) The commissioner shall not participate in the association's adjudication of a protest by 1
1230	1230	an insurer pursuant to § 27-34.3-9(i). 2
1231	1231	27-34.3-12. Prevention of insolvencies. 3
1232	1232	To aid in the detection and prevention of member insurer insolvencies or impairments: 4
1233	1233	(a) It shall be the duty of the commissioner: 5
1234	1234	(1) To notify the commissioners of all the other states, territories of the United States and 6
1235	1235	the District of Columbia within thirty (30) days following the action taken or the date the action 7
1236	1236	occurs, when the commissioner takes any of the following actions against a member insurer: 8
1237	1237	(i) Revocation of license; 9
1238	1238	(ii) Suspension of license; or 10
1239	1239	(iii) Makes a formal order that the company member insurer restrict its premium writing, 11
1240	1240	obtain additional contributions to surplus, withdraw from the state, reinsure all or any part of its 12
1241	1241	business, or increase capital, surplus, or any other account for the security of policy owners, 13
1242	1242	contract owners, certificate holders or creditors. 14
1243	1243	(2) To report to the board of directors when the commissioner has taken any of the actions 15
1244	1244	set forth in paragraph (1) of this subdivision or has received a report from any other commissioner 16
1245	1245	indicating that this action has been taken in another state. The report to the board of directors shall 17
1246	1246	contain all significant details of the action taken or the report received from another commissioner. 18
1247	1247	(3) To report to the board of directors when the commissioner has reasonable cause to 19
1248	1248	believe from any examination, whether completed or in process, of any member company insurer 20
1249	1249	that the company insurer may be an impaired or insolvent insurer. 21
1250	1250	(4) To furnish to the board of directors the NAIC insurance regulatory information system 22
1251	1251	(IRIS) ratios and listings of companies not included in the ratios developed by the national 23
1252	1252	association of insurance commissioners, and the board may use the information contained in the 24
1253	1253	ratios and listings in carrying out its duties and responsibilities under this section. The report and 25
1254	1254	the information contained in it shall be kept confidential by the board of directors until the time it 26
1255	1255	is made public by the commissioner or other lawful authority. 27
1256	1256	(b) The commissioner may seek the advice and recommendations of the board of directors 28
1257	1257	concerning any matter affecting the duties and responsibilities of the commissioner regarding the 29
1258	1258	financial condition of member insurers and companies insurers or health maintenance organizations 30
1259	1259	seeking admission to transact insurance business in this state. 31
1260	1260	(c) The board of directors may, upon majority vote, make reports and recommendations to 32
1261	1261	the commissioner upon any matter germane to the solvency, liquidation, rehabilitation or 33
1262	1262	conservation of any member insurer or germane to the solvency of any company insurer or health 34
1263	1263
1264	1264
1265	1265	LC002082 - Page 35 of 61
1266	1266	maintenance organization seeking to do an insurance business in this state. The reports and 1
1267	1267	recommendations shall not be considered public documents. 2
1268	1268	(d) The board of directors may, upon majority vote, notify the commissioner of any 3
1269	1269	information indicating a member insurer may be an impaired or insolvent insurer. 4
1270	1270	(e) The board of directors may, upon majority vote, make recommendations to the 5
1271	1271	commissioner for the detection and prevention of member insurer insolvencies. 6
1272	1272	27-34.3-13. Credits for assessments paid (tax offsets). 7
1273	1273	(a) A member insurer may offset against its premium, franchise or income tax liability (or 8
1274	1274	liabilities) to this state an assessment described in § 27-34.3-9(h) to the extent of ten percent (10%) 9
1275	1275	of the amount of the assessment for each of the five (5) calendar years following the year in which 10
1276	1276	the assessment was paid. In the event a member insurer should cease doing business, all uncredited 11
1277	1277	assessments may be credited against its premium, franchise, or income tax liability (or liabilities) 12
1278	1278	for the year it ceases doing business. 13
1279	1279	(b) Any sums which are acquired by refund, pursuant to § 27-34.3-9(f), from the 14
1280	1280	association by member insurers, and which have been offset against premium, franchise or income 15
1281	1281	taxes as provided in subsection (a) of this section, shall be paid by the member insurers to this state 16
1282	1282	in any manner that the tax authorities may require. The association shall notify the commissioner 17
1283	1283	that refunds have been made. 18
1284	1284	27-34.3-14. Miscellaneous provisions. 19
1285	1285	(a) This chapter shall not be construed to reduce the liability for unpaid assessments of the 20
1286	1286	insureds of an impaired or insolvent insurer operating under a plan with assessment liability. 21
1287	1287	(b) Records shall be kept of all meetings of the board of directors to discuss the activities 22
1288	1288	of the association in carrying out its powers and duties under § 27-34.3-8. The records of the 23
1289	1289	association with respect to an impaired or insolvent insurer shall not be disclosed prior to the 24
1290	1290	termination of a liquidation, rehabilitation or conservation proceeding involving the impaired or 25
1291	1291	insolvent insurer, upon the termination of the impairment or insolvency of the insurer, or upon the 26
1292	1292	order of a court of competent jurisdiction. Nothing in this subsection shall limit the duty of the 27
1293	1293	association to render a report of its activities under § 27-34.3-15. 28
1294	1294	(c) For the purpose of carrying out its obligations under this chapter, the association shall 29
1295	1295	be deemed to be a creditor of the impaired or insolvent insurer to the extent of assets attributable 30
1296	1296	to covered policies reduced by any amounts to which the association is entitled as subrogee 31
1297	1297	pursuant to § 27-34.3-8(k). Assets of the impaired or insolvent insurer attributable to covered 32
1298	1298	policies shall be used to continue all covered policies and pay all contractual obligations of the 33
1299	1299	impaired or insolvent insurer as required by this chapter. Assets attributable to covered policies or 34
1300	1300
1301	1301
1302	1302	LC002082 - Page 36 of 61
1303	1303	contracts, as used in this subsection, are that proportion of the assets which the reserves that should 1
1304	1304	have been established for covered policies or contracts bear to the reserves that should have been 2
1305	1305	established for all policies of insurance or health benefit plans written by the impaired or insolvent 3
1306	1306	insurer. 4
1307	1307	(d) As a creditor of the impaired or insolvent insurer as established in subsection (c) of this 5
1308	1308	section and consistent with § 27-14.3-38, the association and other similar associations shall be 6
1309	1309	entitled to receive a disbursement of assets out of the marshalled assets, from time to time as the 7
1310	1310	assets become available to reimburse it, as a credit against contractual obligations under this 8
1311	1311	chapter. If the liquidator has not, within one hundred twenty (120) days of a final determination of 9
1312	1312	insolvency of an a member insurer by the receivership court, made an application to the court for 10
1313	1313	the approval of a proposal to disperse assets out of marshalled assets to guaranty associations 11
1314	1314	having obligations because of the insolvency, then the association shall be entitled to make 12
1315	1315	application to the receivership court for approval of its own proposal to disburse these assets. 13
1316	1316	(e)(1) Prior to the termination of any liquidation, rehabilitation or conservation proceeding, 14
1317	1317	the court may take into consideration the contributions of the respective parties, including the 15
1318	1318	association, the shareholders, contract owners, certificate holders, enrollees and policy owners of 16
1319	1319	the insolvent insurer, and any other party with a bona fide interest, in making an equitable 17
1320	1320	distribution of the ownership rights of the insolvent insurer. In that determination, consideration 18
1321	1321	shall be given to the welfare of the policy owners, contract owners, certificate holders, enrollees of 19
1322	1322	the continuing or successor member insurer. 20
1323	1323	(2) No distribution to stockholders, if any, of an impaired or insolvent insurer shall be made 21
1324	1324	until and unless the total amount of valid claims of the association with interest on the claims for 22
1325	1325	funds expended in carrying out its powers and duties under § 27-34.3-8 with respect to the member 23
1326	1326	insurer have been fully recovered by the association. 24
1327	1327	(f)(1) If an order for liquidation or rehabilitation of an a member insurer domiciled in this 25
1328	1328	state has been entered, the receiver appointed under the order shall have a right to recover on behalf 26
1329	1329	of the member insurer, from any affiliate that controlled it, the amount of distributions, other than 27
1330	1330	stock dividends paid by the member insurer on its capital stock, made at any time during the five 28
1331	1331	(5) years preceding the petition for liquidation or rehabilitation subject to the limitations of 29
1332	1332	subdivisions (2) — (4) of this subsection. 30
1333	1333	(2) No distribution shall be recoverable if the member insurer shows that when paid the 31
1334	1334	distribution was lawful and reasonable, and that the member insurer did not know and could not 32
1335	1335	reasonably have known that the distribution might adversely affect the ability of the member insurer 33
1336	1336	to fulfill its contractual obligations. 34
1337	1337
1338	1338
1339	1339	LC002082 - Page 37 of 61
1340	1340	(3) Any person who was an affiliate that controlled the member insurer at the time the 1
