Chapter 036

2013 -- S 0637 SUBSTITUTE A

Enacted 05/.24/13

 

A N A C T

RELATING TO INSURANCE

          

     Introduced By: Senators Walaska, and Bates

     Date Introduced: March 06, 2013

 

It is enacted by the General Assembly as follows:

 

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

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

follows:

 

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

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

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

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

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

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

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

 

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

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

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

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

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

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

costs of the review by the insurance division.

 

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

Licensing Act" is hereby amended to read as follows:

 

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

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

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

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

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

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

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

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

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

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

of the insurance producer.

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

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

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

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

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

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

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

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

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

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

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

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

      (1) Within fifteen (15) days

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

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

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

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

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

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

subsection (f)(e) of this section.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

privileges or immunities.

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

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

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

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

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

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

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

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

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

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

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

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

documents, materials, or information subject to this chapter.

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

this chapter, the insurance commissioner:

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

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

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

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

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

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

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

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

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

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

the source of the document, material or information;

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

this subsection;

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

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

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

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

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

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

NAIC, its affiliates or subsidiaries; and

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

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

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

brought in the Superior Court.

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

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

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

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

fined in accordance with section 42-14-16.

 

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

Life Insurance" is hereby amended to read as follows:

 

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

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

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

classes thereof, subject to the following:

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

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

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

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

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

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

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

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

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

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

 

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

Insurance Rating" is hereby repealed.

 

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

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

recent available actuarial data.

 

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

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

 

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

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

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

which the applicant is doing business;

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

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

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

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

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

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

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

records of the applicant;

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

instrumentalities as their interests may arise; and

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

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

the proceeding deems appropriate.

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

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

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

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

 

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

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

      (b) Procedure.

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

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

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

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

opportunity to file comments or objections with the court.

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

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

owed to each class of creditors.

      (c) Implementation order.

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

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

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

or the interests of assumption policyholders.

      (2) The implementation order shall:

      (i) Order implementation of the commutation plan;

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

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

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

plan;

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

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

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

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

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

subdivision;

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

specified in the commutation plan;

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

regarding progress in implementing the plan; and

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

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

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

ultimately receives any payments under the plan.

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

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

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

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

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

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

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

applicant in its commutation plan, shall:

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

the reinsurance contract;

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

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

apply;

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

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

the state of domicile of the ceding insurer shall apply.

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

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

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

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

entry of the order;

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

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

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

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

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

either:

      (A) The reinsurance contract requires that consent; or

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

      (iv) Either:

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

      (B) The applicant be dissolved.

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

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

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

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

expenses.

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

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

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

(e) (2) of this section, there shall be no recourse against the applicant's owners absent a showing

of fraud.

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

rehabilitation/liquidation statutes.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

instructions.

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

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

 

     SECTION 6. This act shall take effect upon passage.

     

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LC01670/SUB A

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