Chapter 157

2011 -- H 5771

Enacted 06/30/11

 

A N A C T

RELATING TO INSURANCE     

     

     Introduced By: Representatives Tomasso, O`Grady, Ruggiero, Guthrie, and

                               Dickinson

     Date Introduced: March 03, 2011

 

It is enacted by the General Assembly as follows:

 

     SECTION 1. Sections 27-14.1-1, 27-14.1-3, 27-14.1-4 and 27-14.1-6 of the General

Laws in Chapter 27-14.1 entitled "Administrative Supervision" are hereby amended to read as

follows:

 

     27-14.1-1. Definitions. -- As used in this chapter:

      (1) "Consent" means agreement to administrative supervision by the insurer;

      (2) "Exceeded its powers" means the following conditions:

      (i) The insurer has refused to permit examination of its books, papers, accounts, records,

or affairs by the commissioner, his or her deputies, employees or duly commissioned examiners;

      (ii) A domestic insurer has unlawfully removed from this state books, papers, accounts,

or records necessary for an examination of the insurer;

      (iii) The insurer has failed to promptly comply with the applicable financial reporting

statutes or rules and departmental requests relating to those statutes or rules thereto;

      (iv) The insurer has neglected or refused to observe an order of the commissioner to

make good, within a the time prescribed time by law, any prohibited deficiency in its capital,

capital stock or surplus;

      (v) The insurer is continuing to transact insurance or write business after its license has

been revoked or suspended by the commissioner;

      (vi) The insurer, by contract or otherwise, has unlawfully or has in violation of an order

of the commissioner or has without first having obtained written approval of the commissioner if

approval is required by law:

      (A) Totally reinsured its entire outstanding business; or

      (B) Merged or consolidated substantially its entire property or business with another

insurer;

      (vii) The insurer engaged in any transaction in which it is not authorized to engage under

the laws of this state; or

      (viii) The insurer refused to comply with a lawful order of the commissioner;

      (3) "Insurer" means and includes every person subject to the provisions of this title

engaged as indemnitor, surety or contractor in the business of entering into contracts of insurance

or of annuities as limited to:

      (i) Any insurer who is doing an insurer business, or has transacted insurance in this state,

and against whom claims arising from that transaction may exist now or in the future; and

      (ii) Any fraternal benefit society which is subject to the provisions of this title; and

      (4)(iii) Any insurer writing "Mono mono line business" for the purposes of this title

means either a stock or mutual insurance company, whether foreign or domestic which means any

insurer, which deals exclusively in surety bonding.

 

     27-14.1-3. Notice to comply with written requirements of commissioner --

Noncompliance -- Administrative supervision. -- (a) An insurer may be subject to

administrative supervision by the commissioner if upon examination or at any other time it

appears in the commissioner's discretion that:

      (1) The insurer's condition renders the continuance of its business hazardous to the

public or to its insured;

      (2) The insurer appears to have exceeded its powers granted under its certificate of

authority and applicable law;

      (3) The insurer has failed to comply with the applicable provisions of the insurance code;

      (4) The business of the insurer is being conducted fraudulently; or

      (5) The insurer gives its consent.

      (b) If the commissioner determines that the conditions set forth in subsection (a) of this

section exist, the commissioner shall:

      (1) Notify the insurer of his or her determination;

      (2) Furnish to the insurer a written list of the requirements to abate this determination;

and

      (3) Notify the insurer that it is under the supervision of the commissioner and that the

commissioner is applying and effectuating the provisions of the this chapter. The action by the

commissioner shall be subject to review pursuant to applicable state administrative procedures

under the Administrative Procedures Act, chapter 35 of title 42.

      (c) If placed under administrative supervision, the insurer shall have sixty (60) days, or

another period of time as designated by the commissioner, to comply with the requirements of the

commissioner subject to the provisions of this chapter.

      (d) If it is determined after notice and hearing that the conditions giving rise to the

supervision still exist at the end of the supervision period specified in subsection (c) of this

section, the commissioner may extend the period.

      (e) If it is determined that none of the conditions giving rise to the supervision exist, the

commissioner shall release the insurer from supervision.

