2013 -- S 0637

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LC01670

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO INSURANCE

     Introduced By: Senators Walaska, and Bates

     Date Introduced: March 06, 2013

     Referred To: Senate Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Sections 27-2.1-1 and 27-2.1-2 of the General Laws in Chapter 27-2.1

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entitled "Additional Fees for Foreign Insurance Companies" are hereby amended to read as

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follows:

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     27-2.1-1. New application fee. -- Any foreign insurance company applying for licensure

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within the state of Rhode Island to transact insurance business must upon filing of an application

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submit to the insurance commissioner a non-refundable application fee of one thousand dollars

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($1,000) one thousand, two hundred dollars ($1,200). Any foreign insurance company that has

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previously filed an application for licensure within the state of Rhode Island and whose

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application is currently pending must also submit a non-refundable filing fee of one thousand two

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hundred dollars ($1,200) to keep the application current.

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     27-2.1-2. Review of application fee. -- Whenever any foreign insurance company has

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made application to transact insurance business within the state, the applicant shall be assessed

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for the actual time incurred in conducting the analysis in accordance with the expense calculation

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for examinations under subdivision 27-13.1-7(a)(1). and the application is to be reviewed by the

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insurance division, as a condition precedent to the review, the company shall pay to the insurance

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commissioner a non-refundable fee of one thousand eight hundred dollars ($1,800) to cover the

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costs of the review by the insurance division.

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     SECTION 2. Section 27-2.4-16 of the General Laws in Chapter 27-2.4 entitled "Producer

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Licensing Act" is hereby amended to read as follows:

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     27-2.4-16. Notification to insurance commission of termination. -- Notification to

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insurance commissioner of termination. -- (a) Termination for cause. - An insurer or authorized

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representative of the insurer that terminates the employment contract or other insurance business

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relationship with an insurance producer shall notify the insurance commissioner within thirty (30)

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days following the effective date of the termination, using a format prescribed by the insurance

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commissioner, if the reason for termination is one of the reasons set forth in section 27-2.4-14 or

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the insurer has knowledge the insurance producer was found by a court, government body, or

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self-regulatory organization authorized by law to have engaged in any of the activities in section

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27-2.4-14. Upon the written request of the insurance commissioner, the insurer shall provide

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additional information, documents, records or other data pertaining to the termination or activity

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of the insurance producer.

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      (b) Termination without cause. - An insurer or authorized representative of the insurer

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that terminates the employment or contract with an insurance producer for any reason not set

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forth in section 27-2.4-14 shall notify the insurance commissioner within thirty (30) days

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following the effective date of the termination, using a format prescribed by the insurance

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commissioner. Upon written request of the insurance commissioner, the insurer shall provide

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additional information, documents, records or other data pertaining to the termination.

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      (c)(b) Ongoing notification requirement. - The insurer or the authorized representative of

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the insurer shall promptly notify the insurance commissioner in a format acceptable to the

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insurance commissioner if, upon further review or investigation, the insurer discovers additional

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information that would have been reportable to the insurance commissioner in accordance with

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subsection (a) of this section had the insurer then known of its existence.

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      (d)(c) Copy of notification to be provided to the insurance producer.

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      (1) Within fifteen (15) days

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      (2) Within thirty (30) days after the insurance producer has received the original or

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additional notification, the insurance producer may file written comments concerning the

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substance of the notification with the insurance commissioner. The insurance producer shall, by

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the same means, simultaneously send a copy of the comments to the reporting insurer, and the

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comments shall become a part of the insurance commissioner's file and accompany every copy of

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a report distributed or disclosed for any reason about the insurance producer as permitted under

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subsection (f)(e) of this section.

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      (e)(d) Immunities. - (1) In the absence of actual malice, an insurer, the authorized

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representative of the insurer, an insurance producer, the insurance commissioner, or an

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organization of which the insurance commissioner is a member and that compiles the information

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and makes it available to other insurance commissioners or regulatory or law enforcement

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agencies shall not be subject to civil liability, except as provided in this section, and a civil cause

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of action of any nature shall not arise against these entities or their respective agents or

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employees, except as provided in this section, as a result of any statement or information required

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by or provided pursuant to this section or any information relating to any statement that may be

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requested in writing by the insurance commissioner, from an insurer or insurance producer; or a

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statement by a terminating insurer or insurance producer to an insurer or insurance producer

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limited solely and exclusively to whether a termination for cause under subsection (a) of this

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section was reported to the insurance commissioner, provided that the propriety of any

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termination for cause under subsection (a) of this section is certified in writing by an officer or

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authorized representative of the insurer or insurance producer terminating the relationship.