1341	1341	distributions were paid shall be liable up to the amount of distributions received. Any person who 2
1342	1342	was an affiliate who controlled the member insurer at the time the distributions were declared, shall 3
1343	1343	be liable up to the amount of distributions which would have been received if they had been paid 4
1344	1344	immediately. If two (2) or more persons are liable with respect to the same distributions, they shall 5
1345	1345	be jointly and severally liable. 6
1346	1346	(4) The maximum amount recoverable under this subsection shall be the amount needed in 7
1347	1347	excess of all other available assets of the insolvent insurer to pay the contractual obligations of the 8
1348	1348	insolvent insurer. 9
1349	1349	(5) If any person liable under subdivision (3) of this subsection is insolvent, all its affiliates 10
1350	1350	that controlled it at the time the distribution was paid, shall be jointly and severally liable for any 11
1351	1351	resulting deficiency in the amount recovered from the insolvent affiliate. 12
1352	1352	27-34.3-19. Prohibited advertisement of insurance guaranty association act in 13
1353	1353	insurance sales — Notice to policy owners. 14
1354	1354	(a) No person, including an a member insurer, agent, producer, or affiliate of an insurer 15
1355	1355	shall make, publish, disseminate, circulate or place before the public, or cause directly or indirectly, 16
1356	1356	to be made, published, disseminated, circulated or placed before the public, in any newspaper, 17
1357	1357	magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or in 18
1358	1358	the form of e-mail or an electronic website, or over any radio station or television station, or in any 19
1359	1359	other way, any advertisement, announcement or statement, written or oral, which uses the existence 20
1360	1360	of the insurance guaranty association of this state for the purpose of sales, solicitation or 21
1361	1361	inducement to purchase any form of insurance or other coverage covered by the Rhode Island life 22
1362	1362	and health insurance guaranty association act; provided, that this section shall not apply to the 23
1363	1363	association or any other entity which does not sell or solicit insurance or other coverage by a health 24
1364	1364	maintenance organization. The use of the protection afforded by this chapter, other than as provided 25
1365	1365	by this section, by any person in the sale, marketing or advertising of insurance constitutes unfair 26
1366	1366	methods of competition and unfair or deceptive acts or practices under chapter 29 of this title and 27
1367	1367	is subject to the sanctions imposed in that chapter. 28
1368	1368	(b) The association shall prepare a summary document describing the general purposes and 29
1369	1369	current limitations of this chapter in compliance with subsection (c) of this section. This document 30
1370	1370	shall be submitted to the commissioner for approval. At the expiration of the sixty (60) days after 31
1371	1371	the date on which the commissioner approves the document, an a member insurer may not deliver 32
1372	1372	a policy or contract to a policy owner, or contract owner, certificate holder or enrollee unless the 33
1373	1373	summary document is delivered to the policy owner, or contract owner, certificate holder or 34
1374	1374
1375	1375
1376	1376	LC002082 - Page 38 of 61
1377	1377	enrollee at the time of delivery of the policy or contract. The document shall also be available upon 1
1378	1378	request by a policy owner, contract owner, certificate holder or enrollee. The distribution, delivery 2
1379	1379	or contents or interpretation of this document does not guarantee that either the policy or the policy 3
1380	1380	owner, contract owner, certificate holder or enrollee contract or the owner of the policy or contract 4
1381	1381	policy owner, contract owner, certificate holder or enrollee is covered in the event of the 5
1382	1382	impairment or insolvency of a member insurer. The summary document shall be revised by the 6
1383	1383	association as amendments to this chapter may require. Failure to receive this document does not 7
1384	1384	give the policy owner, contract owner, certificate holder, enrollee or insured any greater rights than 8
1385	1385	those stated in this act. 9
1386	1386	(c) The summary document prepared under subsection (b) of this section shall contain a 10
1387	1387	clear and conspicuous disclaimer on its face. The commissioner shall establish the form and content 11
1388	1388	of the disclaimer. The disclaimer shall: 12
1389	1389	(1) State the name and address of the association and the insurance department; 13
1390	1390	(2) Prominently warn the policy or contract owner, contract owner, certificate holder or 14
1391	1391	enrollee that the association may not cover the policy or, if coverage is available, it will be subject 15
1392	1392	to substantial limitations and exclusions and conditioned on continued residence in this state; 16
1393	1393	(3) State the types of policies or contracts for which guaranty funds will provide coverage; 17
1394	1394	(4) State that the member insurer and its agents are prohibited by law from using the 18
1395	1395	existence of the association for the purpose of sales, solicitation or inducement to purchase any 19
1396	1396	form of insurance or health maintenance organization coverage; 20
1397	1397	(5) State that the policy or contract owner policy owner, contract owner, certificate holder 21
1398	1398	or enrollee should not rely on coverage under the association when selecting an insurer or health 22
1399	1399	maintenance organization; 23
1400	1400	(6) Explain rights available and procedures for filing a complaint to allege a violation of 24
1401	1401	any provisions of this chapter; and 25
1402	1402	(7) Provide other information as directed by the commissioner including, but not limited 26
1403	1403	to, sources for information about the financial condition of insurers provided that the information 27
1404	1404	is not proprietary and is subject to disclosure under chapter 2 of title 38. 28
1405	1405	(d) A member insurer shall retain evidence of compliance with subsection (b) for so long 29
1406	1406	as the policy or contract for which the notice is given remains in effect. 30
1407	1407	27-34.3-20. Prospective application. 31
1408	1408	This chapter shall not apply to any member insurer that is insolvent or unable to fulfill its 32
1409	1409	contractual obligations prior to January 1, 1996, and any such insurer shall be subject to the 33
1410	1410	provisions under chapter 34.1 of this title. Nothing in this chapter shall be construed to require an 34
1411	1411
1412	1412
1413	1413	LC002082 - Page 39 of 61
1414	1414	insurer to recompute its assessment bases for any year prior to January 1, 2005, and any assessment 1
1415	1415	bases computed between January 1, 1966 and December 31, 2004 are hereby acknowledged and 2
1416	1416	recognized as factual on the basis of premium date collected from or reported by member insurers 3
1417	1417	with respect to those years. 4
1418	1418	SECTION 5. Section 42-14-5 of the General Laws in Chapter 42-14 entitled "Department 5
1419	1419	of Business Regulation" is hereby amended to read as follows: 6
1420	1420	42-14-5. Superintendents of banking and insurance. 7
1421	1421	(a) The superintendents of banking and insurance shall administer the functions of the 8
1422	1422	department relating to the regulation and control of banking and insurance. 9
1423	1423	(b) Wherever the words "banking administrator” or "banking commissioner” or "insurance 10
1424	1424	administrator” or "insurance commissioner” occur in this chapter or any general law, public law, 11
1425	1425	act, or resolution of the general assembly or department regulation, they shall be construed to mean 12
1426	1426	superintendent of banking and superintendent of insurance except as delineated in subsection (d) 13
1427	1427	below. 14
1428	1428	(c) "Health insurance” shall mean "health insurance coverage,” as defined in §§ 27-18.5-2 15
1429	1429	and 27-18.6-2, "health benefit plan,” as defined in § 27-50-3 and a "medical supplement policy,” 16
1430	1430	as defined in § 27-18.2-1 or coverage similar to a Medicare supplement policy that is issued to an 17
1431	1431	employer to cover retirees, and dental coverage, including, but not limited to, coverage provided 18
1432	1432	by a nonprofit dental service plan as defined in § 27-20.1-1(3). 19
1433	1433	(d) Whenever the words "commissioner,” "insurance commissioner,” "health insurance 20
1434	1434	commissioner” or "director” appear in Title 27 or Title 42, those words shall be construed to mean 21
1435	1435	the health insurance commissioner established pursuant to § 42-14.5-1 with respect to all matters 22
1436	1436	relating to health insurance. The health insurance commissioner shall have sole and exclusive 23
1437	1437	jurisdiction over enforcement of those statutes with respect to all matters relating to health 24
1438	1438	insurance except for purposes of producer licensing or producer appointments. 25
1439	1439	(e) Whenever the word "director” appears or is a defined term in title 19, this word shall 26
1440	1440	be construed to mean the superintendent of banking established pursuant to this section. 27
1441	1441	(f) Whenever the word "director” or "commissioner” appears or is a defined term in title 28
1442	1442	27, this word shall be construed to mean the superintendent of insurance established pursuant to 29
1443	1443	this section except as delineated in subsection (d) of this section. 30
1444	1444	SECTION 6. Chapter 27-2.4 of the General Laws entitled "Producer Licensing Act" is 31
1445	1445	hereby amended by adding thereto the following section: 32
1446	1446	27-2.4-14.1. Appointments. 33
1447	1447	(a) An insurance producer shall not act as an agent of an insurer unless the insurance 34
1448	1448
1449	1449
1450	1450	LC002082 - Page 40 of 61
1451	1451	producer becomes an appointed agent of that insurer. An insurance producer who is not acting as 1
1452	1452	an agent of an insurer is not required to become appointed. 2
1453	1453	(b) To appoint a producer as its agent, the appointing insurer shall file, in a format approved 3
1454	1454	by the insurance commissioner, a notice of appointment within fifteen (15) days from the date the 4