 

     27-14.1-4. Confidentiality of certain proceedings and records. -- (a) Notwithstanding

any other provision of law and except as set forth in this section, proceedings, hearings, notices,

correspondence, reports, records, and other information in the possession of the commissioner or

the department of business regulation relating to the supervision of any insurer are confidential

except as provided by this section.

      (b) The personnel of the department of business regulation shall have access to these

proceedings, hearings, notices, correspondence, reports, records, or information as permitted by

the commissioner.

      (c) The commissioner may open the proceedings or hearings or disclose the notices,

correspondence, reports, records, or information to a department, agency, or instrumentality of

this or another state or of the United States if the commissioner determines that the disclosure is

necessary or proper for the enforcement of the laws of this or another state of the United States.

      (d) The commissioner may open the proceedings or hearings or make public the notices,

correspondence, reports, records, or other information if the commissioner deems that it is in the

best interest of the public or in the best interest of the insurer, its insureds, creditors, or the

general public.

      (e) This section does not apply to hearings, notices, correspondence, reports, records, or

other information obtained upon the appointment of a receiver for the insurer by a court of

competent jurisdiction.

 

     27-14.1-6. Review and stay of action. -- During the period of supervision the insurer

may contest an action taken or proposal proposed to be taken by the supervisor specifying the

manner in which the action being complained of would not result in improving the condition of

the insurer. Denial of the insurer's request upon reconsideration entitles the insurer to request a

proceeding under the Administrative Procedures Act, chapter 35 of title 42.

 

     SECTION 2. Section 27-30-2 of the General Laws in Chapter 27-30 entitled "Consumer

Credit Insurance" is hereby amended to read as follows:

 

     27-30-2. Scope and definitions. -- (a) Citation and scope.

      (1) This chapter may be cited as "Consumer Credit Insurance Act."

      (2) All consumer credit insurance sold in connection with loans or other credit

transactions for personal, family or household purposes shall be subject to the provisions of this

chapter except:

      (i) Insurance written in connection with a credit transaction that is:

      (A) Secured by a first mortgage or deed of trust; and

      (B) Made to finance the purchase of real property or the construction of a dwelling

thereon, or to refinance a prior credit transaction made for such a purpose;

      (b)(ii) Insurance sold as an isolated transaction on the part of the insurer and not related

to an agreement or a plan for insuring debtors of the creditor.

      (c)(iii) Insurance for which no identifiable charge is made to the debtor.

      (d)(iv) Insurance on accounts receivable.

      (e)(b) Definitions. - For the purpose of this chapter:

      (1) "Commissioner" means the director of the department of business regulation or his or

designee;

      (2) "Compensation" means commissions, dividends, retrospective rate credits, service

fees, expense allowances or reimbursements, gifts, furnishing of equipment, facilities, goods or

services, or any other form of remuneration resulting directly from the sale of consumer credit

insurance;

      (3) "Consumer credit insurance" is a general term used in this chapter to refer to any or

all credit life insurance, credit accident and health insurance, credit unemployment insurance

specifically defined in this chapter;

      (4) "Credit accident and health insurance" means insurance on a debtor to provide

indemnity for payments or debt becoming due on a specific loan or other credit transaction while

the debtor is disabled as defined in the policy;

      (5) "Credit life insurance" means insurance on a debtor or debtors, pursuant to or in

connection with a specific loan or other credit transaction, to provide for satisfaction of a debt, in

whole or in part, upon the death of an insured debtor;

      (6) "Credit transaction" means any transaction by the terms of which the repayment of

money loaned or loan commitment made, or payment for goods, services or properties sold or

leased, is to be made at a future date or dates;

      (7) "Credit unemployment insurance" means insurance on a debtor to provide indemnity

for payments or debt becoming due on a specific loan or other credit transaction while the debtor

is involuntarily unemployed as defined in the policy;

      (8) "Creditor" means the lender of money or vendor or lessor of goods, services,

property, rights, or privileges, for which payment is arranged through a credit transaction or any

successor to the right, title, or interest of any lender, vendor, or lessor, and an affiliate, associate,

or subsidiary of any of them or any director, officer, or employee of any of them or any other

person in any way associated with any of them;