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      (2) In any action brought against a person that may have immunity under this chapter for

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making any statement required by this section or providing any information relating to any

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statement that may be requested by the insurance commissioner, the party bringing the action

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shall plead specifically in any allegation that subdivision (e)(d)(1) of this section does not apply

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because the person making the statement or providing the information did so with actual malice.

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      (3) This chapter shall not abrogate or modify any existing statutory or common law

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privileges or immunities.

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      (f)(e) Confidentiality. - (1) Any documents, materials or other information in the control

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or possession of the department that is furnished by an insurer, insurance producer or an

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employee or agent of the insurer or insurance producer acting on behalf of the insurer or

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insurance producer, or obtained by the insurance commissioner in an investigation pursuant to

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this section, shall be confidential by law and privileged, shall not be subject to chapter 2 of title

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38, shall not be subject to subpoena, and shall not be subject to discovery or admissible in

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evidence in any private civil action. The insurance commissioner is authorized to use the

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documents, materials or other information in the furtherance of any regulatory or legal action

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brought as a part of the insurance commissioner's duties.

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      (2) Neither the insurance commissioner nor any person who received documents,

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materials or other information while acting under the authority of the insurance commissioner

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shall be permitted or required to testify in any private civil action concerning any confidential

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documents, materials, or information subject to this chapter.

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      (3) In order to assist in the performance of the insurance commissioner's duties under

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this chapter, the insurance commissioner:

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      (i) May share documents, materials or other information, including the confidential and

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privileged documents, materials or information subject to this chapter, with other state, federal,

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and international regulatory agencies, with the NAIC, its affiliates or subsidiaries, and with state,

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federal, and international law enforcement authorities, provided that the recipient agrees to

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maintain the confidentiality and privileged status of the document, material or other information;

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      (ii) May receive documents, materials or information, including confidential and

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privileged documents, materials or information, from the NAIC, its affiliates or subsidiaries and

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from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall

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maintain as confidential or privileged any document, material or information received with notice

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or the understanding that it is confidential or privileged under the laws of the jurisdiction that is

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the source of the document, material or information;

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      (iii) May enter into agreements governing sharing and use of information consistent with

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this subsection;

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      (iv) No waiver of any applicable privilege or claim of confidentiality in the documents,

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materials, or information shall occur as a result of disclosure to the commissioner under this

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section or as a result of sharing as authorized in this chapter;

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      (v) Nothing in this chapter shall prohibit the insurance commissioner from releasing

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final, adjudicated actions including for cause terminations that are open to public inspection

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pursuant to chapter 2 of title 38 to a database or other clearinghouse service maintained by the

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NAIC, its affiliates or subsidiaries; and

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      (vi) If the department releases to an unauthorized third party any documents, materials or

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other information provided to the department pursuant to this section, then the department shall

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be subject to a fine not to exceed one thousand dollars ($1,000) after a hearing on this violation

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brought in the Superior Court.

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      (g)(f) Penalties for Failing to Report. - An insurer, the authorized representative of the

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insurer, or insurance producer that fails to report as required under the provisions of this section

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or that is found to have reported with actual malice by a court of competent jurisdiction may, after

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notice and hearing, have its license or certificate of authority suspended or revoked and may be

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fined in accordance with section 42-14-16.

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     SECTION 3. Section 27-4.8-4 of the General Laws in Chapter 27-4.8 entitled "Group

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Life Insurance" is hereby amended to read as follows:

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     27-4.8-4. Dependent group life insurance. -- Except for a policy issued under

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subdivision 27-4.8-1(2), a group life insurance policy may be extended to insure the employees or

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members against loss due to the death of their spouses and dependent children, or any class or

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classes thereof, subject to the following:

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      (1) The premium for the insurance shall be paid either from funds contributed by the

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employer, union, association or other person to whom the policy has been issued, or from funds

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contributed by the covered persons, or from both. Except as provided in subdivision (2), a policy

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on which no part of the premium for the spouse's and dependent child's coverage is to be derived

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from funds contributed by the covered persons shall insure all eligible employees or members

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with respect to their spouses and dependent children, or any class or classes thereof.

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      (2) An insurer may exclude or limit the coverage on any spouse or dependent child as to

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whom evidence of individual insurability is not satisfactory to the insurer.

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      (3) The amounts of insurance for any covered spouse or dependent child under the policy

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may not exceed the amount of insurance for which the employee or member is insured.