1455	1455	first insurance application is submitted. An insurer may also elect to appoint a producer to all or 5
1456	1456	some insurers within the insurer's holding company system or group by the filing of a single 6
1457	1457	appointment request. 7
1458	1458	(c) An insurer shall pay an appointment fee, in the amount and method of payment set forth 8
1459	1459	in a regulation promulgated for that purpose, for each insurance producer appointed by the insurer. 9
1460	1460	(d) An insurer shall remit, in a manner prescribed by the insurance commissioner, a renewal 10
1461	1461	appointment fee in the amount set forth in a regulation promulgated for that purpose. 11
1462	1462	SECTION 7. Chapter 27-9 of the General Laws entitled "Casualty Insurance Rating" is 12
1463	1463	hereby amended by adding thereto the following section: 13
1464	1464	27-9-57. Unfair discrimination. 14
1465	1465	(a) No individual or entity subject to this chapter shall, because of race, color, creed, 15
1466	1466	national origin, or disability: 16
1467	1467	(1) Make any distinction or discrimination between persons as to the premiums or rates 17
1468	1468	charged for insurance policies. 18
1469	1469	(2) Demand or require a greater premium from any persons than it requires at that time 19
1470	1470	from others in similar cases. 20
1471	1471	(3) Insert in the policy any condition, or make any stipulation, whereby the insured binds 21
1472	1472	themselves, or their heirs, executors, administrators, or assigns, to accept any sum or service less 22
1473	1473	than the full value or amount of such policy in case of a claim thereon except such conditions and 23
1474	1474	stipulations as are imposed upon others in similar cases; and any such stipulation or condition so 24
1475	1475	made or inserted shall be void. 25
1476	1476	SECTION 8. Title 27 of the General Laws entitled "INSURANCE" is hereby amended by 26
1477	1477	adding thereto the following chapter: 27
1478	1478	CHAPTER 1.3 28
1479	1479	INSURANCE DATA SECURITY ACT 29
1480	1480	27-1.3-1. Title. 30
1481	1481	This chapter shall be known and may be cited as the "Insurance Data Security Act." 31
1482	1482	27-1.3-2. Purpose and intent. 32
1483	1483	(a) The purpose and intent of this chapter is to establish standards for data security and 33
1484	1484	standards for the investigation of, and notification to the commissioner of, a cybersecurity event 34
1485	1485
1486	1486
1487	1487	LC002082 - Page 41 of 61
1488	1488	applicable to licensees, as defined in § 27-1.3-3. Notwithstanding any other provision of law, this 1
1489	1489	chapter establishes the exclusive state standards applicable to licensees for data security, the 2
1490	1490	investigation of a cybersecurity event as defined in § 27-1.3-3, and notification to the 3
1491	1491	commissioner. These provisions do not affect a licensee's responsibility to notify consumers in 4
1492	1492	accordance with § 27-1.3-6(c). 5
1493	1493	(b) This chapter may not be construed to create or imply a private cause of action for 6
1494	1494	violation of its provisions nor may it be construed to curtail a private cause of action which would 7
1495	1495	otherwise exist in the absence of this chapter. 8
1496	1496	27-1.3-3. Definitions. 9
1497	1497	As used in this chapter, the following terms shall have the following meanings: 10
1498	1498	(1) "Authorized individual" means an individual known to and screened by the licensee 11
1499	1499	and determined to be necessary and appropriate to have access to the nonpublic information held 12
1500	1500	by the licensee and its information systems. 13
1501	1501	(2) "Commissioner" shall have the meaning established in § 42-14-5. 14
1502	1502	(3) "Consumer" means an individual, including, but not limited to, applicants, 15
1503	1503	policyholders, insureds, beneficiaries, claimants, and certificate holders who is a resident of this 16
1504	1504	state and whose nonpublic information is in a licensee's possession, custody or control. 17
1505	1505	(4) "Cybersecurity event" means an event resulting in unauthorized access to, disruption 18
1506	1506	or misuse of, an information system or nonpublic information stored on such information system. 19
1507	1507	(i) The term "cybersecurity event" does not include the unauthorized acquisition of 20
1508	1508	encrypted nonpublic information if the encryption, process or key is not also acquired, released or 21
1509	1509	used without authorization. 22
1510	1510	(ii) The term "cybersecurity event" does not include an event with regard to which the 23
1511	1511	licensee has determined that the nonpublic information accessed by an unauthorized person has not 24
1512	1512	been used or released and has been returned or destroyed. 25
1513	1513	(5) "Department" means the department of business regulation, division of insurance. 26
1514	1514	(6) "Encrypted" means the transformation of data into a form which results in a low 27
1515	1515	probability of assigning meaning without the use of a protective process or key. 28
1516	1516	(7) "Information security program" means the administrative, technical, and physical 29
1517	1517	safeguards that a licensee uses to access, collect, distribute, process, protect, store, use, transmit, 30
1518	1518	dispose of, or otherwise handle nonpublic information. 31
1519	1519	(8) "Information system" means a discrete set of electronic information resources 32
1520	1520	organized for the collection, processing, maintenance, use, sharing, dissemination, or disposition 33
1521	1521	of electronic information, as well as any specialized system such as industrial/process controls 34
1522	1522
1523	1523
1524	1524	LC002082 - Page 42 of 61
1525	1525	systems, telephone switching and private branch exchange systems, and environmental control 1
1526	1526	systems. 2
1527	1527	(9) "Licensee" means any person licensed, authorized to operate, or registered, or required 3
1528	1528	to be licensed, authorized, or registered pursuant to the insurance laws of this state, but shall not 4
1529	1529	include a purchasing group or a risk retention group chartered and licensed in a state other than this 5
1530	1530	state or a licensee that is acting as an assuming insurer that is domiciled in another state or 6
1531	1531	jurisdiction. 7
1532	1532	(10) "Multi-factor authentication" means authentication through verification of at least two 8
1533	1533	(2) of the following types of authentication factors: 9
1534	1534	(i) Knowledge factors, such as a password; or 10
1535	1535	(ii) Possession factors, such as a token or text message on a mobile phone; or 11
1536	1536	(iii) Inherence factors, such as a biometric characteristic. 12
1537	1537	(11) "Nonpublic information" means information that is not publicly available information 13
1538	1538	and is: 14
1539	1539	(i) Business related information of a licensee the tampering with which, or unauthorized 15
1540	1540	disclosure, access or use of which, would cause a material adverse impact to the business, 16
1541	1541	operations or security of the licensee; 17
1542	1542	(ii) Any information concerning a consumer which because of name, number, personal 18
1543	1543	mark, or other identifier can be used to identify such consumer, in combination with any one or 19
1544	1544	more of the following data elements: 20
1545	1545	(A) Social security number; 21
1546	1546	(B) Driver's license number or non-driver identification card number; 22
1547	1547	(C) Account number, credit or debit card number; 23
1548	1548	(D) Any security code, access code or password that would permit access to a consumer's 24
1549	1549	financial account; or 25
1550	1550	(E) Biometric records; 26
1551	1551	(iii) Any information or data, except age or gender, in any form or medium created by or 27
1552	1552	derived from a health care provider or a consumer and that relates to: 28
1553	1553	(A) The past, present or future physical, mental, behavioral health or medical condition of 29
1554	1554	any consumer or a member of the consumer's family; 30
1555	1555	(B) The provision of health care to any consumer; or 31
1556	1556	(C) Payment for the provision of health care to any consumer. 32
1557	1557	(12) "Person" means any individual or any non-governmental entity, including, but not 33
1558	1558	limited to, any non-governmental partnership, corporation, limited liability company, branch, 34
1559	1559
1560	1560
1561	1561	LC002082 - Page 43 of 61
1562	1562	agency or association. 1
1563	1563	(13) "Publicly available information" means any information that a licensee has a 2
1564	1564	reasonable basis to believe is lawfully made available to the general public from: federal, state or 3
1565	1565	local government records; widely distributed media; or disclosures to the general public that are 4
1566	1566	required to be made by federal, state or local law: 5
1567	1567	(i) For the purposes of this definition, a licensee has a reasonable basis to believe that 6
1568	1568	information is lawfully made available to the general public if the licensee has taken steps to 7
1569	1569	determine: 8
1570	1570	(A) That the information is of the type that is available to the general public; and 9
1571	1571	(B) Whether a consumer can direct that the information not be made available to the general 10
1572	1572	public and the consumer has not done so. 11
1573	1573	(14) "Risk assessment" means the procedure that each licensee is required to complete 12
1574	1574	under § 27-1.3-4(c). 13
1575	1575	(15) "State" means the State of Rhode Island. 14
1576	1576	(16) "Third-party service provider" means a person, not otherwise defined as a licensee, 15
1577	1577	that contracts with a licensee to maintain, process, store or otherwise is permitted access to 16
1578	1578	nonpublic information through its provision of services to the licensee. 17
1579	1579	27-1.3-4. Information security program. 18
1580	1580	(a) Implementation of an information security program. Commensurate with the size and 19
1581	1581	complexity of a licensee, the nature and scope of a licensee's activities, including its use of third-20
1582	1582	party service providers, and the sensitivity of the nonpublic information used by the licensee or in 21
1583	1583	the licensee's possession, custody or control, shall develop, implement, and maintain a 22