      (9) "Debtor" means a borrower of money or a purchaser or lessee of goods, services,

property, rights, or privileges for which payment is arranged through a credit transaction;

      (10) "Gross debt" means the sum of the remaining payments owed to the creditor by the

debtor;

      (11) "Identifiable charge" means a charge for a type of consumer credit insurance that is

made to debtors having such insurance and not made to debtors not having such insurance; it

includes a charge for insurance that is disclosed in the credit or other instrument furnished to the

debtor which sets out the financial elements of the credit transaction and any difference in the

finance, interest, service or other similar charge made to debtors who are in like circumstances

except for the insured or non-insured status of the debtor or of the property used as security for

the credit transaction;

      (12) "Net debt" means the amount necessary to liquidate the remaining debt in a single

lump-sum payment, excluding all unearned interest and other unearned finance charges;

      (13) "Open-end credit" means credit extended by a creditor under an agreement in

which:

      (i) The creditor reasonably contemplates repeated transactions;

      (ii) The creditor imposes a finance charge from time to time on an outstanding unpaid

balance; and

      (iii) The amount of credit that may be extended to the debtor during the term of the

agreement (up to any set limit by the creditor) is generally made available to the extent that any

outstanding balance is repaid.

 

     SECTION 3. Section 27-4.8-5 of the General Laws in Chapter 27-4.8 entitled "Group

Life Insurance" is hereby amended to read as follows:

 

     27-4.8-5. Group life insurance standard provision. -- (a) No policy of group life

insurance shall be delivered in this state unless it contains in substance the following provisions,

or provisions which in the opinion of the commissioner are more favorable to the persons insured,

or at least as favorable to the persons insured and more favorable to the policyholder, however:

      (1) Subsections (f) to (k) inclusive shall not apply to policies insuring the lives of

debtors;

      (2) The standard provisions required for individual life insurance policies shall not apply

to group life insurance policies; and

      (3) If the group life insurance policy is on a plan of insurance other than the term plan, it

shall contain a nonforfeiture provision or provisions which, in the opinion of the commissioner, is

or are equitable to the insured persons and to the policyholder. Nothing herein shall be construed

to require that group life insurance policies contain the same nonforfeiture provisions as are

required for individual life insurance policies.

      (b) The policy shall contain a provision that the policyholder is entitled to a grace period

of thirty-one (31) days for the payment of any premium due except the first, during which grace

period the death benefit coverage shall continue in force, unless the policyholder gives the insurer

written notice of discontinuance in advance of the date of discontinuous and in accordance with

the terms of the policy. The policy may provide that the policyholder shall be liable to the insurer

for the payment of a pro rata premium for the time the policy was in force during the grace

period.

      (c) The policy shall contain a provision that the validity of the policy shall not be

contested except for nonpayment of premiums after it has been in force for two (2) years from its

date of issue; and that no statement made by any person insured under the policy relating to his or

her insurability shall be used in contesting the validity of the insurance with respect to which the

statement was made after the insurance has been in force prior to the contest for a period of two

(2) years during the person's lifetime nor unless it is contained in a written instrument signed by

him or her. This provision shall not preclude the assertion at any time of defenses based upon

provisions in the policy that relate to eligibility for coverage.

      (d) The policy shall contain a provision that a copy of the application, if any, of the

policy holder shall be attached to the policy when issued, that all statements made by the

policyholder or by the persons insured shall be deemed representations and not warranties and

that no statement made by any person insured shall be used in any contest unless a copy of the

instrument containing the statement is or has been furnished to the person or, in the event of death

or incapacity of the insured person, to his or her beneficiary or personal representative.

      (e) The policy shall contain a provision setting forth the conditions, if any, under which

the insurer reserves the right to require a person eligible for insurance to furnish evidence of

individual insurability satisfactory to the insurer as a condition to part or all of his coverage.

      (f) The policy shall contain a provision specifying an equitable adjustment of premiums

or benefits, or both, to be made in the event the age of a person insured has been misstated. The

provision to contain a clear statement of the method of adjustment to be made.