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     SECTION 4. Section 27-9-4.1 of the General Laws in Chapter 27-9 entitled "Casualty

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Insurance Rating" is hereby repealed.

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     27-9-4.1. Automobile insurance territories. -- The director of the department of

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business regulation shall formulate a plan of automobile insurance territories based upon the most

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recent available actuarial data.

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     SECTION 5. Sections 27-14.5-3 and 27-14.5-4 of the General Laws in Chapter 27-14.5

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entitled "Voluntary Restructuring of Solvent Insurers" are hereby amended to read as follows:

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     27-14.5-3. Notice. -- (a) Wherever in this chapter notice is required, the applicant shall,

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within ten (10) days of the event triggering the requirement, cause transmittal of the notice:

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      (1) By first class mail and facsimile to the insurance regulator in each jurisdiction in

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which the applicant is doing business;

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      (2) By first class mail to the national conference of insurance guaranty funds and all

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guarantee guaranty associations for the states in which the applicant is doing business;

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      (3) Pursuant to the notice provisions of reinsurance agreements or, where an agreement

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has no provision for notice, by first class mail to all reinsures of the applicant;

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      (4) By first class mail to all insurance agents or insurance producers of the applicant;

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      (5) By first class mail to all persons known or reasonably expected to have claims

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against the applicant including all policyholders, at their last known address as indicated by the

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records of the applicant;

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      (6) By first class mail to federal, state, and local government agencies and

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instrumentalities as their interests may arise; and

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      (7) By publication in a newspaper of general circulation in the state in which the

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applicant has its principal place of business and in any other locations that the court overseeing

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the proceeding deems appropriate.

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      (b) If notice is given in accordance with this section, any orders under this chapter shall

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be conclusive with respect to all claimants and policyholders, whether or not they received notice.

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      (c) Where this chapter requires that the applicant provide notice but the commissioner

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has been named receiver of the applicant, the commissioner shall provide the required notice.

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     27-14.5-4. Commutation plans. -- (a) Application. - Any commercial run-off insurer

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may apply to the court for an order implementing a commutation plan.

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      (b) Procedure.

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      (1) The applicant shall give notice of the application and proposed commutation plan.

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      (2) All creditors shall be given the opportunity to vote on the plan.

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      (3) All creditors, assumption policyholders, reinsurers, and guaranty associations shall be

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provided with access to the same information relating to the proposed plan and shall be given the

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opportunity to file comments or objections with the court.

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      (4) Approval of a commutation plan requires consent of: (i) fifty percent (50%) of each

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class of creditors; and (ii) the holders of seventy-five percent (75%) in value of the liabilities

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owed to each class of creditors.

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      (c) Implementation order.

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      (1) The court shall enter an implementation order if: (i) the plan is approved under

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subdivision (b)(4) of this section; and (ii) the court determines that implementation of the

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commutation plan would not materially adversely affect either the interests of objecting creditors

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or the interests of assumption policyholders.

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      (2) The implementation order shall:

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      (i) Order implementation of the commutation plan;

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      (ii) Subject to any limitations in the commutation plan, enjoin all litigation in all

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jurisdictions between the applicant and creditors other than with the leave of the court;

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      (iii) Require all creditors to submit information requested by the bar date specified in the

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plan;

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      (iv) Require that upon a noticed application, the applicant obtain court approval before

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making any payments to creditors other than, to the extent permitted under the commutation plan,

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payments in the ordinary course of business, this approval to be based upon a showing that the

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applicant's assets exceed the payments required under the terms of the commutation plan as

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determined based upon the information submitted by creditors under paragraph (iii) of this

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subdivision;

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      (v) Release the applicant of all obligations to its creditors upon payment of the amounts

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specified in the commutation plan;

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      (vi) Require quarterly reports from the applicant to the court and commissioner

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regarding progress in implementing the plan; and

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      (vii) Be binding upon the applicant and upon all creditors and owners of the applicant,

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whether or not a particular creditor or owner is affected by the commutation plan or has accepted

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it or has filed any information on or before the bar date, and whether or not a creditor or owner

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ultimately receives any payments under the plan.

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      (3) The applicant shall give notice of entry of the order.

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      (d) Applicable law and procedure with respect to dispute resolution procedures.