1584	1584	comprehensive written information security program, based on the licensee's risk assessment and 23
1585	1585	that contains administrative, technical, and physical safeguards for the protection of nonpublic 24
1586	1586	information and the licensee's information system. 25
1587	1587	(b) Objectives of information security program. A licensee's information security program 26
1588	1588	shall be designed to: 27
1589	1589	(1) Protect the security and confidentiality of nonpublic information and the security of the 28
1590	1590	information system; 29
1591	1591	(2) Protect against any threats or hazards to the security or integrity of nonpublic 30
1592	1592	information and the information system; 31
1593	1593	(3) Protect against unauthorized access to or use of nonpublic information, and minimize 32
1594	1594	the likelihood of harm to any consumer; and 33
1595	1595	(4) Define and periodically reevaluate a schedule for retention of nonpublic information 34
1596	1596
1597	1597
1598	1598	LC002082 - Page 44 of 61
1599	1599	and a mechanism for its destruction when no longer needed. 1
1600	1600	(c) Risk assessment. The licensee shall: 2
1601	1601	(1) Designate one or more employees, an affiliate, or an outside vendor designated to act 3
1602	1602	on behalf of the licensee who is responsible for the information security program; 4
1603	1603	(2) Identify reasonably foreseeable internal or external threats that could result in 5
1604	1604	unauthorized access, transmission, disclosure, misuse, alteration or destruction of nonpublic 6
1605	1605	information, including the security of information systems and nonpublic information that are 7
1606	1606	accessible to, or held by, third-party service providers; 8
1607	1607	(3) Assess the likelihood and potential damage of these threats, taking into consideration 9
1608	1608	the sensitivity of the nonpublic information; 10
1609	1609	(4) Assess the sufficiency of policies, procedures, information systems and other 11
1610	1610	safeguards in place to manage these threats, including consideration of threats in each relevant area 12
1611	1611	of the licensee's operations, including: 13
1612	1612	(i) Employee training and management; 14
1613	1613	(ii) Information systems, including network and software design, as well as information 15
1614	1614	classification, governance, processing, storage, transmission, and disposal; and 16
1615	1615	(iii) Detecting, preventing, and responding to attacks, intrusions, or other systems failures; 17
1616	1616	and 18
1617	1617	(5) Implement information safeguards to manage the threats identified in its ongoing 19
1618	1618	assessment, and no less than annually, assess the effectiveness of the safeguards' key controls, 20
1619	1619	systems, and procedures. 21
1620	1620	(d) Risk management. Based on its risk assessment, the licensee shall: 22
1621	1621	(1) Design its information security program to mitigate the identified risks, commensurate 23
1622	1622	with the size and complexity of the licensee's activities, including its use of third-party service 24
1623	1623	providers, and the sensitivity of the nonpublic information used by the licensee or in the licensee's 25
1624	1624	possession, custody or control; 26
1625	1625	(2) Determine which security measures listed below are appropriate and implement such 27
1626	1626	security measures: 28
1627	1627	(i) Place access controls on information systems, including controls to authenticate and 29
1628	1628	permit access only to authorized individuals to protect against the unauthorized acquisition of 30
1629	1629	nonpublic information; 31
1630	1630	(ii) Identify and manage the data, personnel, devices, systems, and facilities that enable the 32
1631	1631	organization to achieve business purposes in accordance with their relative importance to business 33
1632	1632	objectives and the organization's risk strategy; 34
1633	1633
1634	1634
1635	1635	LC002082 - Page 45 of 61
1636	1636	(iii) Restrict access at physical locations containing nonpublic information only to 1
1637	1637	authorized individuals; 2
1638	1638	(iv) Protect, by encryption or other appropriate means, all nonpublic information while 3
1639	1639	being transmitted over an external network and all nonpublic information stored on a laptop 4
1640	1640	computer or other portable computing or storage device or media; 5
1641	1641	(v) Adopt secure development practices for in-house developed applications utilized by the 6
1642	1642	licensee and procedures for evaluating, assessing or testing the security of externally developed 7
1643	1643	applications utilized by the licensee; 8
1644	1644	(vi) Modify the information system in accordance with the licensee's information security 9
1645	1645	program; 10
1646	1646	(vii) Utilize effective controls, which may include multi-factor authentication procedures 11
1647	1647	for any individual accessing nonpublic information; 12
1648	1648	(viii) Regularly test and monitor systems and procedures to detect actual and attempted 13
1649	1649	attacks on, or intrusions into, information systems; 14
1650	1650	(ix) Include audit trails within the information security program designed to detect and 15
1651	1651	respond to cybersecurity events and designed to reconstruct material financial transactions 16
1652	1652	sufficient to support normal operations and obligations of the licensee; 17
1653	1653	(x) Implement measures to protect against destruction, loss, or damage of nonpublic 18
1654	1654	information due to environmental hazards, such as fire and water damage or other catastrophes or 19
1655	1655	technological failures; and 20
1656	1656	(xi) Develop, implement, and maintain procedures for the secure disposal of nonpublic 21
1657	1657	information in any format; 22
1658	1658	(3) Include cybersecurity risks in the licensee's enterprise risk management process; 23
1659	1659	(4) Stay informed regarding emerging threats or vulnerabilities and utilize reasonable 24
1660	1660	security measures when sharing information relative to the character of the sharing and the type of 25
1661	1661	information shared; and 26
1662	1662	(5) Provide its personnel with cybersecurity awareness training that is updated as necessary 27
1663	1663	to reflect risks identified by the licensee in the risk assessment. 28
1664	1664	(e) Oversight by board of directors. If the licensee has a board of directors, the board or an 29
1665	1665	appropriate committee of the board shall, at a minimum: 30
1666	1666	(1) Require the licensee's executive management, or designees, to develop, implement, and 31
1667	1667	maintain the licensee's information security program; 32
1668	1668	(2) Require the licensee's executive management, or designees, to report in writing at least 33
1669	1669	annually, the following information: 34
1670	1670
1671	1671
1672	1672	LC002082 - Page 46 of 61
1673	1673	(i) The overall status of the information security program and the licensee's compliance 1
1674	1674	with this chapter; and 2
1675	1675	(ii) Material matters related to the information security program, addressing issues such as 3
1676	1676	risk assessment, risk management and control decisions, third-party service provider arrangements, 4
1677	1677	results of testing, cybersecurity events or violations and management's responses thereto, or 5
1678	1678	recommendations for changes in the information security program; and 6
1679	1679	(3) If executive management delegates any of its responsibilities pursuant to this section, 7
1680	1680	it shall oversee the development, implementation and maintenance of the licensee's information 8
1681	1681	security program prepared by the designee(s) and shall receive a report from the designee(s) 9
1682	1682	complying with the requirements of the report to the board of directors. 10
1683	1683	(f) Oversight of third-party service provider arrangements. 11
1684	1684	(1) A licensee shall exercise due diligence in selecting its third-party service provider; and 12
1685	1685	(2) A licensee shall take reasonable steps to request a third-party service provider to 13
1686	1686	implement appropriate administrative, technical, and physical measures to protect and secure the 14
1687	1687	information systems and nonpublic information that are accessible to, or held by, the third-party 15
1688	1688	service provider. 16
1689	1689	(g) Program adjustments. The licensee shall monitor, evaluate and adjust, as appropriate, 17
1690	1690	the information security program consistent with any relevant changes in technology, the sensitivity 18
1691	1691	of its nonpublic information, internal or external threats to information, and the licensee's own 19
1692	1692	changing business arrangements, such as mergers and acquisitions, alliances and joint ventures, 20
1693	1693	outsourcing arrangements and changes to information systems. 21
1694	1694	(h) Incident response plan: 22
1695	1695	(1) As part of its information security program, each licensee shall establish a written 23
1696	1696	incident response plan designed to promptly respond to, and recover from, any cybersecurity event 24
1697	1697	that compromises the confidentiality, integrity or availability of nonpublic information in its 25
1698	1698	possession, the licensee's information systems, or the continuing functionality of any aspect of the 26
1699	1699	licensee's business or operations; 27
1700	1700	(2) Such incident response plan shall address the following areas: 28
1701	1701	(i) The internal process for responding to a cybersecurity event; 29
1702	1702	(ii) The goals of the incident response plan; 30
1703	1703	(iii) The definition of clear roles, responsibilities and levels of decision-making authority; 31
1704	1704	(iv) External and internal communications and information sharing; 32
1705	1705	(v) Identification of requirements for the remediation of any identified weaknesses in 33
1706	1706	information systems and associated controls; 34
1707	1707
1708	1708
1709	1709	LC002082 - Page 47 of 61
1710	1710	(vi) Documentation and reporting regarding cybersecurity events and related incident 1
1711	1711	response activities; and 2
1712	1712	(vii) The evaluation and revision as necessary of the incident response plan following a 3
1713	1713	cybersecurity event. 4
1714	1714	(i) Annual certification to commissioner of domiciliary state. Annually, each insurer 5