      (g) The policy shall contain a provision that any sum becoming due by reason of the

death of the person insured shall be payable to the beneficiary designated by the person insured,

except that, where the policy contains conditions pertaining to family status, the beneficiary may

be the family member specified by the policy terms, subject to the provisions of the policy in the

event there is no designated beneficiary, as to all or any part of the sum, living at the death of the

person insured, and subject to any right reserved by the insurer in the policy and set forth in the

certificate to pay at its option a part of the sum not exceeding two thousand dollars ($2000) to any

person appearing to the insurer to be equitably entitled to it by reason of having incurred funeral

or other expenses incident to the last illness or death of the person insured.

      (h) The policy shall contain a provision that the insurer will issue to the policyholder for

delivery to each person insured a certificate setting forth a statement as to the insurance

protection to which he or she is entitled, to whom the insurance benefits are payable, a statement

as to any dependent's coverage included in the certificate, and the rights and conditions set forth

in subsections (h), (i), (j) and (k) following.

      (i) The policy shall contain a provision that, if the insurance, or any portion of it, on a

person covered under the policy or on the dependent of a person covered, ceases because of

termination of employment or of membership in the class or classes eligible for coverage under

the policy, the person shall be entitled to have issued to him or her by the insurer, without

evidence of insurability, an individual policy of life insurance without disability or other

supplementary benefits, provided application for the individual policy shall be made, and the first

premium paid to the insurer, within thirty-one (31) days after termination and provided further

that:

      (1) The individual policy shall, at the option of the person, be on any one of the forms

then customarily issued by the insurer at the age and for the amount applied for, except that the

group policy may exclude the option to elect term insurance;

      (2) The individual policy shall be in an amount not in excess of the amount of life

insurance that ceases because of termination, less the amount of any life insurance for which the

person becomes eligible under the same or any other group policy within thirty-one (31) days

after termination, provided that any amount of insurance that shall have matured on or before the

date of termination as an endowment payable to the person insured, whether in one sum or in

installments or in the form of an annuity, shall not, for the purposes of this provision, be included

in the amount that is considered to cease because of termination; and

      (3) The premium on the individual policy shall be at the insurer's then customary rate

applicable to the form and amount of the individual policy, to the class of risk to which the person

then belongs, and to the individual age attained on the effective date of the individual policy.

Subject to the same conditions set forth above, the conversion privilege shall be available:

      (i) To a surviving dependent, if any, at the death of an employee or member, with respect

to the coverage under the group policy that terminates by reason of the death; and

      (ii) To the dependent of the employee or member upon termination of coverage of the

dependent, while the employee or member remains insured under the group policy, by reason of

the dependent ceasing to be a qualified family member under the group policy.

      (j) The policy shall contain a provision that if the group policy terminates or is amended

so as to terminate the insurance of any class of insured persons, every person insured thereunder

at the date of termination whose insurance terminates, including the insured dependent of a

covered person, and who has been so insured for at least five (5) years prior to the termination

date shall be entitled to have issued by the insurer an individual policy of life insurance, subject to

the same conditions and limitations as are provided by subsection (h) above, except that the group

policy may provide that the amount of the individual policy shall not exceed the smaller of:

      (i)(1) The amount of the person's life insurance protection ceasing because of the

termination or amendment of the group policy, less the amount of any life insurance for which the

person is or becomes eligible under a group policy issued or reinstated by the same or another

insurer within thirty-one (31) days after termination; or

      (ii)(2) Ten-thousand dollars ($10,000).

      (k) The policy shall contain a provision that, if a person insured under the group policy,

or the insured dependent of a covered person, dies during the period within which the individual

would have been entitled to have an individual policy issued in accordance with subsection (h) or

(i) above and before the individual policy shall have become effective, the amount of life

insurance which he or she would have been entitled to have issued under the individual policy

shall be payable as a claim under the group policy, whether or not application for the individual

policy or the payment of the first premium therefore has been made.