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      (1) Any dispute resolution procedure in any commutation plan brought by a ceding

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insurance creditor to challenge the value of its claim assessed in any commutation plan will be

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consistent with the provisions of title 9, United States code;

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     (2) The adjudicator and the court, if applicable, hearing any appeal from an adjudication

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proceeding where the ceding insurance creditor challenges the value of its claim assessed by the

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applicant in its commutation plan, shall:

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     (i) Not attempt to enforce a reinsurance contract on terms different than those set forth in

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the reinsurance contract;

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     (ii) Not apply the laws of Rhode Island to reinsurance agreements of ceding insurers not

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domiciled in Rhode Island unless the reinsurance contract provides that Rhode Island law shall

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apply;

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     (iii) Apply the law applicable to the underlying contract between the ceding insurer and

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the applicant or, if the underlying reinsurance contract has no choice of law provision, the law of

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the state of domicile of the ceding insurer shall apply.

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      (d)(e) Order of dissolution or discharge.

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      (1) Upon completion of the commutation plan, the applicant shall advise the court.

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      (2) The court shall then enter an order that:

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      (i) Is effective upon filing with the court proof that the applicant has provided notice of

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entry of the order;

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      (ii) Transfers those liabilities subject to an assumption reinsurance agreement to the

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assumption reinsurer, thereby notating the original policy by substituting the assumption reinsurer

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for the applicant and releasing the applicant of any liability relating to the transferred liabilities;

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      (iii) Assigns each assumption reinsurer the benefit of reinsurance on transferred

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liabilities, except that the assignment shall only be effective upon the consent of the reinsurer if

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either:

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      (A) The reinsurance contract requires that consent; or

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      (B) The consent would otherwise be required under applicable law; and

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      (iv) Either:

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      (A) The applicant be discharged from the proceeding without any liabilities; or

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      (B) The applicant be dissolved.

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      (3) The applicant shall provide notice of entry of the order.

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      (e)(f) Reinsurance. - Nothing in this chapter shall be construed as authorizing the

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applicant, or any other entity, to compel payment from a reinsurer on the basis of estimated

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incurred but not reported losses or loss expenses, or case reserves for unpaid losses and loss

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expenses.

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      (f)(g) Modifications to plan. - After provision of notice and an opportunity to object, and

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upon a showing that some material factor in approving the plan has changed, the court may

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modify or change a commutation plan, except that upon entry of an order under subdivision (d)(2)

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of this section, there shall be no recourse against the applicant's owners absent a showing of

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fraud.

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      (g)(h) Role of commissioner and guaranty funds; relationship to

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rehabilitation/liquidation statutes.

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      (1) The commissioner and guaranty funds shall have the right to intervene in any and all

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proceedings under this section; provided, that notwithstanding any provision of title 27, any

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action taken by a commercial run-off insurer to restructure pursuant to chapter 14.5, including the

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formation or re-activation of an insurance company for the sole purpose of entering into a

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voluntary restructuring shall not affect the guaranty fund coverage existing on the business of

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such commercial run-off insurer prior to the taking of such action.

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      (2) If, at any time, the conditions for placing an insurer in rehabilitation or liquidation

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specified in chapter 14.3 of this title exist, the commissioner may request and, upon a proper

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showing, the court shall order that the commissioner be named statutory receiver of the applicant.

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      (3) If no implementation order has been entered, then upon being named receiver, the

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commissioner may request, and if requested, the court shall order, that the proceeding under this

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chapter be converted to a rehabilitation or liquidation pursuant to chapter 14.3 of this title. If an

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implementation order has already been entered, then the court may order a conversion upon a

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showing that some material factor in approving the original order has changed.

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      (4) The commissioner, any creditor, or the court on its own motion may move to have

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the commissioner named as receiver. The court may enter such an order only upon finding either

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that one or more grounds for rehabilitation or liquidation specified in chapter 14.3 of this title

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exist or that the applicant has materially failed to follow the commutation plan or any other court

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instructions.

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      (5) Unless and until the commissioner is named receiver, the board of directors or other

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controlling body of the applicant shall remain in control of the applicant.

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     SECTION 6. This act shall take effect upon passage.

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LC01670

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO INSURANCE

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     This act would make changes to insurance statutes which: (1) Amend the fee for foreign

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insurance company licenses; (2) Repeal the reporting of producer terminations without cause; (3)

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Amend the group life insurance statute to allow the dependents of an employee to purchase a

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greater amount of life insurance through the employer; (4) Repeal the unnecessary requirement

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that the director establish automobile insurance territories; and (5) Amend the solvent run off

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statute to address issues raised by federal legislation.

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     This act would take effect upon passage.

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LC01670

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