1715	1715	domiciled in this state shall submit to the commissioner a written statement by April 15 certifying 6
1716	1716	that the insurer is in compliance with the requirements set forth in this section. Each insurer shall 7
1717	1717	maintain for examination by the department all records, schedules and data supporting this 8
1718	1718	certificate for a period of five (5) years. To the extent an insurer has identified areas, systems or 9
1719	1719	processes that require material improvement, updating or redesign, the insurer shall document the 10
1720	1720	identification and the remedial efforts planned and underway to address such areas, systems or 11
1721	1721	processes. This documentation must be available for inspection by the commissioner. 12
1722	1722	27-1.3-5. Investigation of a cybersecurity event. 13
1723	1723	(a) If the licensee learns that a cybersecurity event has or may have occurred, the licensee, 14
1724	1724	or an outside vendor and/or service provider designated to act on behalf of the licensee, shall 15
1725	1725	conduct a prompt investigation. 16
1726	1726	(b) During the investigation, the licensee, or an outside vendor and/or service provider 17
1727	1727	designated to act on behalf of the licensee, shall, at a minimum, determine as much of the following 18
1728	1728	information as possible: 19
1729	1729	(1) Whether a cybersecurity event has occurred; 20
1730	1730	(2) Assess the nature and scope of the cybersecurity event; 21
1731	1731	(3) Identify any nonpublic information that may have been involved in the cybersecurity 22
1732	1732	event; and 23
1733	1733	(4) Perform or oversee reasonable measures to restore the security of the information 24
1734	1734	systems compromised in the cybersecurity event in order to prevent further unauthorized 25
1735	1735	acquisition, release or use of nonpublic information in the licensee's possession, custody or control. 26
1736	1736	(c) If the licensee learns that a cybersecurity event has or may have occurred in a system 27
1737	1737	maintained by a third-party service provider, and it has or may have impacted the licensee's 28
1738	1738	nonpublic information, the licensee shall make reasonable efforts to complete the steps set forth in 29
1739	1739	subsection (b) of this section or make reasonable efforts to confirm and document that the third-30
1740	1740	party service provider has completed those steps. 31
1741	1741	(d) The licensee shall maintain records concerning all cybersecurity events for a period of 32
1742	1742	at least five (5) years from the date of the cybersecurity event and shall produce those records upon 33
1743	1743	demand of the commissioner. 34
1744	1744
1745	1745
1746	1746	LC002082 - Page 48 of 61
1747	1747	27-1.3-6. Notification of a cybersecurity event. 1
1748	1748	(a) Notification to the commissioner. Each licensee shall notify the commissioner as 2
1749	1749	promptly as possible but in no event later than three (3) business days from a determination that a 3
1750	1750	cybersecurity event has occurred when either of the following criteria has been met: 4
1751	1751	(1) This state is the licensee's state of domicile, in the case of an insurer, or this state is the 5
1752	1752	licensee's home state, in the case of a producer, as those terms are defined in § 27-2.4-2; or 6
1753	1753	(2) The licensee reasonably believes that the nonpublic information involved affects two 7
1754	1754	hundred fifty (250) or more consumers residing in this state and that either of the following apply: 8
1755	1755	(i) A cybersecurity event impacting the licensee of which notice is required to be provided 9
1756	1756	to any government body, self-regulatory agency or any other supervisory body pursuant to any state 10
1757	1757	or federal law; or 11
1758	1758	(ii) A cybersecurity event that has a reasonable likelihood of materially harming: 12
1759	1759	(A) Any consumer residing in this state; or 13
1760	1760	(B) Any material part of the normal operation(s) of the licensee. 14
1761	1761	(b) The licensee shall provide any information required by this section in electronic form 15
1762	1762	as directed by the commissioner. The licensee shall have a continuing obligation to update and 16
1763	1763	supplement initial and subsequent notifications to the commissioner concerning the cybersecurity 17
1764	1764	event. The licensee shall provide as much of the following information as possible: 18
1765	1765	(1) Date of the cybersecurity event; 19
1766	1766	(2) Description of how the information was exposed, lost, stolen, or breached, including 20
1767	1767	the specific roles and responsibilities of third-party service providers, if any; 21
1768	1768	(3) How the cybersecurity event was discovered; 22
1769	1769	(4) Whether any lost, stolen, or breached information has been recovered and if so, how 23
1770	1770	this recovery was achieved; 24
1771	1771	(5) The identity of the source of the cybersecurity event; 25
1772	1772	(6) Whether the licensee has filed a police report or has notified any regulatory, government 26
1773	1773	or law enforcement agencies and, if so, when such notification was provided; 27
1774	1774	(7) Description of the specific types of information acquired without authorization. 28
1775	1775	Specific types of information consisting of particular data elements including, for example, types 29
1776	1776	of medical information, types of financial information or types of information allowing 30
1777	1777	identification of the consumer; 31
1778	1778	(8) The period during which the information system was compromised by the cybersecurity 32
1779	1779	event; 33
1780	1780	(9) The number of total consumers in this state affected by the cybersecurity event. The 34
1781	1781
1782	1782
1783	1783	LC002082 - Page 49 of 61
1784	1784	licensee shall provide the best estimate in the initial report to the commissioner and update this 1
1785	1785	estimate with each subsequent report to the commissioner pursuant to this section; 2
1786	1786	(10) The results of any internal review identifying a lapse in either automated controls or 3
1787	1787	internal procedures, or confirming that all automated controls or internal procedures were followed; 4
1788	1788	(11) Description of efforts being undertaken to remediate the situation which permitted the 5
1789	1789	cybersecurity event to occur; 6
1790	1790	(12) A copy of the licensee's privacy policy and a statement outlining the steps the licensee 7
1791	1791	will take to investigate and notify consumers affected by the cybersecurity event; and 8
1792	1792	(13) Name of a contact person who is both familiar with the cybersecurity event and 9
1793	1793	authorized to act for the licensee. 10
1794	1794	(c) Notification to consumers. A licensee shall comply with chapter 49.3 of title 11, as 11
1795	1795	applicable, and provide a copy of the notice sent to consumers under that chapter to the 12
1796	1796	commissioner, when a licensee is required to notify the commissioner under subsection (a) of this 13
1797	1797	section. 14
1798	1798	(d) Notice regarding cybersecurity events of third-party service providers: 15
1799	1799	(1) In the case of a cybersecurity event involving a licensee's nonpublic information in a 16
1800	1800	system maintained by a third-party service provider, of which the licensee has become aware, the 17
1801	1801	licensee shall treat that event as it would under subsection (a) of this section; 18
1802	1802	(2) The computation of the licensee's deadlines shall begin on the day after the third-party 19
1803	1803	service provider notifies the licensee of the cybersecurity event or the licensee otherwise has actual 20
1804	1804	knowledge of the cybersecurity event, whichever is sooner; 21
1805	1805	(3) Nothing in this chapter shall prevent or abrogate an agreement between a licensee and 22
1806	1806	another licensee, a third-party service provider or any other party to fulfill any of the investigation 23
1807	1807	requirements imposed under § 27-1.3-5 or notice requirements imposed under this section. 24
1808	1808	(e) Notice regarding cybersecurity events of reinsurers to insurers: 25
1809	1809	(1)(i) In the case of a cybersecurity event involving nonpublic information that is used by 26
1810	1810	the licensee that is acting as an assuming insurer or in the possession, custody or control of a 27
1811	1811	licensee that is acting as an assuming insurer and that does not have a direct contractual relationship 28
1812	1812	with the affected consumers, the assuming insurer shall notify its affected ceding insurers and the 29
1813	1813	commissioner of its state of domicile within seventy-two (72) hours of making the determination 30
1814	1814	that a cybersecurity event has occurred; 31
1815	1815	(ii) The ceding insurers that have a direct contractual relationship with affected consumers 32
1816	1816	shall fulfill the consumer notification requirements imposed under chapter 49.3 of title 11 ("identity 33
1817	1817	theft protection act of 2015"), and any other notification requirements relating to a cybersecurity 34
1818	1818
1819	1819
1820	1820	LC002082 - Page 50 of 61
1821	1821	event imposed under this section; 1
1822	1822	(2)(i) In the case of a cybersecurity event involving nonpublic information that is in the 2
1823	1823	possession, custody or control of a third-party service provider of a licensee that is an assuming 3
1824	1824	insurer, the assuming insurer shall notify its affected ceding insurers and the commissioner of its 4
1825	1825	state of domicile within seventy-two (72) hours of receiving notice from its third-party service 5
1826	1826	provider that a cybersecurity event has occurred; 6
1827	1827	(ii) The ceding insurers that have a direct contractual relationship with affected consumers 7
1828	1828	shall fulfill the consumer notification requirements imposed under chapter 49.3 of title 11 and any 8
1829	1829	other notification requirements relating to a cybersecurity event imposed under this section. 9
1830	1830	(f) Notice regarding cybersecurity events of insurers to producers of record. 10
1831	1831	(1) In the case of a cybersecurity event involving nonpublic information that is in the 11
1832	1832	possession, custody or control of a licensee that is an insurer or its third-party service provider and 12