      (l) Where active employment is a condition of insurance, the policy shall contain a

provision that an insured may continue coverage during the insured's total disability by timely

payment to the policyholder of that portion, if any, of the premium that would have been required

from the insured had total disability not occurred. The continuation shall be on a premium paying

basis for a period of six (6) months from the date on which the total disability started, but not

beyond the earlier of:

      (i) Approval by the insurer of continuation of the coverage under any disability provision

which the group insurance policy may contain; or

      (ii) The discontinuance of the group insurance policy.

      (m) In the case of a policy insuring the lives of debtors, the policy shall contain a

provision that the insurer will furnish to the policyholder for delivery to each debtor insured

under the policy a certificate of insurance describing the coverage and specifying that the death

benefit shall first be applied to reduce or extinguish the indebtedness.

 

     SECTION 4. Chapter 27-12.2 of the General Laws entitled "Administrative Supervision

Act" is hereby repealed in its entirety.

 

     CHAPTER 27-12.2

Administrative Supervision Act

 

     27-12.2-1. Definitions. -- As used in this chapter:

      (1) "Consent" means agreement to administrative supervision by the insurer.

      (2) "Exceeded its powers" means the following conditions:

      (i) The insurer has refused to permit examination of its books, papers, accounts, records

or affairs by the commissioner, his or her deputies, employees, or duly commissioned examiners;

      (ii) A domestic insurer has unlawfully removed from this state, books, papers, accounts

or records necessary for an examination of the insurer;

      (iii) The insurer has failed to promptly comply with the applicable financial reporting

statutes or rules and departmental requests relating thereto;

      (iv) The insurer has neglected or refused to observe an order of the commissioner to

make good, within the time prescribed by law, any prohibited deficiency in its capital, capital

stock, or surplus;

      (v) The insurer is continuing to transact insurance or write business after its license has

been revoked or suspended by the commissioner;

      (vi) The insurer, by contract or otherwise, has unlawfully or has in violation of an order

of the commissioner, or has without first having obtained written approval of the commissioner if

approval is required by law:

      (A) Totally reinsured its entire outstanding business, or

      (B) Merged or consolidated substantially its entire property or business with another

insurer;

      (vii) The insurer engaged in any transaction in which it is not authorized to engage under

the laws of this state; or

      (viii) The insurer refused to comply with a lawful order of the commissioner; and

      (3) "Insurer" means and includes every person engaged as indemnitor, surety or

contractor in the business of entering into contracts of insurance or of annuities as limited to:

      (i) Any insurer who is doing an insurer business, or has transacted insurance in this state,

and against whom claims arising from that transaction may exist now or in the future; and

      (ii) Any fraternal benefit society which is subject to the provisions of chapter 25 of this

title.

 

     27-12.2-2. Applicability. -- The provisions of this chapter shall apply to all domestic

insurers, including protected cell companies organized under the Protected Cell Companies Act,

chapter 64 of this title, and any of its protected cells established under that chapter, to the extent

not inconsistent with the provisions of that chapter, and any other insurer doing business in this

state whose state of domicile has asked the commissioner to apply the provisions of this chapter

as regards the insurer.

 

     27-12.2-3. Administrative supervision. -- (a) An insurer may be subject to

administrative supervision by the commissioner if upon examination or at any other time it

appears in the commissioner's discretion that:

      (1) The insurer's condition renders the continuance of its business hazardous to the

public or to its insured;

      (2) The insurer appears to have exceeded its powers granted under its certificate of

authority and applicable law;

      (3) The insurer has failed to comply with the applicable provisions of the insurance code;

      (4) The business of the insurer is being conducted fraudulently; or

      (5) The insurer gives its consent.

      (b) If the commissioner determines that the conditions set forth in subsection (a) exist,

the commissioner shall:

      (1) Notify the insurer of his or her determination;

      (2) Furnish to the insurer a written list of the requirements to abate this determination;

and

      (3) Notify the insurer that it is under the supervision of the commissioner and that the

commissioner is applying and effectuating the provisions of this chapter. That action by the

commissioner shall be subject to review pursuant to the applicable Administrative Procedures

Act, chapter 35 of title 42.

      (c) If placed under administrative supervision, the insurer shall have sixty (60) days, or

another period of time as designated by the commissioner, to comply with the requirements of the

commissioner subject to the provisions of this chapter.