1833	1833	for which a consumer accessed the insurer's services through an independent insurance producer, 13
1834	1834	the insurer shall notify the producers of record of all affected consumers as soon as practicable as 14
1835	1835	directed by the commissioner. 15
1836	1836	(2) The insurer is excused from this obligation for those instances in which it does not have 16
1837	1837	the current producer of record information for any individual consumer. 17
1838	1838	27-1.3-7. Power of commissioner. 18
1839	1839	(a) The commissioner shall have power to examine and investigate into the affairs of a 19
1840	1840	licensee to determine whether the licensee has been or is engaged in any conduct in violation of 20
1841	1841	this chapter. This power is in addition to the powers which the commissioner has pursuant to 21
1842	1842	chapter 13.1 of title 27 and any such investigation or examination shall be conducted pursuant to 22
1843	1843	chapter 13.1 of title 27. 23
1844	1844	(b) Whenever the commissioner has reason to believe that a licensee has been or is engaged 24
1845	1845	in conduct in this state which violates this chapter, the commissioner may take action that is 25
1846	1846	necessary or appropriate to enforce the provisions of this chapter. 26
1847	1847	27-1.3-8. Confidentiality. 27
1848	1848	(a) Any documents, materials or other information in the control or possession of the 28
1849	1849	department that are furnished by a licensee or an employee or agent thereof acting on behalf of a 29
1850	1850	licensee pursuant to §§ 27-1.3-4(i) and 27-1.3-6(b)(2), (b)(3), (b)(4), (b)(5), (b)(8), (b)(10), and 30
1851	1851	(b)(11), or that are obtained by the commissioner in an investigation or examination pursuant to § 31
1852	1852	27-1.3-7 shall be confidential by law and privileged, shall not be subject to chapter 2 of title 38, 32
1853	1853	shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in 33
1854	1854	any private civil action; provided, however, the commissioner is authorized to use the documents, 34
1855	1855
1856	1856
1857	1857	LC002082 - Page 51 of 61
1858	1858	materials or other information in the furtherance of any regulatory or legal action brought as a part 1
1859	1859	of the commissioner's duties. 2
1860	1860	(b) Neither the commissioner nor any person who received documents, materials or other 3
1861	1861	information while acting under the authority of the commissioner shall be permitted or required to 4
1862	1862	testify in any private civil action concerning any confidential documents, materials, or information 5
1863	1863	subject to subsection (a) of this section. 6
1864	1864	(c) In order to assist in the performance of the commissioner's duties under this chapter, 7
1865	1865	the commissioner: 8
1866	1866	(1) May share documents, materials or other information, including the confidential and 9
1867	1867	privileged documents, materials or information subject to subsection (a) of this section, with other 10
1868	1868	state, federal, and international regulatory agencies, with the National Association of Insurance 11
1869	1869	Commissioners, its affiliates or subsidiaries, and with state, federal, and international law 12
1870	1870	enforcement authorities; provided that, the recipient agrees in writing to maintain the 13
1871	1871	confidentiality and privileged status of the document, material or other information; 14
1872	1872	(2) May receive documents, materials or information, including otherwise confidential and 15
1873	1873	privileged documents, materials or information, from the National Association of Insurance 16
1874	1874	Commissioners, its affiliates or subsidiaries and from regulatory and law enforcement officials of 17
1875	1875	other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any 18
1876	1876	document, material or information received with notice or the understanding that it is confidential 19
1877	1877	or privileged under the laws of the jurisdiction that is the source of the document, material or 20
1878	1878	information; 21
1879	1879	(3) May share documents, materials or other information subject to subsection (a) of this 22
1880	1880	section, with a third-party consultant or vendor provided the consultant agrees in writing to 23
1881	1881	maintain the confidentiality and privileged status of the document, material or other information; 24
1882	1882	and 25
1883	1883	(4) May enter into agreements governing sharing and use of information consistent with 26
1884	1884	this subsection. 27
1885	1885	(d) No waiver of any applicable privilege or claim of confidentiality in the documents, 28
1886	1886	materials, or information shall occur as a result of disclosure to the commissioner under this section 29
1887	1887	or as a result of sharing as authorized in subsection (c) of this section. 30
1888	1888	(e) Nothing in this chapter shall prohibit the commissioner from releasing final, adjudicated 31
1889	1889	actions that are open to public inspection pursuant to chapter 2 of title 38 to a database or other 32
1890	1890	clearinghouse service maintained by the National Association of Insurance Commissioners, its 33
1891	1891	affiliates or subsidiaries. 34
1892	1892
1893	1893
1894	1894	LC002082 - Page 52 of 61
1895	1895	27-1.3-9. Exceptions. 1
1896	1896	(a) The following exceptions shall apply to this chapter: 2
1897	1897	(1) A licensee meeting one of the following criteria is exempt from § 27-1.3-4: 3
1898	1898	(1) A licensee with fewer than twenty-five (25) employees, including any independent 4
1899	1899	contractors with access to the licensee's nonpublic information; or 5
1900	1900	(2) A licensee with less than five million dollars ($5,000,000) in gross annual revenue; or 6
1901	1901	(3) A licensee with less than ten million dollars ($10,000,000) in assets, measured at the 7
1902	1902	end of the licensee's fiscal year. 8
1903	1903	(4) A licensee subject to and in compliance with Pub. L. 104-191, 110 Stat. 1936, enacted 9
1904	1904	August 21, 1996 (Health Insurance Portability and Accountability Act) and related privacy, security 10
1905	1905	and breach notification regulations pursuant to Code of Federal Regulations, Parts 160 and 164, 11
1906	1906	and Pub. L. 111-5, 123 Stat. 226, enacted February 17, 2009 (Health Information Technology) is 12
1907	1907	considered to meet the requirements of this chapter, other than the requirements of §§ 27-1.3-6(a) 13
1908	1908	and (b) regarding notification to the commissioner, if: 14
1909	1909	(i) The licensee maintains a program for information security and breach notification that 15
1910	1910	treats all nonpublic information relating to consumers in this state in the same manner as protected 16
1911	1911	health information; 17
1912	1912	(ii) The licensee annually submits to the commissioner a written statement certifying that 18
1913	1913	the licensee is in compliance with the requirements of this subsection; and 19
1914	1914	(iii) The commissioner has not issued a determination finding that the applicable federal 20
1915	1915	regulations are materially less stringent than the requirements of this chapter. 21
1916	1916	(5) An employee, agent, representative or designee of a licensee, who is also a licensee, is 22
1917	1917	exempt from § 27-1.3-4 and need not develop its own information security program to the extent 23
1918	1918	that the employee, agent, representative or designee is covered by the information security program 24
1919	1919	of the other licensee. 25
1920	1920	(b) In the event that a licensee ceases to qualify for an exception, the licensee shall have 26
1921	1921	one hundred eighty (180) days to comply with this chapter. 27
1922	1922	27-1.3-10. Penalties. 28
1923	1923	If any provision of this chapter or the application thereof to any person or circumstance is 29
1924	1924	for any reason held to be invalid, the remainder of the chapter and the application of such provision 30
1925	1925	to other persons or circumstances shall not be affected thereby. 31
1926	1926	27-1.3-11. Severability. 32
1927	1927	If any provision of this chapter or the application thereof to any person or circumstance is 33
1928	1928	for any reason held to be invalid, the remainder of the chapter and the application of such provision 34
1929	1929
1930	1930
1931	1931	LC002082 - Page 53 of 61
1932	1932	to other persons or circumstances shall not be affected thereby. 1
1933	1933	SECTION 9. Title 27 of the General Laws entitled "INSURANCE" is hereby amended by 2
1934	1934	adding thereto the following chapter: 3
1935	1935	CHAPTER 82 4
1936	1936	PET INSURANCE ACT 5
1937	1937	27-82-1. Short Title. 6
1938	1938	This act shall be known and may be cited as the "Pet Insurance Act." 7
1939	1939	27-82-2. Scope and Purpose. 8
1940	1940	(a) The purpose of this act is to promote the public welfare by creating a comprehensive 9
1941	1941	legal framework within which pet insurance may be sold in this state. 10
1942	1942	(b) The requirements of this act shall apply to pet insurance policies that are issued to any 11
1943	1943	resident of this state and are sold, solicited, negotiated, or offered in this state, and policies or 12
1944	1944	certificates that are delivered or issued for delivery in this state. 13
1945	1945	(c) All other applicable provisions of this state's insurance laws shall continue to apply to 14
1946	1946	pet insurance except that the specific provisions of this act shall supersede any general provisions 15
1947	1947	of law that would otherwise be applicable to pet insurance. 16
1948	1948	27-82-3. Definitions. 17
1949	1949	(a) If a pet insurer uses any of the terms in this chapter in a policy of pet insurance, the pet 18
1950	1950	insurer shall use the definition of each of those terms as set forth herein and include the definition 19
1951	1951	of the term(s) in the policy. The pet insurer shall also make the definition available through a clear 20
1952	1952	and conspicuous link on the main page of the pet insurer or pet insurer's program administrator's 21
1953	1953	website. 22
1954	1954	(b) Nothing in this chapter shall in any way prohibit or limit the types of exclusions pet 23
1955	1955	insurers may use in their policies or require pet insurers to have any of the limitations or exclusions 24
1956	1956	defined below. 25
1957	1957	(c) As used in this chapter: 26