      (d) If it is determined after notice and a hearing that the conditions giving rise to the

supervision still exist at the end of the supervision period specified in this section, the

commissioner may extend the period.

      (e) If it is determined that none of the conditions giving rise to the supervision exist, the

commissioner shall release the insurer from supervision.

 

     27-12.2-4. Confidentiality of proceedings and records. -- (a) Notwithstanding any

other provision of law and except as set forth in this section, proceedings, hearings, notices,

correspondence, reports, records, and other information in the possession of the commissioner or

the department of business regulations relating to the supervision of any insurer are confidential

except as provided by this section.

      (b) The personnel of the department of business regulations shall have access to these

proceedings, hearings, notices, correspondence, reports, records, or information as permitted by

the commissioner.

      (c) The commissioner may open the proceedings or hearings or disclose the notices,

correspondence, reports, records, or information to a department, agency or instrumentality of this

or another state of the United States if the commissioner determines that the disclosure is

necessary or proper for the enforcement of the laws of this or another state of the United States.

      (d) The commissioner may open the proceedings or hearings or make public the notices,

correspondence, reports, records, or other information if the commissioner deems that it is in the

best interest of the public or in the best interest of the insurer, its insureds, creditors, or the

general public.

      (e) This section does not apply to hearings, notices, correspondence, reports, records, or

other information obtained upon the appointment of a receiver for the insured by a court of

competent jurisdiction.

 

     27-12.2-5. Prohibited acts during supervision. -- During the period of supervision, the

commissioner or his or her designated appointee shall serve as the administrative supervisor. The

commissioner may provide that the insurer may not do any of the following acts during the period

of supervision, without the prior approval of the commissioner or his or her appointed supervisor:

      (1) Dispose of, convey, or encumber any of its assets or its business in force;

      (2) Withdraw any of its bank accounts;

      (3) Lend any of its funds;

      (4) Invest any of its funds;

      (5) Transfer any of its property;

      (6) Incur any debt, obligation, or liability;

      (7) Merge or consolidate with another company;

      (8) Approve new premiums or renew any policies;

      (9) Enter into any new reinsurance contract or treaty;

      (10) Terminate, surrender, forfeit, convert, or lapse any insurance policy, certificate, or

contract, except for nonpayment of premiums due;

      (11) Release, pay, or refund premium deposits, accrued cash or loan values, unearned

premiums, or other reserves on any insurance policy, certificate, or contract;

      (12) Make any material change in management; or

      (13) Increase salaries and benefits of officers or directors or the preferential payment of

bonuses, dividends, or other payments deemed preferential.

 

     27-12.2-6. Review and stay of action. -- During the period of supervision the insurer

may contest an action taken or proposed to be taken by the supervisor specifying the manner in

which the action being complained of would not result in improving the condition of the insurer.

Denial of the insurer's request upon reconsideration entitles the insurer to request a proceeding

under the Administrative Procedures Act, chapter 35 of title 42.

 

     27-12.2-7. Administrative election of proceeding. -- Nothing contained in this chapter

shall preclude the commissioner from initiating proceedings against the insured under chapters 13

or 14.3 of this title or as permitted by law, regardless of whether the commissioner has previously

initiated administrative supervision proceedings under this chapter against the insurer.

 

     27-12.2-8. Rules. -- The commissioner is empowered to adopt reasonable rules and

regulations necessary for the implementation of this chapter.

 

     27-12.2-9. Meetings between the commissioner of insurance and the supervisor. --

Notwithstanding any other provision of law, the commissioner may meet with a supervisor

appointed under this chapter and with the attorney or other representative of the supervisor,

without the presence of any other person, at the time of any proceeding or during the pendency of

any proceeding held under the authority of this chapter to carry out the commissioner's duties

under this chapter or for the supervisor to carry out his or her duties under this chapter.

 

     27-12.2-10. Immunity. -- There shall be no liability on the part of, and no cause of action

of any nature shall arise against, the commissioner or the department of business regulations or its

employees or agents for any action taken by them in the performance of their powers and duties

under this chapter.

 

     SECTION 5. This act shall take effect upon passage.

     

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LC01255

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