1958	1958	(1) "Chronic condition" means a condition that can be treated or managed, but not cured. 27
1959	1959	(2) "Congenital anomaly or disorder" means a condition that is present from birth, whether 28
1960	1960	inherited or caused by the environment, which may cause or contribute to illness or disease. 29
1961	1961	(3) "Hereditary disorder" means an abnormality that is genetically transmitted from parent 30
1962	1962	to offspring and may cause illness or disease. 31
1963	1963	(4) "Orthopedic" refers to conditions affecting the bones, skeletal muscle, cartilage, 32
1964	1964	tendons, ligaments, and joints. It includes, but is not limited to, elbow dysplasia, hip dysplasia, 33
1965	1965	intervertebral disc degeneration, patellar luxation, and ruptured cranial cruciate ligaments. It does 34
1966	1966
1967	1967
1968	1968	LC002082 - Page 54 of 61
1969	1969	not include cancers or metabolic, hemopoietic, or autoimmune diseases. 1
1970	1970	(5) "Pet insurance" means a property insurance policy that provides coverage for accidents 2
1971	1971	and illnesses of pets. 3
1972	1972	(6) "Preexisting condition" means any condition for which any of the following are true 4
1973	1973	prior to the effective date of a pet insurance policy or during any waiting period: 5
1974	1974	(i) A veterinarian provided medical advice; 6
1975	1975	(ii) The pet received previous treatment; or 7
1976	1976	(iii) Based on information from verifiable sources, the pet had signs or symptoms directly 8
1977	1977	related to the condition for which a claim is being made. 9
1978	1978	(iv) A condition for which coverage is afforded on a policy cannot be considered a 10
1979	1979	preexisting condition on any renewal of the policy. 11
1980	1980	(7) "Renewal" means to issue and deliver at the end of an insurance policy period a policy 12
1981	1981	which supersedes a policy previously issued and delivered by the same pet insurer or affiliated pet 13
1982	1982	insurer and which provides types and limits of coverage substantially similar to those contained in 14
1983	1983	the policy being superseded. 15
1984	1984	(8) "Veterinarian" means an individual who holds a valid license to practice veterinary 16
1985	1985	medicine from the appropriate licensing entity in the jurisdiction in which he or she practices. 17
1986	1986	(9) "Veterinary expenses" means the costs associated with medical advice, diagnosis, care, 18
1987	1987	or treatment provided by a veterinarian, including, but not limited to, the cost of drugs prescribed 19
1988	1988	by a veterinarian. 20
1989	1989	(10) "Waiting period" means the period of time specified in a pet insurance policy that is 21
1990	1990	required to transpire before some or all of the coverage in the policy can begin. Waiting periods 22
1991	1991	may not be applied to renewals of existing coverage. 23
1992	1992	(11) "Wellness program" means a subscription or reimbursement-based program that is 24
1993	1993	separate from an insurance policy that provides goods and services to promote the general health, 25
1994	1994	safety, or wellbeing of the pet. If any wellness program: 26
1995	1995	(i) Pays or indemnifies another as to loss from certain contingencies called "risks," 27
1996	1996	including through reinsurance; 28
1997	1997	(ii) Pays or grants a specified amount or determinable benefit to another in connection with 29
1998	1998	ascertainable risk contingencies; or 30
1999	1999	(iii) Acts as a surety, it is transacting in the business of insurance and is subject to the 31
2000	2000	insurance code, as defined in § 27-54.1-1. This definition is not intended to classify a contract 32
2001	2001	directly between a service provider and a pet owner that only involves the two (2) parties as being 33
2002	2002	"the business of insurance," unless other indications of insurance also exist. 34
2003	2003
2004	2004
2005	2005	LC002082 - Page 55 of 61
2006	2006	27-82-4. Disclosures. 1
2007	2007	(a) A pet insurer transacting pet insurance shall disclose the following to consumers: 2
2008	2008	(1) If the policy excludes coverage due to any of the following: 3
2009	2009	(i) A preexisting condition; 4
2010	2010	(ii) A hereditary disorder; 5
2011	2011	(iii) A congenital anomaly or disorder; or 6
2012	2012	(iv) A chronic condition. 7
2013	2013	(2) If the policy includes any other exclusions, the following statement: "Other exclusions 8
2014	2014	may apply. Please refer to the exclusions section of the policy for more information." 9
2015	2015	(3) Any policy provision that limits coverage through a waiting or affiliation period, a 10
2016	2016	deductible, coinsurance, or an annual or lifetime policy limit. 11
2017	2017	(4) Whether the pet insurer reduces coverage or increases premiums based on the insured's 12
2018	2018	claim history, the age of the covered pet or a change in the geographic location of the insured. 13
2019	2019	(5) If the underwriting company differs from the brand name used to market and sell the 14
2020	2020	product. 15
2021	2021	(b) Right to examine and return the policy. 16
2022	2022	(1) Unless the insured has filed a claim under the pet insurance policy, pet insurance 17
2023	2023	applicants shall have the right to examine and return the policy, certificate or rider to the company 18
2024	2024	or an agent/insurance producer of the company within fifteen (15) days of its receipt and to have 19
2025	2025	the premium refunded if, after examination of the policy, certificate or rider, the applicant is not 20
2026	2026	satisfied for any reason. 21
2027	2027	(2) Pet insurance policies, certificates and riders shall have a notice prominently printed on 22
2028	2028	the first page or attached thereto including specific instructions to accomplish a return. The 23
2029	2029	following free look statement or language substantially similar shall be included: 24
2030	2030	"You have fifteen (15) days from the day you receive this policy, certificate, or rider to 25
2031	2031	review it, and return it to the company if you decide not to keep it. You do not have to tell the 26
2032	2032	company why you are returning it. If you decide not to keep it, simply return it to the company at 27
2033	2033	its administrative office, or you may return it to the agent/insurance producer that you bought it 28
2034	2034	from as long as you have not filed a claim. You must return it within fifteen (15) days of the day 29
2035	2035	you first received it. The company will refund the full amount of any premium paid within thirty 30
2036	2036	(30) days after it receives the returned policy, certificate, or rider. The premium refund will be sent 31
2037	2037	directly to the person who paid it. The policy, certificate, or rider will be void as if it had never 32
2038	2038	been issued." 33
2039	2039	(c) A pet insurer shall clearly disclose a summary description of the basis or formula on 34
2040	2040
2041	2041
2042	2042	LC002082 - Page 56 of 61
2043	2043	which the pet insurer determines claim payments under a pet insurance policy within the policy, 1
2044	2044	prior to policy issuance, and through a clear and conspicuous link on the main page of the pet 2
2045	2045	insurer's or pet insurer's program administrator's website. 3
2046	2046	(d) A pet insurer that uses a benefit schedule to determine claim payment under a pet 4
2047	2047	insurance policy shall do both of the following: 5
2048	2048	(1) Clearly disclose the applicable benefit schedule in the policy. 6
2049	2049	(2) Disclose all benefit schedules used by the pet insurer under its pet insurance policies 7
2050	2050	through a clear and conspicuous link on the main page of the pet insurer's or pet insurer's program 8
2051	2051	administrator's website. 9
2052	2052	(e) A pet insurer that determines claim payments under a pet insurance policy based on 10
2053	2053	usual and customary fees, or any other reimbursement limitation based on prevailing veterinary 11
2054	2054	service provider charges, shall do both of the following: 12
2055	2055	(1) Include a usual and customary fee limitation provision in the policy that clearly 13
2056	2056	describes the pet insurer's basis for determining usual and customary fees and how that basis is 14
2057	2057	applied in calculating claim payments. 15
2058	2058	(2) Disclose the pet insurer's basis for determining usual and customary fees through a clear 16
2059	2059	and conspicuous link on the main page of the pet insurer's or pet insurer's program administrator's 17
2060	2060	website. 18
2061	2061	(f) If any medical examination by a licensed veterinarian is required to effectuate coverage, 19
2062	2062	the pet insurer shall clearly and conspicuously disclose the required aspects of the examination 20
2063	2063	prior to purchase and disclose that examination documentation may result in a preexisting condition 21
2064	2064	exclusion. 22
2065	2065	(g) Waiting periods and the requirements applicable to them, must be clearly and 23
2066	2066	prominently disclosed to consumers prior to the policy purchase. 24
2067	2067	(h) The pet insurer shall include a summary of all policy provisions required in subsections 25
2068	2068	(a) through (g) of this section, inclusive, in a separate document titled "insurer disclosure of 26
2069	2069	important policy provisions." 27
2070	2070	(i) The pet insurer shall post the "insurer disclosure of important policy provisions" 28
2071	2071	document required in subsection (h) of this section through a clear and conspicuous link on the 29
2072	2072	main page of the pet insurer's or pet insurer's program administrator's website. 30
2073	2073	(j) In connection with the issuance of a new pet insurance policy, the pet insurer shall 31
2074	2074	provide the consumer with a copy of the "insurer disclosure of important policy provisions" 32
2075	2075	document required pursuant to subsection (h) of this section in at least twelve-point (12-point) type 33
2076	2076	when the policy is delivered. 34
2077	2077
2078	2078
2079	2079	LC002082 - Page 57 of 61
2080	2080	(k) At the time a pet insurance policy is issued or delivered to a policyholder, the pet insurer 1
2081	2081	shall include a written disclosure with the following information, printed in twelve-point (12-point) 2
2082	2082	boldface type: 3
2083	2083	(1) The address and customer service telephone number of the pet insurer or the agent or 4
2084	2084	broker of record. 5
2085	2085	(2) If the policy was issued or delivered by an agent or broker, a statement advising the 6
2086	2086	policyholder to contact the broker or agent for assistance. 7
2087	2087	(l) The disclosures required in this section shall be in addition to any other disclosures 8
2088	2088	required by law or regulation. 9
2089	2089	27-82-5. Policy Conditions. 10
2090	2090	(a) A pet insurer may issue policies that exclude coverage on the basis of one or more 11
2091	2091	preexisting conditions with appropriate disclosure to the consumer. The pet insurer has the burden 12
2092	2092	of proving that the preexisting condition exclusion applies to the condition for which a claim is 13
2093	2093	being made. 14
2094	2094	(b) A pet insurer may issue policies that impose waiting periods upon effectuation of the 15
2095	2095	policy that do not exceed thirty (30) days for illnesses or orthopedic conditions not resulting from 16
2096	2096	an accident. Waiting periods for accidents are prohibited. However, an insurer may issue coverage 17
2097	2097	to be effective at 12:01 a.m. on the second calendar day after the purchase, subject only to the 18
2098	2098	following exceptions. 19
2099	2099	(1) If an insurer elects to conduct individualized underwriting on a specific pet, then 20
2100	2100	coverage must be effective by 12:01 a.m. on the second calendar day after the insurer has 21
2101	2101	determined such pet is eligible for coverage. 22
2102	2102	(2) An insurer may delay coverage from becoming effective to establish a method for the 23
2103	2103	consumer or group administrator to pay the premium. 24
2104	2104	(3) For pet insurance coverage acquired by an individual through an employer or 25
2105	2105	organization, the coverage effective date of such pet insurance may be delayed to align with the 26
2106	2106	eligibility and effective date requirements of the employer's or organization's benefit plan. 27
2107	2107	(4) A pet insurer utilizing a waiting period permitted in subsection (b) of this section shall 28
2108	2108	include a provision in its contract that allows the waiting periods to be waived upon completion of 29
2109	2109	a medical examination. Pet insurers may require the examination to be conducted by a licensed 30
2110	2110	veterinarian after the purchase of the policy. 31
2111	2111	(i) A medical examination under subsection (b)(1) of this section shall be paid for by the 32
2112	2112	policyholder, unless the policy specifies that the pet insurer will pay for the examination. 33
2113	2113	(ii) A pet insurer can specify elements to be included as part of the examination and require 34
2114	2114
2115	2115
2116	2116	LC002082 - Page 58 of 61
2117	2117	documentation thereof; provided, the specifications do not unreasonably restrict a consumer's 1
2118	2118	ability to waive the waiting periods in subsection (b) of this section. 2
2119	2119	(5) Waiting periods, and the requirements applicable to them, must be clearly and 3
2120	2120	prominently disclosed to consumers prior to the policy purchase. 4
2121	2121	(6) If a policy does not include a waiting period for an illness or orthopedic condition, an 5
2122	2122	insurer may set a policy effectuation date that is up to fifteen (15) calendar days after purchase, so 6
2123	2123	long as such policy effectuation date is clearly disclosed and no premium is charged before the 7
2124	2124	policy becomes effective. 8
2125	2125	(c) A pet insurer must not require a veterinary examination of the covered pet for the 9
2126	2126	insured to have their policy renewed. 10
2127	2127	(d) If a pet insurer includes any prescriptive, wellness, or non-insurance benefits in the 11
2128	2128	policy form, then it is made part of the policy contract and must follow all applicable laws and 12
2129	2129	regulations in the insurance code. 13
2130	2130	(e) An insured's eligibility to purchase a pet insurance policy must not be based on 14
2131	2131	participation, or lack of participation, in a separate wellness program. 15
2132	2132	27-82-6. Sales practices for wellness programs. 16
2133	2133	(a) A pet insurer and/or producer shall not do the following: 17
2134	2134	(1) Market a wellness program as pet insurance; 18
2135	2135	(2) Market a wellness program during the sale, solicitation, or negotiation of pet insurance. 19
2136	2136	(b) If a wellness program is sold by a pet insurer and/or producer: 20
2137	2137	(1) The purchase of the wellness program shall not be a requirement to the purchase of pet 21
2138	2138	insurance. 22
2139	2139	(2) The costs of the wellness program shall be separate and identifiable from any pet 23
2140	2140	insurance policy sold by a pet insurer and/or producer. 24
2141	2141	(3) The terms and conditions for the wellness program shall be separate from any pet 25
2142	2142	insurance policy sold by a pet insurer and/or producer. 26
2143	2143	(4) The products or coverages available through the wellness program shall not duplicate 27
2144	2144	products or coverages available through the pet insurance policy; 28
2145	2145	(5) The advertising of the wellness program shall not be misleading and shall be in 29
2146	2146	accordance with subsection (b) of this section; and 30
2147	2147	(6) A pet insurer and/or producer shall clearly disclose the following to consumers, printed 31
2148	2148	in twelve-point (12-point) boldface type: 32
2149	2149	(i) That wellness programs are not insurance. 33
2150	2150	(ii) The address and customer service telephone number of the pet insurer or producer or 34
2151	2151
2152	2152
2153	2153	LC002082 - Page 59 of 61
2154	2154	broker of record. 1
2155	2155	(c) Coverages included in the pet insurance policy contract described as "wellness" benefits 2
2156	2156	are insurance. 3
2157	2157	27-82-7. Insurance producer training. 4
2158	2158	(a) An insurance producer shall not sell, solicit, or negotiate a pet insurance product until 5
2159	2159	after the producer is appropriately licensed and has completed the required training identified in 6
2160	2160	subsection (c) of this section. 7
2161	2161	(b) Insurers shall ensure that its producers are trained under subsection (c) of this section 8
2162	2162	and that its producers have been appropriately trained on the coverages and conditions of its pet 9
2163	2163	insurance products. 10
2164	2164	(c) The training required under this subsection shall include information on the following 11
2165	2165	topics: 12
2166	2166	(1) Preexisting conditions and waiting periods; 13
2167	2167	(2) The differences between pet insurance and noninsurance wellness programs; 14
2168	2168	(3) Hereditary disorders, congenital anomalies or disorders and chronic conditions and how 15
2169	2169	pet insurance policies interact with those conditions or disorders; and 16
2170	2170	(4) Rating, underwriting, renewal, and other related administrative topics. 17
2171	2171	(d) The satisfaction of the training requirements of another state that are substantially 18
2172	2172	similar to the provisions of subsection (c) of this section shall be deemed to satisfy the training 19
2173	2173	requirements in this state. 20
2174	2174	27-82-8. Violations. 21
2175	2175	Violations of this chapter shall be subject to penalties pursuant to § 42-14-16. 22
2176	2176	SECTION 10. Sections 1 through 3 and sections 5 through 9 of this act shall take effect on 23
2177	2177	January 1, 2024, and section 4 shall take effect upon passage, provided: 24
2178	2178	(1) The provisions of this act in effect before the effective date of this act shall continue to 25
2179	2179	apply to and govern all matters, including all past, present and future assessments, credits and 26
2180	2180	refunds, relating to any member insurer that either: 27
2181	2181	(i) Was an insolvent insurer prior to the effective date of this act; or 28
2182	2182	(ii) Was an impaired insurer for which the association formally exercised its powers under 29
2183	2183	§ 27-34.3-8 to provide coverage to the policyholders of the impaired insurer prior to the effective 30
2184	2184	date of this act; and 31
2185	2185	(2) The provisions of this act in effect on and after the effective date of this act shall apply 32
2186	2186	to and govern all matters, including assessments, credits and refunds, relating to all insolvent 33
2187	2187
2188	2188
2189	2189	LC002082 - Page 60 of 61
2190	2190	insurers and impaired insurers not identified in subsection (1) of this effective date section. 1
2191	2191	========
2192	2192	LC002082
2193	2193	========
2194	2194
2195	2195
2196	2196	LC002082 - Page 61 of 61
2197	2197	EXPLANATION
2198	2198	BY THE LEGISLATIVE COUNCIL
2199	2199	OF
2200	2200	A N A C T
2201	2201	RELATING TO INSURANCE -- PRODUCER LICENSING ACT
2202	2202	***
2203	2203	This act would amend the statutory provisions regarding insurance producer appointments 1
2204	2204	to provide for an efficient electronic process clarify language relating to insurance claims adjusters, 2
2205	2205	add elements to unfair discrimination prohibitions, amend the Rhode Island life and health 3
2206	2206	guarantee association act, and add an insurance data security act and a pet insurance act. 4
2207	2207	Sections 1 through 3 and sections 5 through 9 of this act would take effect on January 1, 5
2208	2208	2024 and section 4 would take effect upon passage, provided: 6
2209	2209	(1) The provisions of this act in effect before the effective date of this act would continue 7
2210	2210	to apply to and govern all matters, including all past, present and future assessments, credits and 8
2211	2211	refunds, relating to any member insurer that either: 9
2212	2212	(i) Was an insolvent insurer prior to the effective date of this act; or 10
2213	2213	(ii) Was an impaired insurer for which the association formally exercised its powers under 11
2214	2214	§ 27-34.3-8 to provide coverage to the policyholders of the impaired insurer prior to the effective 12
2215	2215	date of this act; and 13
2216	2216	(2) The provisions of this act in effect on and after the effective date of this act would apply 14
2217	2217	to and govern all matters, including assessments, credits and refunds, relating to all insolvent 15
2218	2218	insurers and impaired insurers not identified in subsection (1) of this effective date section. 16
2219	2219	========
2220	2220	LC002082
2221	2221	========